financial planning term paper

Financial planning behaviour: a systematic literature review and new theory development

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• Published: 03 October 2023

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• Kingsley Hung Khai Yeo 1 ,
• Weng Marc Lim 1 , 2 , 3 &
• Kwang-Jing Yii 1  

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Financial resilience is founded on good financial planning behaviour. Contributing to theorisation efforts in this space, this study aims to develop a new theory that explains financial planning behaviour. Following an appraisal of theories, a systematic literature review of financial planning behaviour through the lens of the theory of planned behaviour (TPB) is conducted using the SPAR-4-SLR protocol. Thirty relevant articles indexed in Scopus and Web of Science were identified and retrieved from Google Scholar. The content of these articles was analysed using the antecedents, decisions, and outcomes (ADO) and theories, contexts, and methods (TCM) frameworks to obtain a fundamental grasp of financial planning behaviour. The results provide insights into how the financial planning behaviour of an individual can be understood and shaped by substituting the original components of the TPB with relevant concepts from behavioural finance, and thus, leading to the establishment of the theory of financial planning behaviour, which posits that (a) financial satisfaction (attitude), (b) financial socialisation (subjective norms), and (c) financial literacy, mental accounting, and financial cognition (perceived behavioural controls) directly affect (d) the intention to adopt and indirectly shape, (e) the actual adoption of financial planning behaviour, which could manifest in six forms (i.e. adoption of cash flow, tax, investment, risk, estate, and retirement planning). The study contributes to establishing the theory of financial planning behaviour, which is an original theory that explains how different concepts in behavioural finance could be synthesised to parsimoniously explain financial planning behaviour.

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Introduction

Background of financial planning.

Personal financial planning is critical to maintaining a healthy financial status and fulfilling future financial needs (Mahapatra et al. 2019 ). In essence, personal financial planning is a process of managing personal wealth to obtain economic satisfaction (Kapoor et al. 2014 ). This encompasses six areas of financial planning, namely cash flow planning, tax planning, investment planning, risk management, estate planning, and retirement planning (Altfest 2004 ). Ideally, comprehensive financial planning should involve all six areas. However, the specific life stage of an individual, such as retirees, and life realities, such as retrenchment, may dictate the primary focus and/or relevance of these areas. For example, retirees might not be actively engaged in tax planning, and a retrenched worker might not be in a position to engage in investment planning. More importantly, personal financial planning is a profound concept that theoretically reflects and practically safeguards individuals’ financial resilience, and thus, it can be understood from two unique lenses: academic and practice.

From an academic perspective, the field of personal finance is interdisciplinary; it covers a wide range of areas, including economics, family studies, finance, information technology, psychology, and sociology (Schuchartdt et al. 2007 ). Different disciplines have varied theories that play a supporting role in understanding individuals’ financial behaviour and money management (Copur and Gutter 2019 ). However, the theories explaining personal finance are often borrowed rather than created, a situation that is common for emerging interdisciplinary fields (Murray and Evers 1989 ) such as personal finance (Lyons and Neelakantan 2008 ), which encompasses close to 250 publications only in Scopus by the end of 2022. Footnote 1

From a practice standpoint, Palmer et al. ( 2009 ) argued that it is necessary to develop financial planning for each individual that can deal with the uncertainty of the economic environment. Hanna and Lindamood ( 2010 ) echoed that personal financial planning can provide individuals sufficient economic benefits such as increasing wealth, preventing financial loss, and smooth consumption. Footnote 2 However, many individuals lack sufficient financial capability, skills, and knowledge to be able to effectively manage their personal finances (Chen and Volpe 1998 ).

Problems and importance of financial planning

Over time, the society is facing increasing challenges of high living expenses and various financial difficulties given the constant development of complexity in financial matters (Baker et al. 2023 ; Mahapatra et al. 2019 ). Individuals’ ability to manage their personal finances and financial affairs has been gaining attention across the world, wherein being financially healthy gets prioritised by individuals in their lives (e.g. changing investment approach and contributing more to retirement savings to hedge against inflation; Personal Capital 2022 ).

