4 key components of a financial plan

A well-designed financial plan takes all aspects of your life into consideration and should evolve as you age and your life changes.

Tags: Planning, Budgeting, Estate planning, Goals, Investing, Savings, Insurance
Published: March 31, 2022

You may think you need a certain amount of money to have a financial plan. However, a written plan can help you set goals for you and your family and take control of your money no matter where you are in life.


What is financial planning?

A financial plan is like a blueprint for your future. It aims to:

  • Evaluate your current financial situation and help you see how your daily financial decisions fit into the big picture
  • Map out your short-term and long-term goals
  • Plan the routes you can take to work toward your goals

A comprehensive plan takes all aspects of your financial life into consideration. That includes things like budgeting, retirement, tax, estate, investments, and insurance, just to name a few.

Financial planning requires ongoing conversations and should evolve as you age and your life changes. You may not define all your goals at once and they’re also likely to change over time. But the important part is to start the planning conversations early and determine the direction you want to go.


4 key components of a financial plan

1. Budgeting and saving

Budgeting and saving are a critical foundation to a financial plan. You can’t build wealth without having a handle on your expenses and knowing what you can save.

Track and categorize your monthly income and expenses. Adjust your spending as needed to pay down high-interest debt, such as credit cards. Use what’s left over to build your emergency fund. Once you have enough saved to cover three-six months of household expenses, you can start working toward additional goals.

You’ll want to revisit your budget if you have significant life changes, such as a career change, marriage or divorce, and as you’re nearing retirement.


Read more on budgeting and saving:

How to track your spending patterns

What’s in your emergency fund?


2. Investing

While you don’t need a financial plan to start investing, a comprehensive financial plan will almost certainly include an investment strategy.  

Since investing isn’t a one-size-fits-all activity, your strategy should be based on your personal goals, time frame and risk tolerance. Having clearly defined goals will also help you determine how to invest.

There are almost as many ways to invest as there are investments, so where do you begin? Depending on your goals, your options may include retirement accounts, such as (401(k)s and individual retirement accounts (IRAs), and non-retirement accounts, such as 529 savings plans, health savings accounts (HSAs) and brokerage accounts.


Read more on investing:

Saving vs. investing: What’s the difference?

How to start investing to build wealth


3. Estate planning

An estate plan gives your financial plan structure and provides direction on how your assets should be managed and distributed after you’re gone.

Work with an attorney to set up important documents, such as a will, trust, and financial and healthcare powers of attorney. Review your estate plan regularly and update it as necessary, especially after significant life changes.


Read more on estate planning:

4 reasons estate planning is important


4. Insurance

As you work toward building your wealth, you also need to think about how to protect it. Insurance can help reduce risk and protect your assets and your ability to provide an income. It can also provide you with resources for additional care when needed, and your family if an unexpected death or accident happens.


Read more on insurance:

3 types of insurance you shouldn’t ignore



Building personal wealth happens over time, and the day-to-day decisions you make can have a significant impact on your success. A plan can help you organize, prioritize, and remain on track as you work toward your goals.


When it comes to creating a financial plan, you don’t have to go it alone. Learn about our approach to financial planning.