How To Do Financial Planning in 9 Steps

how to do financial planing

How to do financial planning doesn’t have to be difficult or complicated. It can work for you whether you’re rich or poor. It creates a framework and strategy for your money so you can achieve your goals and the things that matter to you. There are various steps associated with financial planning and you can begin working on whichever is most important to you right now. You don’t have to do everything right now. 

Step 1: Set Some Goals (but not about money)

Goal setting is something everyone talks about a lot and why it’s important, but do we listen and pay attention or just brush it off as something we’ll get around to eventually? You have to know what you want and what you want to achieve in order to get there. It can be big or small. It doesn’t matter.

But a money goal in and of itself isn’t all that motivating. It’s about what you want money to do for you: How will you spend your time? What will do you? How will you feel? Who will you spend it on/spend your time with? What kind of legacy do you want to leave? Money is just a tool to give you options and allow you to live life on your terms. Then, you can make a start. With small, incremental steps to get you where you want to be.

Step 2: How to do financial planning: Figure out your money story

What’s your relationship to money like? Are you a spender or saver? How do you feel when you buy stuff? Do you think only about the short-term or can you plan ahead? We all have a money story which subtly and sub-consciously impacts our behaviours around money. That means some of us spend money like there is no tomorrow and have no idea where all our money goes. Whereas others track every cent and struggle to buy anything if it isn’t part of our budget.

There is no right or wrong, but an awareness of how you relate to money, how it leaves you feeling (when you spend or save for example) and the impact it has on you (and your relationships) will allow you to begin to have a healthier relationship with money so that you can start making more empowered decisions.

Step 3: Get on top of your spending

The foundation of any successful business, household or individual is their cashflow. Cashflow looks at all the money coming in (income) against all the money going out (expenses). What you have left (free cashflow) is what you can then use to invest in yourself, your future and achieving the goals you have decided are important to you.

The purpose to figuring out your money story is that once you have more awareness about how you relate to money – are you fast and loose or sticky and tight? – you will get better with your spending and cashflow (either by learning to live within your means a little bit, or to treat yourself and occasionally spend a bit).

But the bottom line is that if you aren’t able to live within your means (have more money coming in than going out), achieving your goals and everything you’ve decided is important to you is impossible. Unfortunately, too many people live in debt. Outside of mortgages and car payments, there are the credit cards, store accounts, and all the rest of it. It’s not healthy. Both financially and emotionally.

And this applies equally to people who earn a lot of money as it does to people who are just getting by. The only way to improve your cashflow is to earn more or spend less (preferably do both simultaneously).

What can you do to improve your income?  Aim for a promotion at work, learn a new skill that pays better, start a side hustle. How can you spend less? – if you’re honest we all have wastage and spend a lot of money on stuff we don’t really need. Examine that. Write a list of everything you could cut back on. You’ll be amazed at how much money you can save doing that.

Step 4: Make Busting Debt a Priority

Living in debt is stressful. It causes anxiety. Some people do it out of necessity because getting by is tough based on what they earn. For others, it can be about keeping up appearances – the house, the cars, where the kids go to school etc. No matter your situation, getting out of debt should be a priority. Pay off the small debts firsts like credit cards and then make a commitment you’ll pay them off each month and never run a massive credit balance ever again.

Then move onto the bigger stuff – the cars and the house. The challenge is being happy with what you have. Because inevitably, so many people want to then move onto the bigger house and nicer cars, so in the end they might have nicer toys but their financial situation never actually improves.

Don’t let that be you. Gratitude is a wonderful thing. We can all learn to do it better. Be grateful for what you have. Nicer, newer, bigger, shinier – doesn’t make you any happier.

Step 5: Set up an emergency fund

The next step in how to do financial planning is that everyone should aim to have at least 6-12 months’ worth of expenses in an emergency fund. An emergency fund is money sitting in a savings or money market account generating a bit of interest – but more importantly than you can get to quickly.

An emergency fund is there for a catastrophe – like you lose your job or have some big medical expense you need to cover (that insurance/medical aid doesn’t). It’s also there for when stuff happens, or things go wrong. Your geyser bursts. Car breaks down. Fridge packs up. The things we don’t plan for or that inevitably happen.