Birari and Patil ( 2014 ) state that individuals should practice and gain basic financial skills to manage their expenditures and acquire well-developed planning to avoid being in financial difficulties. Many factors may lead to irrational financial behaviours from individuals—for example, excess consumption, aggressive trading, lack of savings, and retirement planning. However, one of the major root causes that propels irrational financial behaviour as well as the many financial difficulties that people encounter is inarguably the lack of financial literacy (Organization for Economic Cooperation and Development 2020 ).

According to the Organization for Economic Cooperation and Development ( 2013 ), financial literacy consists of financial knowledge, skill, attitude, awareness, and behaviour to make a rational financial decision and achieve individual financial well-being. In other words, financial literacy is the ability to utilise knowledge and skills to manage financial matters effectively (Pailella, 2016 ; Tavares et al. 2023 ).

Noteworthily, financial behaviour in individuals’ daily lives cannot be separated from financial literacy. Tan et al. ( 2011 ) state that the process of personal financial planning requires individuals to acquire not only cognitive ability but also financial literacy. According to Ali et al. ( 2014 ), financial literacy should be given serious attention from individuals because it is able to affect their welfare. Indeed, financial literacy has been proven to have a positive impact on financial planning. Specifically, individuals who lack financial literacy will often end up in debt (Lusardi and Tufano 2009 ) and will most likely increase their financial burden (Gathergood 2012 ). By having sufficient relevant information, individuals can analyse their financial situation and make decisions wisely.

Gaps and necessity to theorise financial planning behaviour

As mentioned, extant understanding of financial planning is mainly derived from borrowed theories. While this practice remains acceptable, it is important that new theories are developed to enrich understanding of financial planning, particularly from a behavioural perspective, as the issue of good or poor financial planning is dependent on the individual and his or her financial planning behaviour. With the maturity of the literature on financial planning, the time is now opportune to engage in new theory development (Kumar et al. 2022 ).

The need for theory development is further accentuated as there is a notable lack of theory development in explaining financial planning behaviour. Noteworthily, existing frameworks and models remain piecemeal and do not fully cover the whole spectrum of financial planning. After an appraisal of theories related to financial planning (“ Evolution of theories ” Section), the theory of planned behaviour (TPB) has been found to be the most suitable theory on parsimonious grounds (i.e. the capability and capacity of the theory’s core components to act as an organising frame) and its track record of theory spinoffs (e.g. the theory of behavioural control; Lim and Weissmann 2023 ) to explain an individual’s financial planning behaviour. Therefore, an integration of the respective antecedents, decisions, and outcomes (ADO) to form a new, holistic theory is required to document the complexity and the extent of considerations required to explain financial planning behaviour. Such an integration can and will be pursued via a systematic literature review (Lim et al. 2022a , b ).

Goals and contributions of this study

The goal of this study is to establish a formal theory to explain financial planning behaviour. To do so, a systematic literature review is conducted, wherein the SPAR-4-SLR protocol is adopted to guide the review process, whereas the antecedents, decisions, and outcomes (ADO) framework (Paul and Benito 2018 ) and the theories, contexts, and methods (TCM) framework (Paul et al. 2017 ) are adopted and integrated to analyse the findings of the review—a best practice demonstrated and recommended by Lim et al. ( 2021 ). In doing so, this study makes two noteworthy contributions.

From a theoretical perspective, the integrated framework contributes to integrate fragmented knowledge and reduce the production of isolated knowledge on financial planning behaviour. In addition, the framework clarifies the state of existing insights and empowers the discovery of new insights on financial planning behaviour. Certainly, insights gathered from a well-structured framework can provide a better start to add to existing knowledge and increase growth in the field (Kumar et al. 2019 ; Lim et al. 2022a , b ). More importantly, the nomological structure of the framework also enables the study to establish a new theory called the theory of financial planning behaviour , which can act as a multi-dimensional behavioural guideline that involves planning, developing, and assessing the operation of cash flow, tax efficiency, investment planning, risk management, estate planning, and retirement planning within an individual.

From a practical standpoint, the insights from the study are expected to contribute to future financial service professionals gaining advantages in the understanding of financial planning behaviour in catering to the future needs of the public. Additionally, policymakers would benefit from utilising the information to effectively provide financial education programs to enhance individuals’ financial well-being. Further implications for this study focusing on consumers and managers are also discussed towards the end of this study.

Theoretical background

Evolution of theories.

