6 Steps of Financial Planning Flashcards

What is the first step in financial planning?

What do you need to do in step 2 of financial planning?

Which of the following is NOT an alternative course of action in step 3?

What should you understand in step 4 when evaluating alternatives?

What is the purpose of step 5 in financial planning?

What does step 6 require you to do with your plan?

Steps of Financial Planning

Step 1: Assess your current financial status by compiling a comprehensive list of assets including savings, monthly income, monthly expenses, and outstanding debts.
Step 2: Establish your financial goals by distinguishing between needs and wants, and formulating a clear plan for saving or spending your finances.
Step 3: Explore various alternatives for action, which may include:
- Maintaining the current financial strategy
- Expanding upon existing financial assets or income
- Modifying the current approach
- Initiating an entirely new financial strategy
Step 4: Critically evaluate your options utilizing resources such as the internet, financial institutions, specialists, and media. Consider the potential opportunity costs and associated risks, including:
- Interest rate risk
- Inflation risk
- Personal risk
- Income risk
- Liquidity risk
Step 5: Develop and implement a structured financial plan that outlines your strategies and actions to achieve your goals.
Step 6: Conduct an annual review and adjustment of your financial plan, adapting to shifts in your life circumstances and financial situation.

This quiz covers the essential steps of financial planning through flashcards designed for quick learning. It includes identifying your current financial situation, setting goals, and exploring alternative courses of action. Perfect for anyone looking to enhance their understanding of personal finance.