5 Steps To Developing A Winning Financial Plan


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We spend our lives planning; our next holiday, for a family, buying a yacht! Being able to realize our plans requires objectives, information, organization and compromise. Successful plans will also require a significant degree of financial planning. A comprehensive plan that covers savings, investments, insurance, retirement planning, education and emergency fund, major purchase planning and other financial goals.

Here are five steps to the financial planning process that will significantly help you increase the potential of developing a winning financial plan:

Step 1 –  Defining your financial objectives and goals

Financial planning is built around financial objectives and goals that you want to achieve. Your goals and objectives serve as a guide to the financial plan as a roadmap for your financial future. Though goals may change over time, it is important to establish some preliminary goals to help guide your savings strategy.

For instance, what do you want your financial future to look like? What do you want to accomplish in the short-term – such as savings to purchase a car or buy a home? What goals seem easier to achieve, and which ones seem like a stretch?

As such your financial objectives and goals should contain the following features: 

  • Quantifiable and achievable
  • Clear and have a defined timeframe
  • Separate your needs from your wants

The financial objectives and goals you come up with at this stage should be documented and used to measure progress. Periodic reviews will allow you to capture changing circumstances and ensure they remain relevant.

Related:7 Reasons Why You Should Have A Financial Plan

Step 2 – Gathering your financial and personal information

Once you have your financial objectives and goals in place, you’ll need to access your personal financial standing. As such, you will need to gather information with regard to your current income, budget, spending, savings, and investing habits. If you haven’t set a budget, now is the perfect time to start tracking your spending by category and increasing your own awareness of your spending habits.

The financial planning process and its success will heavily depend on the quality and clarity of the information you gather. With this information, you’ll be able to capture all the related information and account for your current financial stability. This includes income, expenditure, assets, liabilities, risk attitude, tolerance and capacity.

Step 3 – Analysing your financial and personal information

Once your objectives and goals are in place, you need to assess your ability to reach them based on your current cash flow. To reach your financial goals, especially long-term goals like building retirement income, you need to focus on meeting your monthly savings and investment goals. As such, you need you to assess your savings, liquidity, solvency and debt. Here are some ratios that you can use to improve your understanding of your financial circumstances and pinpoint areas of strength and weakness:

  • Savings Ratio – computed by dividing your cash surplus by your after-tax income. This ratio indicates your savings rate i.e. the portion of your after-tax income that is being saved. It can also be used to measure your risk profile. With this ratio, the higher the better but 10% savings is fair too.
  • Solvency Ratio – computed by dividing your net worth by your total assets, indicating your financial cushion in meeting your debt obligations. A high ratio is good and 50% or more indicates good standing and quality assets.
  • Liquidity Ratio – computed by dividing your cash equivalents by your monthly expense. The ratio seeks to measure your ability to meet unexpended expenses such as medical expenses. A good measure is subjective but having about 6 months in savings is great.
  • Debt Service Ratio – computing by dividing your monthly loan payment by monthly take-home income. Seeks to measure your ability to repay your debts promptly. Ideally maintaining your ratio within the following bands would be an idea for your financial stability – 40-45% housing loan, 20-25% personal or car loan, and 10-15% credit card debt.

This is the most difficult of the financial planning process, so do not shy away from seeking help. A financial advisor can easily asses your personal financial circumstance using the information you gathered in step 2. With it, they can assess your attitude, tolerance and capacity for risk using a psychometrically designed risk tolerance questionnaire in relation to investment assets. With this information, your advisor can assess your ideal asset allocation for investment and pension goals.

Related: How to Close The Financial Gap in Your Financial Plan

Step 4 – Development and presentation of the financial plan

Once you’ve assessed your current income, spending, and savings, you may need to draft up a financial plan based on this information. Using the information you gathered in step 2 and the analysis completed in step 3, link them to the goals and objectives in step 1 by addressing each objective or goal and making recommendations for each.

This will include the following as well:

  • Net worth statement (a balance sheet)
  • Annual consolidated tax calculation
  • Annual cash flow report addressing any shortfalls or surpluses you may have. For instance, if you are facing a shortfall, will you scale back your monthly spending or start a side hustle to help you reach those long-term goals.?
  • Timelines for when you will reach certain goals. For instance, savings for a down payment on your house.

Ensure that your financial plan remains flexible and can be adapted to new challenges and scenarios that may arise. As you move forward in pursuing your financial goals, continuously tweak and assess if you are well-positioned to withstand unexpected financial challenges.

Step 5 – Implement and review your financial plan

Once the analysis and development of the plan is complete, start implementing the courses of action that will help you reach your goals. This may involve:

  • A new investment strategy or pension
  • Changing your debt provider, perhaps from your local bank to opening an account with a Sacco
  • Getting life insurance or adding on some more additional life or serious illness insurance
  • Income and expenditure adjustments to ensure your goals are met within your stipulated timelines

Financial planning is a dynamic process that never ends as it requires continuous review and monitoring. Always take the time to review what you’ve done, and where you are regularly and check if you are on track with your goals. Goals should be reviewed annually to take into account a change in income, asset values, and business or family circumstances.


Should you choose to develop a financial plan to follow through in this coming new year, I hope these steps will help you get started. Financial planning that follows a properly defined and documented process will give the greatest chance of a successful outcome. It may not guarantee financial security or wealth, but it will provide an opportunity to pursue both and requires proper analysis, discipline and financial literacy on your part.

Image credits: Top by RODNAE Productions via Pexels

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Irene Makanga
Irene has an MBA in Finance and is an avid businesswoman, passionate about financial literacy.


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