Over the past decades, several theories have been used by researchers on financial planning and the determining factors that influence it. The evolution of theories relating to financial planning is based on the concept of behavioural finance. These theories remain important in financial planning research (Asebedo 2022 ; Overton 2008 ). The most well-known theory related to behavioural finance is the TPB (Ajzen 1991 ). It has been widely used on different research topics to predict and explain individuals’ behaviour or the insufficient control of their behaviour (Ajzen 1985 , 1991 , 2002 ). Noteworthily, the TPB is an extension of the theory of reasoned action, which suggested that human behaviour is determined by the intention to perform a certain behaviour, whereby the intention can be determined by attitudes and subjective norms (Fishbein and Ajzen 1975 ).

In addition, Maslow’s ( 1943 ) hierarchy of needs has been used by Chieffe and Rakes ( 1999 ) to identify and rate the different segments of financial services best suited to each level of income group. The hierarchical approach of this theory provides a framework that explains different financial planning services related to each income group. According to Xiao and Noring ( 1994 ) and Xiao and Anderson ( 1997 ), the notion of Maslow’s hierarchy of needs clearly explains an individual’s financial needs in the form of a hierarchy. The framework of a hierarchical form of financial planning indicates that individuals would only strive for a high level of financial needs after a lower level of financial needs is met. It is recommended for individuals to fulfil their needs step by step to avoid facing financial difficulties.

Another theory that has been applied to financial planning is the life-cycle hypothesis (Modigliani and Brumberg 1954 ), which is an economic theory that explains an individual’s saving and spending behaviour throughout their lifetime. The theory also points out that individuals want to have smooth consumption by saving more if their income increases and borrowing more when their income ceases. Shefrin and Thaler ( 1988 ) state that individuals mentally place their assets into three different accounts, which are current income, current assets, and future income. According to Modigliani and Brumberg ( 1954 ), this theory assumes that individuals will fully utilise their utility for future consumption and aim to accumulate savings and resources for future consumption after retiring. The model explains that individuals’ consumption and saving decisions are formed from a life-cycle perspective. Such individuals will begin with low income when they start working, and their income will slowly increase until it reaches a peak level. Taking a behavioural enrichment (or behaviourally realistic) perspective of the life-cycle theory, Shefrin and Thaler ( 1988 ) state that the behavioural life-cycle hypothesis includes mental accounting, self-control, and framing, which represent three important behavioural features that are usually missing in the economic perspective of the traditional life-cycle theory. The authors mention that individuals use mental accounting to control their propensity to spend on their assets. The willingness to spend is usually related to their current income. According to Warneryd ( 1999 ), individuals usually have a specific method to mentally allocate their expenditures into different accounts. In addition, the marginal propensity to save and consume will be different in each account. According to Shefrin and Thaler ( 1988 ), individuals may face difficulties in controlling their spending, and thus, these individuals may form personal behavioural incentives and constraints. For example, individuals would possess the intention to save and create assets when constraints are available. They also explain that individuals’ preferences are not fixed but vary depending on the constantly changing economic environment and social stimuli (Duesenberry and Turvey 1950 ; Katona 1975 ). Furthermore, the life-cycle theory faces some challenges while explaining individuals’ behaviour, such as assuming that individuals will act rationally, be consistent, and make wise intertemporal choices throughout their lifetime (Deaton 2005 ). The life-cycle theory explains that individuals’ saving decisions are based on their preferences for either present or future consumption. The theory also assumes that individuals determine a desirable age of retirement and level of consumption to fully utilise their utility throughout their lifetime.

Prospect theory is an economic theory that assumes individuals treat losses and gains differently, showing how an individual decides among several choices that involve uncertainties (Kahneman and Tversky 1979 ). This theory explains that their decisions are easily affected by psychological factors and that they are logical decision-makers. However, when individuals decide on whether to purchase or not, they are most likely affected by their cognitive biases. The theory also postulates that making losses will cause a larger emotional impact on individuals rather than a comparable amount of gain. Thus, individuals will prefer choosing the option with perceived gains. For example, individuals would prefer the option of a sure gain instead of a riskier option with a chance of receiving nothing or making a loss. Hence, the theory summarises that individuals are mostly loss averse when they face several choices. Individuals are more sensitive towards losses and would most likely prefer avoiding losses and prefer sure wins. This can be explained by the fact that the emotional impact of losses on an individual is greater than an equivalent gain.

