What Is The First Step in Financial Planning?


You have goals and aspirations, but do you have a plan to bring your vision to life? And to achieve your goals, it’s not about how much you make — it’s about how much you keep and what you do to put that savings to work for you. Whether it’s paying for a child or grandchild’s college tuition, purchasing a villa on a tropical island, or traveling to see the world, without a well-documented plan and an execution strategy, your hopes and dreams will remain just that.

As financial specialists, one of the most frequently asked questions we receive is, “What is the first step in financial planning?” While everyone’s financial picture may be unique, the first step in financial planning will usually be getting an accurate assessment of where you are right now. Let’s take a closer look at the first step in financial planning.

Fortunately, you’re not alone. At Korving & Company, LLC, we are an investment management, financial advising, and financial planning firm that specializes in working with retirees, couples who are serious about retirement planning, as well as those who have recently suffered the loss of a spouse. No matter where you are today, we can create a personalized financial plan that reflects where you would like to be and outlines the steps to get there. Get in touch by calling (757) 638-5490 or using our online contact form to schedule a consultation.

What Is the First Step of the Financial Planning Process? Taking the Snapshot

You know the adage — you don’t know where you’re going if you don’t know where you’ve come from — or where you are. Because of this, the first step in financial planning is to capture where you are today. This involves taking a very detailed look at your personal financial situation with a real-time snapshot. It’s imperative to take an accurate assessment of your personal finances because it’s the only way to establish the right course of action and make progress toward your ideal financial future. This involves openly discussing and making a list of the following key areas:

  • Are you currently or have you previously worked with a certified financial planner?
  • How much income do you have every month?
  • What are your total outstanding debts?
  • What are the monthly payments on those debts?
  • What are your account balances, such as checking and savings accounts?
  • Do you have any investments, such as mutual funds? What are those balances?
  • Which retirement planning accounts do you currently own, such as 401(k), pension, NQDC plan, Roth IRA, traditional IRA, etc., and what are the balances on each of those?
  • Do you own a Health Savings Account? Are you currently investing your balance in the stock market?
  • What are your monthly savings?  To which accounts do you allocate those savings, and how much into each of those?
  • What are your monthly expenses?
  • What are the essential monthly expenses, such as a mortgage, rent, auto payment, utilities, and other quintessential expenses?
  • Do you currently have health care coverage?
  • Do you currently have any types of life insurance?
  • Are you responsible for dependents, such as young children, elderly parents, children with special needs, or others? If so, what does their monthly income and expenses look like?
  • And questions specific to your current financial status.

Once all of these components and attributes are unearthed, we will be more easily able to create an accurate balance sheet of your current situation. Specifically, we will be able to answer the amount of money you have, the amount you bring in, and the amount you should be able to redirect toward achieving your short-term and long-term goals.

What Factors Impact My Current Financial Situation?

When examining your current financial situation, there are a number of factors that should be considered. Some of the most common are listed below.

Credit Card Use

While credit cards can be convenient, it’s essential to your financial health to use them strategically. Simply put, credit card debt is one of the worst types of debt — no matter your current situation. This doesn’t mean that credit cards are bad, but the exorbitant interest rates associated with most credit cards can more than offset any capital gains you may earn from investments. According to the Federal Reserve, the median credit card interest rate for all credit cards stands at a magnificent 19.49% (1). If you do use credit cards, it’s best to pay off the entire balance every month to avoid paying interest. If you are in credit card debt, you need to work to pay it off as soon as possible.  Consider alternative courses of action to pay this down, and reach out to us for referrals to people who can help you establish a plan to knock it out.

Cash Flow

Your personal financial situation is like a puzzle made up of many pieces. Each piece represents something in your financial life. However, your cash flow is the big picture on the box. Your cash flow is where everything originates and flows. As for where the most critical decisions are made, cash flow is the most vital aspect of understanding financial planning. Simply put, it’s almost impossible to figure out your financial puzzle without understanding cash flow. Can you see the picture now?

Emergency Fund

Life is full of ups and downs. We get sick, we have emergencies and life events; and then a global pandemic occurs. But when the unexpected happens — and it will happen — do you have financial security? Where will you turn? If you don’t have an established emergency fund, you will most likely turn to high-interest credit cards, which can put a damper on your overall financial picture. When creating a financial plan, an emergency fund should be built into the foundation for unexpected financial circumstances.

Financial Know-How

Knowledge is power, and financial literacy is golden. While becoming a guru in the futures market isn’t necessary, you must understand certain basic concepts, such as compounding interest, debt-to-income, the average cost of funds, etc. Fortunately, the team at Korving & Company offers an array of financial planning and investment advisory services designed to help educate and empower you to make smarter financial decisions.

Retirement Planning

Did you know there’s a 25% chance that a 65-year-old man will live to be 93, while a 65-year-old woman has the same probability of living to 96? Are you financially prepared? Retirement planning is the process of estimating expenses, determining timeframe horizon, calculating after-tax returns, doing estate planning, assessing risk tolerance, and more. With retirement planning, you’ll gain confidence and greater peace of mind knowing that you’re prepared to enter the next phase of life. Most importantly, it can help prevent you from running out of money in retirement.

Net Worth

Your net worth is the value of the assets you own minus your liabilities. Understanding your net worth is paramount to developing a plan and achieving your long-term and short-term goals.

Monthly Income

How much income do you have coming in every month? And how much money do you need to meet your monthly financial obligations? Both of these figures are key to your financial plan.

Residual Income

At Korving & Company, we work to make your money work for you — even while you sleep. And that’s residual income. In other words, residual income is income you receive after you’ve finished income-producing work. Examples of residual income include dividend income, interest income, rental income, real estate income, etc.

How Does My Current Financial Situation Impact Financial Planning?

Once we have a solid financial snapshot of where you are, we can build a financial plan based on what you need to do to achieve your short-term and long-term financial goals. In the event you have a positive net worth and are in a solid financial situation, we can help strengthen your outlook and create more security. This means we can guide you toward the types of investments and solutions designed to preserve and grow your assets in a risk-managed way. On the other hand, if your current financial situation isn’t as strong as desired, we can create a roadmap to help you achieve the tomorrow you’ve always envisioned.

Who Can Help Me Evaluate My Financial Situation?

While you may find tutorials on the web for properly repainting furniture or building a birdhouse, accurately evaluating your financial situation isn’t a DIY project. To do it properly, you need an experienced, knowledgeable, and objective professional viewpoint, which is exactly what our financial advisors offer at Korving & Company.

Our financial advisors specialize in helping you objectively evaluate and continually reevaluate where you are. But that’s only the beginning. Our personal financial planning takes it a step further by helping you discover and document your unique financial goals. Once you can clearly see your vision of the future on paper, the team at Korving & Company can outline the steps you should take today to get there with a financial action plan. From start to finish, we will guide you through the process and help you see your future in an entirely new light.

Get Financial Planning Help from Korving & Company Today

Whether it’s buying a family vacation home in the mountains or purchasing an RV and crisscrossing the country, most of us have relatively simple goals. But bringing those goals to fruition is anything but simple. Fortunately, the expert financial planners at Korving & Co. make financial planning easy.

Ready to see for yourself?

Call 757-638-5490 or complete our online contact form to speak with an experienced financial planner at Korving & Company today.

Arie J. Korving, CFP Co-founder, Korving & Company 3


Arie J. Korving, a CERTIFIED FINANCIAL PLANNER™ professional, has been delivering customized wealth management solutions to his clients for more than three decades. Prior to co-founding Korving & Company, he was First Vice President with UBS Wealth Management and held management positions with General Electric.

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