A 5-Step Process For Creating A Financial Plan, Episode #2

As a busy physician, you know that creating a financial plan that will help you achieve your goals can seem as fun as doing surgery on yourself. But you can rest easy, this process doesn’t have to be intimidating. Think of it along the same lines as moving… you can’t get everything done at once, so you need a plan for how you are going to get it done bit by bit.

This episode is that — a proven, 5-step process for creating a financial plan. We walk through why a financial plan is important, break down each of the five steps so you can understand exactly what comprises each of them, and provide a helpful resource to get you get started. Listen to hear all the details.

Outline of this episode

How a financial plan does NOT have to be intimidating [0:20]
The 5 steps involved in creating a financial plan [1:20]
How to take inventory of your current financial situation [1:48]
What it looks like to set and quantify financial goals [5:44]
Figuring out how your cash flow can fund your financial goals [9:14]
Allocating your cash flow to save toward your goals [10:59]
How to prioritize your financial goals and begin taking action [14:20]

STEP ONE: Take a financial inventory

It’s important to start out from an organized place when attempting to create a financial plan. We call it, taking inventory of current financial life. This is the first step and it is often the toughest. Over the years you have likely accumulated a lot of financial data and accounts, so it’s vital that you find an organized way to bring them all together.

In this step, you want to understand your net worth (assets minus liabilities), understand your insurance coverage, and know the details of your estate plan.

It may not be fun to pull all of this together, but it’s the best starting point you can have. You will experience more peace of mind just because you know the status of all these things.

STEP THREE: Understand your cash flow

As you develop your financial plan you will need to assess how much money you have left over each month after paying income taxes. In other words, what money do you have left to save or spend? That is the amount referred to when talking about “cash flow.”

Think of your monthly cash flow like a pitcher of water. Your expenses and savings goals are different cups that need to be filled. Each holds a different amount and you can only use the amount of water that is in the pitcher to fill them. That means you’ve got to prioritize which of the cups are most important so that you can fill them up first.

This is a fluid process that can change as needed. Striking the right balance can be difficult, but you can do it.

STEP FIVE: Prioritize your goals and take action

Once you’ve determined what your current situation is and have compared it to the goals you’ve set, you’ll have to make some decisions about what’s most important to you. When you do, you’ll know which goals you should start working toward first. This may require a balanced approach that allows you to fund a variety of goals at the same time, in differing amounts.

What’s important is that you are taking action. You’ll want to target your savings-based goals through wise planning and the use of automation, and your non-savings goals will require that you set aside the time to simply do what is needed to bring them into reality. That part is easier said than done, but just like your many years of schooling and training, you can do it if you apply perseverance.

All five of these steps take time and you’ll have to be patient. When you do, you’ll begin to see the power of small actions, done consistently over time. We cover all five steps in detail in this episode, so be sure you listen.

Resources & People Mentioned

Download a copy of our Financial Checkup guide
Visit the resources page of our website for more guides and one-pagers
Email us with your questions or suggestions for topics: info@mdwmllc.com

Connect With Trent and Andrew

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