The financial capability model is another prominent theory. Financial capability, which has been gaining prominence across the globe, is defined as the capability and skills of individuals to make rational and effective judgements on managing their financial resources (Noctor et al. 1992 ). Nowadays, individuals have been urged to ensure that they acquire sufficient resources for their retirement and provide a financial safeguard for any sudden occurrence. According to Atkinson et al. ( 2007 ), the financial capability model has been studied and is related to individuals’ financial behaviour, attitude, and knowledge. The researchers identified five different components under the financial capability model: (1) making ends meet (managing personal financial resources, i.e. individuals who have acquired financial knowledge skill sets can finance their resources well and meet financial goals); (2) keeping track (managing money, i.e. planning and recording personal daily expenses to avoid overspending); (3) planning ahead (this helps individuals to be future oriented, i.e. always planning and managing their financial resources to be prepared for any financial uncertainties in the future); (4) choosing products (accumulating resources and managing different assets’ risks, i.e. making a rational decision in choosing financial products and diversifying risks); and (5) staying informed (being updated and studying financial matters in the current market and economy, i.e. individuals have to be eager to keep track on financial matters happening in the market, such as changes in the overnight policy rate (OPR) and stock market movement).

After a review of all the theories (Table 1 ), the TPB has been found to be the most suitable theory to serve as a foundational lens for a review on financial planning behaviour with the aim of establishing a new theory in this field. Unlike the other theories (e.g. Maslow’s hierarchy of needs, life-cycle hypothesis including behavioural life-cycle hypothesis, financial capability model, prospect theory), the TPB is an adaptable yet parsimonious theory that has a track record of spinning off new theories (e.g. the theory of behavioural control; Lim and Weissmann 2023 ). Noteworthily, the TPB can be applied to financial behaviours (Bansal and Taylor 2002 ; East 1993 ; Xiao and Wu 2006 ), wherein the three antecedents of the TPB (attitude, subjective norms, and perceived behavioural control) are found to be associated with intention and contribute to financial behaviour (Shim et al. 2007 ; Xiao et al. 2007 ). Unlike other theories, the mediating effect of financial literacy, which provides an important lens to understand good and poor financial planning, can be applied to the TPB to explain an individual’s intention on financial behaviour. More importantly, it is necessary to understand how the TPB can further explain individuals’ behaviour before examining financial literacy through a behavioural approach. The theory assumes that intention is the best factor to predict an individual’s behaviour, which, in turn, is examined by attitude and social normative perceptions towards an individual’s behaviour (Montano and Kasprzyk 2015 ). Furthermore, individuals’ experiences normally affect their financial decision-making and the way they manage their personal finances. Therefore, financial literacy can be explained as an individual’s confidence and capability to make full use of their financial knowledge (Huston 2010 ) and manage financial matters (Lusardi and Mitchell 2014 ), which they would have perceived control over. In this regard, the theory can be applied to examine how the financial literacy process works on each individual. Moreover, Lusardi and Mitchell ( 2014 ) explain that the favour of financial literacy is more than that of financial capability, where individuals are responsible for their own financial decisions. Hence, financial literacy acknowledges the perceived control of individuals on their financial decisions. That being said, an individual will only show positive financial behaviour when they perceive the value of their behaviour based on their attitude. Therefore, financial behaviour will not be decided based on their financial knowledge but based on their attitude, which is the main component of this theory. In other words, the evaluation of financial knowledge will be better captured through the components of the TPB (e.g. perceived behavioural control), though conceptual contextualisation is necessary to better resonate with the financial planning behaviour of individuals. To aid this task, the next section provides a deeper discussion to understand the fundamental tenets of the TPB.

Theorisation of the theory of planned behaviour

According to Xiao ( 2008 ), the TPB is one of the best and most suitable theories related to financial behaviour that studies and predicts human behaviour. In essence, the TPB is an extension of the theory of reasoned action, which initially posits that attitude and subjective norms shape the intention to perform a behaviour, which, in turn, predicts the actual performance of that behaviour (Ajzen 1991 ). However, behavioural intention does not always translate into behavioural performance (Lim and Weissmann 2023 ), which is the main reason why the TPB was proposed to overcome the limitation of the theory of reasoned action, with the inclusion of perceived behavioural control in the TPB as a mechanism to recognise the volitional control that individuals possess in translating or not translating behavioural intention into behavioural performance (Ajzen 1991 , 2002 ).

