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  • Writer's pictureDominick Galauran

Financial Planning: Definition, Steps, and How to Create a Financial Plan for Retirement

Updated: Feb 15, 2023

Couple doing financial planning with pen and calculator

Creating a financial plan can be daunting, but it doesn't have to be. By taking it one step at a time, you can develop the right plan for you – whether you're just starting or nearing retirement age.

What is financial planning?

Financial planning is creating a comprehensive overview of your financial goals, current money situation, and strategies needed to achieve those goals. It involves assessing key areas of your financial life, such as cash flow management, insurance planning, investments, tax planning, estate planning, retirement planning, education planning, and charitable giving.

Financial planning can help you make sound decisions about your money and put you on track to reach your life’s goals. It can also help you get the most out of your life by enabling you to focus on areas that bring the most satisfaction to you, both personally and professionally. Financial advisors can assist in creating a financial plan that works best for you. Some are using paid and free financial planning tools to aid them in their financial planning.

What are the steps in creating a financial retirement plan?

old man holding a book teaching a young man financial retirement plan

Outline Your Financial Goals

Outlining your financial goals for retirement can be daunting, but it can also be extremely rewarding if done correctly. Here is a step-by-step guide to outlining your financial goals for retirement:

Step 1: Determine your financial goals. Start by setting your retirement goals. Do you want to retire at a certain age? Do you want a certain amount of money saved by the time you retire?

Do you want to travel or purchase a second home after retirement? Establishing your goals will help you create a plan to reach them.

Step 2: Review your current financial situation. Gather any relevant documents and account statements that can provide an accurate picture of your current financial status. Take an inventory of your assets and liabilities, such as properties, investments, retirement accounts, and loans. Knowing exactly where you stand is important to determine the next steps.

Step 3: Create a budget. Review your spending history and create a budget. This budget should include all your fixed expenses, such as rent or mortgage payments, and variable expenses, such as groceries, entertainment, and travel. Make sure to factor in your income from your paycheck and other sources.

Step 4: Use a financial goals worksheet. Use a financial goals worksheet to understand why you’re saving your hard-earned money. This will help you determine your situation's most feasible and practical goals.

Step 5: Outline a strategy. Once you’ve established your goals, create a plan to reach them. Consider consolidating debt, opening bank or brokerage accounts, establishing a savings regime, and building an investment plan. Make sure to adjust your financial plan as your life and goals change.

By following these steps, you will have a comprehensive plan to help you meet your retirement goals and secure your financial future.

Collect Information About Your Finances & Investments

Creating a financial retirement plan requires an overview of your current financial standing and goals. To get started, it’s important to collect information about your finances and investments. Here is a step-by-step guide:

Step 1: Establish Your Goals – Determine your financial goals, such as paying down debt, planning for retirement, or creating a college fund.

Step 2: Gather Relevant Documents – Collect relevant documents such as bank statements, credit card statements, and account statements to get a picture of your current financial situation.

Step 3: Create a Plan – Create a short- and long-term plan to reach your financial goals.

Step 4: Begin Implementing the Plan – Begin putting your financial plan into practice. This could include saving money for retirement or an emergency fund and investing in the market.

Step 5: Adjust Your Plan – Adjust your financial plan as needed as your life and goals change. This could involve reviewing your financial plan regularly to ensure it meets your needs.

You can create a financial retirement plan by following these steps and collecting the necessary information.

Construct a Comprehensive Financial Plan

Step 1: Determine Your Retirement Goals - The first step in constructing a comprehensive retirement plan is determining your retirement goals. Think about what kind of lifestyle you want in your retirement and how much money you need to make that happen. Set realistic goals that are achievable and take into account your current financial situation.

Step 2: Gather Relevant Documents - Gather all the relevant financial documents and account statements that will give you an accurate picture of your current financial situation. These documents should include bank statements, investment accounts, pension information, tax returns, and other relevant documents.

Step 3: Analyze Your Current Financial Situation - Once you have all the relevant documents, it’s time to analyze your current financial situation. Calculate your net worth and assess your current cash flow. Consider any debts you may have and any other financial obligations.

Step 4: Create a Short- and Long-Term Plan - Now you have all the data you need to start creating a plan. Make short- and long-term plans to reach your retirement goals. This plan should include a strategy for investments, budgeting, and saving.

Step 5: Put Your Financial Plan Into Action - Once your plan is complete, it’s time to implement it. Begin making contributions to retirement accounts, such as 401(k)s, IRAs, and other investments. Set up automatic transfers from your bank account to your retirement accounts to help you stay on track with your goals.

Step 6: Adjust Your Financial Plan - Your financial situation and retirement goals may change over time, so monitoring your progress and adjusting your plan as needed is important. Revisiting your plan at least once a year to ensure it is still aligned with your goals.

Step 7: Talk To A Financial Adviser - Creating a financial retirement plan can be complicated and overwhelming. Consider talking to a financial adviser who can help you create a plan tailored to your needs. A financial planner can also help you make necessary adjustments to your plan as your situation changes.

Step 8: Have a Contingency Plan - It’s important to have a contingency plan in place in case of any unexpected events. This could include setting aside money for an emergency fund, buying insurance, and planning any health care costs that may arise in retirement.

Step 9: Enjoy Your Retirement - Once you have your financial plan and put it into action, it’s time to enjoy your retirement. Make sure you plan to stay active and engaged in your retirement years. Spend time doing the activities you enjoy and make the most of your retirement years.