It might take time to build but begin to set some money aside every month and grow that emergency fund. It also leaves you feeling a lot better, knowing you have some cash set aside if trouble finds you (funny how trouble finds us when we can least afford it or expect it).

Top Tip: To really get a comprehensive understanding of the world of money, finance and investing, read our Financial Planning the Ultimate Guide. It teaches you everything you need to know about the world of financial planning.

Step 6: Protect yourself and your assets

Depending on what stage of life you’re at, like single and starting, out or married with kids and a bunch of assets – will determine how much work you need to put in here. Insuring your assets like cars, house, possessions etc. is something everyone understands. Shop around. Get the best deal. But know what you’re covered for. Cheaper isn’t always better. Likewise, insuring yourself and your income is important. If you’re sick or disabled and can’t work, are you covered? If you have dependants, is your life sufficiently insured so that they’ll be okay. Never fun to talk about. But critically important, nonetheless.

Step 7: Create a diversified investment portfolio

Investing and how to invest is different for everyone. It depends on your goals, time horizon, capacity for risk and a whole host of factors. And often you’re investing for different reasons at the same time. You might be investing for retirement or to achieve financial freedom, and at the same time be investing for your kids’ education or to buy a house in future. And each investment will have its own strategy, portfolio, product that you use etc. That’s why we believe in outcomes-based investing.

If each investment you create doesn’t have a clear purpose and with a specified return objective attached, you’re investing on hope, and that can be a dangerous game to play. Because essentially investing is how you create wealth and options.

The longer your investment time horizon, the more risk you can afford (and usually need to take) with your investments to achieve your goals. Assets that provide the best potential for long-term growth are usually where you want to allocate most of your money to achieve the best possible returns over a long period of time. Equities, property, and even things like crypto.

Diversification is key. A balance across assets, sectors will protect you against being wiped out financially. Investments will always be volatile but that isn’t something you should fear if you’re well diversified and plan on investing for a long period of time. And then it’s deciding how to invest. Do you buy funds, ETFs or shares directly? Should you buy property to start generating rental income? What is the optimal asset allocation for what you want to achieve?

That’s why working with a professional who can help you figure this all out makes a lot of sense.

If you’re a business owner or entrepreneur you must read this: Financial Advice For Small Business Owners. 12 Smart Tips to Survive and Thrive.

Step 8: Don't forget your estate planning

Estate planning is often neglected because it’s an unpleasant and uncomfortable thing to talk about, what happens when you die? If it’s just you, maybe no big deal. But if you have a family and dependents, a totally different story.

The cornerstone of any estate plan is your will. Have you got one? When last did you update it? What if you have foreign assets? The will sees to your wishes being adhered to when you die so those you want to inherit the residue of your estate (assets and what’s left after you die after taking into account taxes, costs, duties etc.) do so.

Estate planning also needs to make sure there is enough liquidity in your estate to pay estate duty, executors fees, outstanding debts and all the costs associated with winding up an estate. You don’t want your family or heirs to be forced to sell assets to cover those costs – so life cover might be something you consider providing the liquidity to your estate.

A professional financial planner can make the necessary calculations for you, so you know exactly where you stand and what you need to do.

Step 9: Review Regularly

Make sure you’re reviewing things regularly. Is the insurance and risk cover (life, disability etc.) correct and appropriate? Are your investments correctly weighted and achieving the targets they should be? Is your emergency fund depleted or do you need to top it up? When last have you reviewed your will and estate planning? When last have you actually jumped off the hamster wheel and reflected on what you’re doing and trying to achieve?


How to do financial planning in 9 steps was designed to give you a broad framework and understanding of how financial planning is important and what you can do to achieve your goals. We all have to start somewhere. And that point is different for all of us. For a detailed introduction into the world of financial planning, this will serve as an excellent guide.

Carl-Peter Lehmann

Carl-Peter Lehmann

Carl-Peter is a Director and Partner at Henceforward. He has worked in the industry for more than 20 years in different places across the world. He studied at Stellenbosch University, is a CERTIFIED FINANCIAL PLANNER®, and has a certification in Discretionary Investment Management. He has spent a large part of his career helping clients with global balance sheets and offshore investing.

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