Perceived behavioural control can be expressed as follows: Given an individual’s available resources and choices, how easy or hard it is to display a certain behaviour or act in a certain way? In this regard, the performance of an individual’s behaviour depends on his or her ability to act on said behaviour (Ajzen 1991 ). The TPB posits that the perceived control on certain behaviour will be greater when the individual has greater resources (social media, money, time) and choices (Lim and Weissmann 2023 ). Indeed, several researchers have found that perceived behavioural control has a positive relationship with intention and behaviour (Fu et al. 2006 ; Lee-Patridge and Ho 2003 ; Mathieson 1991 ; Shih and Fang 2004 ; Teo and Pok 2003 ).

Subjective norms can also be used to predict individual behavioural intention. As one of the original components of the theory of reasoned action, subjective norms refer to social influence and the social environment affecting an individual’s behavioural intention (Fishbein and Ajzen 1975 ). It is defined as an individual’s perception of the possibility that social agents approve or disapprove a behaviour (Ajzen 1991 ; Fishbein and Ajzen 1975 ). It focuses on everything around individuals, such as social networks, cultural norms, and group beliefs. This is known as a direct determinant of behavioural intention in the theory of reasoned action and the TPB. Through the lens of subjective norms, an individual is said to be willing to perform a certain behaviour even though he or she does not favour performing such behaviour while being under social pressure and social influence (Venkatesh and Davis 2000 ). Kuo and Dai ( 2012 ) state that as subjective norms become more positive, an individual’s behavioural intention to perform or act on a certain behaviour becomes more positive. Several studies have shown a significant relationship between subjective norms and intention (Chan and Lu 2004 ; May 2005 ; Teo and Pok 2003 ; Venkatesh and Davis 2000 ). Sharif and Naghavi’s ( 2020 ) research on family financial socialisation also finds that the behaviour of acquiring relevant norms and information on financial socialisation is associated with subjective norms. The informational subjective norms are known to predict perceived information. Ameliawati and Setiyani ( 2018 ) mention that subjective norms in the TPB represent financial socialisation. Their study describes subjective norms as financial socialisation to research the influence of financial management behaviour. In addition, the research of Jamal et al. ( 2015 ) on the effects of social influence and financial literacy on students’ saving behaviour used the TPB to develop the model. The author uses subjective norms to represent the social pressures influencing students’ intentions to save. It analyses the influences of parents and peers on the impact on the students’ saving behaviour. Hence, subjective norms have a significant effect on the intentions of individuals towards financial planning behaviour.

Attitude has been identified as a construct that guides an individual’s intention, which results in them acting on a particular behaviour. In essence, attitude can be defined as the evaluation of the positive and negative effects on individuals performing an act or behaviour (Fishbein and Ajzen 1975 ), and by extension, reflects the individual’s belief in certain behaviours or acts that contribute positively or negatively to a person’s life (Ajzen and Fishbein 2000 ). There are two components of attitude: the attitude towards a physical object (money, savings, pension) and the attitude towards behaviour or performing a certain act (using savings or money to practice financial planning). Keynes ( 2016 ) and Katona ( 1975 ) state that most individuals possess positive attitudes towards personal saving. Many studies have determined a significant relationship between attitudes and intention (Lu et al. 2003 ; Ramayah et al. 2020 ; Wu and Chen 2005 ). Therefore, attitude can be one of the most important factors to determine and predict human behaviour (Ajzen 1987 ). According to Xiao ( 2008 ), the more favourable the attitude of an individual on performing a behaviour, the easier it is for the individual to perform the behaviour and the stronger the behavioural intention. Further understanding of an individual’s attitude can help to predict their intention and behaviour.