Implement Your Financial Plan in Your Everyday Life

Implementing a financial plan can bring significant benefits to your everyday life. Not only will you have a plan in place that can help you reach your financial goals, but it can also help you stay organized and ensure that your expenses are managed responsibly. By creating a budget and tracking your spending, you can better manage your money and ensure you live within your means.

Additionally, having a plan in place can help ensure that you are making progress toward your long-term financial goals, such as saving for retirement or a down payment on a house. This can give you peace of mind and help you feel secure in your financial future. Ultimately, having a financial plan in place can help you have financial freedom and stability, allowing you to focus on the things that truly make you happy.

Periodically Revise Your Long-Term Financial Plan

It is important to regularly review and revise your long-term financial plan for retirement. You should take a fresh look at least once a year or after a big life change. These changes may include a change in income, job change, family dynamics such as having a baby, adoption, getting married, divorced or losing a spouse/partner, selling or buying a home, inheritance, and unexpected debt. Around age 50, you may want to include long-term care insurance and expand your plan to add income in retirement.

  1. Gather relevant documents and account statements that paint a picture of your current financial situation.

  2. Calculate your current net worth and cash flow.

  3. Create a short- and long-term plan to reach your financial goals.

  4. Begin putting your financial plan into practice.

  5. Adjust your financial plan as your life and goals change.

  6. Review and revise your financial plan at least once a year or after a major life change.

  7. Around age 50, consider adding long-term care insurance and expanding your plan to include income in retirement.

  8. Monitor your progress and stay on track.

Step 6: Compare the Costs and Benefits of Different Retirement Plans

Creating a financial retirement plan is an important step in ensuring your financial security in the future. Here is a step-by-step guide to help you compare the costs and benefits of different retirement plans.

Step 1: Research different retirement plans and assess the associated costs. This includes the fees associated with investing, the costs involved with setting up and maintaining the plan, and the taxes you will pay on any income you receive.

Step 2: Consider the benefits of each plan. These can include tax benefits, employer matching contributions, and the ability to withdraw money before retirement.

Step 3: Compare the costs and benefits of the different retirement plans to identify which one best suits your needs.

Step 4: Create a retirement plan based on the plan that you have identified as being the most cost-effective and beneficial. This plan should include the amount you will need to save each month from reaching your retirement goal.

Step 5: Monitor your retirement plan regularly to ensure it is on track. Make adjustments as needed if your savings goals or financial situation changes.

For example, suppose you have decided that an IRA is your best retirement plan. In that case, you will need to research the different types of IRAs, assess the setup and maintenance costs, consider any employer-matching contributions, and decide on an amount to save each month. You will then need to set up your IRA, make contributions to it, and monitor it regularly to ensure that it is on track to meet your retirement goals.

Evaluate the Viability of Different Retirement Plans

Step 1: Define your financial goals. Start by considering your goals for retirement, such as when you want to retire, how much money you want to have saved, and other factors, such as your desired lifestyle and any hobbies you want to pursue.

Step 2: Gather relevant documents and statements. This includes your bank statements, credit card statements, mortgage statements, tax returns, and other financial documents that will help you better understand your current financial situation.

Step 3: Create a short- and long-term plan. Make sure to consider both short-term goals (such as paying down debt) and long-term goals (such as planning for retirement) when creating your financial plan.

Step 4: Implement your plan. This could include setting up automatic payments to pay down your debt, investing in the stock market, or increasing your contributions to your retirement plan.

Step 5: Monitor and adjust. As your life and goals change, make sure to adjust your plan to stay on track. Regularly monitoring your finances and making changes as necessary will help ensure you stay on the path to financial success.

Step 6: Evaluate different retirement plans. To evaluate the viability of different retirement plans, consider the fees associated with the plan, the investment options available in the plan, the potential for growth or loss, and the level of assistance available. Talk to a financial advisor to discuss your options and find the best plan for you.

How to create a financial plan for retirement if you have little money?

Bald guy with broken piggy bank staring in front.

Step 1: Analyze Your Current Financial Standing: Before creating a financial retirement plan, you need to understand your current financial standing. Start by creating a net worth statement to identify what assets you have and what debts you owe.

Step 2: Set Your Retirement Goals: Think about what you want your money to do for you when you retire, such as providing a comfortable lifestyle, covering medical expenses, or simply having a cushion in emergencies. Write down your long-term goals and prioritize them according to their importance.

Step 3: Develop an Actionable Plan: With your financial standing and goals defined, you can start developing the actionable steps of your financial plan. Start by setting up a retirement savings account and begin contributing. Consider seeking professional advice from a financial advisor to determine the best asset allocation for your preferred risk level.

Step 4: Pay Down Debt: If you have significant debt, your financial plan should include steps to pay it down. You can increase your monthly payments, consolidate loans, or explore other debt repayment strategies.

Step 5: Invest: Investing in the market is the best way to grow your wealth over the long term. If you work with a financial advisor, they can help you determine the best asset allocation between large and small-cap stocks, bonds, cash, and alternative investments for your preferences.

Step 6: Build Up Credit: If one of your goals is a big purchase like a house or a new car, then you’ll also want to include in your plan steps to build up your credit. This could include paying off credit cards and student loans on time and other tactics for improving your credit score.

Step 7: Track Your Progress: Regularly review your financial plan to make sure you are on track to reach your goals. Re-evaluate your plan if your financial standing and goals change.


By following these steps, you can create a financial retirement plan even if you have little money. Not only can this help you reach your retirement goals, but it can also give you financial peace of mind. You can also try talking to a registered financial advisor.

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