Intention can be defined as an individual’s perception of performing a particular act or behaviour (Fishbein and Ajzen 1975 ). In this regard, intention is said to produce a direct effect on an individual’s behaviour as it signals the willingness of an individual to act (Ajzen 1991 ). The TPB explains that the degree of intentions that are converted into behaviour is determined by the amount of volitional control. Behaviour such as saving money is not considered as full volitional control given the lack of resources and opportunities able to affect the capability to perform the behaviour. While individuals can control their behaviour, their actual behaviour can easily be predicted by their intention accurately, but this does not prove that the measure of correlation is perfect between intention and behaviour (Fishbein and Ajzen 1975 ). Moreover, strong bias always exists in individuals, where they will overestimate the possibility of acting on desired behaviour and underestimate the possibility of acting on undesired behaviour. This can cause inconsistencies between intention and behaviour (performing an actual action) (Ajzen et al. 2004 ). Behaviour and intention will show high correlation whenever the interval time between them is low (Fishbein and Ajzen 1981 ). Yet, intention is known to change over time, and thus, if the interval between intention and behaviour is greater, the possibility of change in intention is higher (Ajzen 1985 ).

Behaviour refers to an observable response to a specific target (Fishbein and Ajzen 1975 ). In essence, the performance of a given behaviour is a direct outcome of the intention to perform that behaviour as well as an indirect result of attitude, subjective norms, and perceived behavioural control (Ajzen 1991 ), as discussed above.

The TPB has been widely used in different fields of research over the past decades: medicine (Hagger and Chatzisarantis 2009 ; McEachan et al. 2011 ), marketing and advertising (King et al. 2008 ; Yaghoubi and Bahmani 2010 ), tourism and hospitality (Han 2015 ; Quintal et al. 2010 ), information science (Lee 2009 ; Shih and Fang 2004 ), and, last but not least, human behaviour (Kobbeltvedt and Wolff 2009 ; Perugini and Bagozzi 2001 ). All the studies listed above have concluded on the positive and significant effect of attitude, subjective norms, and perceived behavioural control on an individual’s intention to act on behaviour. In the financial context, Shih and Fang ( 2004 ) apply the TPB to an individual’s financial decisions regarding internet banking. The study concludes that the TPB can be successfully applied to understand an individual’s intention to use internet banking. Lau et al. ( 2001 ) and Lee ( 2009 ) also apply the TPB to study investors’ intentions on online banking and trading online. To provide a more accurate account for financial planning behaviour, a systematic literature review is conducted and reported in the next sections.

Methodology

Study approach: systematic literature review.

This study conducts a systematic literature review to develop comprehensive insights into financial planning behaviour based on the TPB. As mentioned above, the TPB is the extension of the theory of reasoned action, and it strongly posits that an individual’s behaviour is determined by the three factors (attitude, subjective norms, and perceived behavioural control) and is backed by their behavioural intention (Ajzen 1991 ).

A systematic literature review is known as a ‘research synthesis’, an extensive process of summarising primary research based on an explicit research question, where it attempts to identify, select, synthesise, and assess all the evidence by providing answers to the research question (Donthu et al. 2021 ; Lim et al. 2022a , b ). In this regard, systematic literature reviews not only summarise and synthesise existing knowledge but also facilitate knowledge creation (Kraus et al. 2022 ; Mukherjee et al. 2022 ). Moreover, systematic literature reviews gathered eligible and pertinent evidence based on a preset criterion to answer a specific research question, and thus, a transparent and explicit systematic methodology can be used for systematic literature reviews to analyse and reduce biases (Harris et al. 2014 ; Paul et al. 2021 ).

Systematic literature reviews can be conducted through various methods. Generally, systematic literature reviews can be domain-based, theory-based, and method-based (Palmatier et al. 2017 ; Paul et al. 2021 ). In this study, a theory-based review was used for new theory development. Specifically, the theory-based review is chosen over the other approaches because it serves the purpose of analysing a specific role played by a theory in a given field. One of the examples given by Hassan et al. ( 2015 ) is the role of the TPB in the field of consumer behaviour. In this study, the TPB was applied to financial planning behaviour.

Study procedure: SPAR-4-SLR

Few protocols exist for systematic literature reviews. The most common protocol used by researchers in conducting systematic literature reviews is the preferred reporting items for systematic reviews and meta-analysis (PRISMA) by Moher et al. ( 2009 ). PRISMA is a comprehensive protocol that helps researchers to develop systematic literature reviews. It gathers and reports decisions that researchers have justified from their reviews. However, an uprising protocol was proposed by Paul et al. ( 2021 ) to address the existing limitations of PRISMA, namely the Scientific Procedures and Rationales for Systematic Literature Reviews protocol or the SPAR-4-SLR protocol. As shown in Fig.  1 , the protocol consists of three stages and six sub-stages, followed by sequences.

Assembling This stage constitutes the (1a) identification and (1b) acquisition of literature that is yet to be synthesised.

Arranging This stage entails the (2a) organisation and (2b) purification of literature in the stage of being synthesised.

Assessing This stage reflects the (3a) evaluation and (3b) reporting of literature that has been synthesised.

Review process

Systematic reviews assembling, arranging, and assessing the literature according to the SPAR-4-SLR protocol are expected to: (1) provide significant insights and (2) stimulate nuanced agendas for knowledge advancement in the review domain. Substantially, by providing such significant insights and agendas using the SPAR-4-SLR protocol, (1) the review is comprehensively justified for logical and pragmatic reasons, and (2) each stage and sub-stage is reported with full transparency.

The researchers begin with assembling in the (1a) identification stage, identifying the research domain and research question. The research domain of this study is behavioural finance with a specific focus on financial planning. The research question of this study is ‘How can the TPB be contextualised to develop a theory of financial planning behaviour?’ Thus, academic articles selected should focus on financial planning (i.e. the focus of this review) and the TPB (i.e. the theory contextualised for this review). The source quality was established based on Scopus or Web of Science indexing in line with Paul et al. ( 2021 ). Moving on to the (1b) acquisition stage, the search mechanism will rely on Google Scholar, which is free and can be easily accessed for article search. Footnote 3 The search period will begin from 2000 to 2020 (20 years) as most articles on the TPB and financial planning behaviour started to appear in the early 2000s. Related articles searched between these years are included in this study. The search was conducted multiple times with different keywords based on American and British spelling as well as different combinations: (1) ‘financial planning’ + ‘theory of planned behavior’, (2) ‘financial planning’ + ‘theory of planned behaviour’, (3) ‘personal financial planning’ + ‘theory of planned behavior’, and (4) ‘personal financial planning’ + ‘theory of planned behaviour’. Footnote 4

Next, the researchers move onto arranging in the (2a) organisation stage, wherein the organising code for this study is ADO and TCM, which rely on the suggested frameworks used, the ADO framework (Paul and Benito 2018 ; Pansari and Kumar 2017 ) and the TCM framework (Paul et al. 2017 ). Refer to Fig.  2 for the overview of ADO on the insights of the TPB on financial planning behaviour and its supporting TCM. In the (2b) purification stage, the articles gathered are filtered in this process. The researchers decided which articles to include and exclude from the study. The criteria to exclude articles in this stage include duplicate articles, irrelevant articles, inaccessible articles, and lastly, non-journal-title articles; 41 articles were excluded based on the criteria, and 30 articles proceeded to the next stage.

The state of the art of the antecedents, decisions, and outcomes of financial planning behaviour and its supporting theories, contexts, and methods

Finally, the researchers move into assessing in the (3a) evaluation stage, which involves the analysis and the agenda proposal. The study utilised content analysis, a methodical approach for coding and interpreting textual data from the selected articles to draw meaningful conclusions (Kraus et al. 2022 ). This systematic technique, which was executed by one author (a doctoral scholar) and cross-validated by another author (a senior academic) with an intercoder reliability of ± 95% and differences clarified and resolved, enabled the researchers to identify, categorise, and analyse patterns within the text, contributing to a comprehensive understanding of the subject matter (Patil et al. 2022 ). The theory development and future research agenda were formulated through conceptual extrapolation and sensemaking (i.e. scanning, sensing, and substantiating) (Lim and Kumar 2023 ). This process entailed critically examining the existing theories, extracting key concepts, and extrapolating these to propose new research directions. Thus, this study provided a roadmap for future studies, fostering further evolution in the field of financial planning behaviour. In the (3b) reporting stage, the reporting conventions used include figures, tables, and words. No ethical approval is required since the review is based on accessible secondary data (journal articles), which can be accessed by anyone with subscription (Lim et al. 2022a , b ).

Profile of TPB and financial planning behaviour research

The systematic review of 30 articles covered different insights into the existing research of the TPB and financial planning behaviour, covering the six components of financial planning (i.e. cash flow planning, tax planning, risk management, investment planning, estate planning, and retirement planning) (Fig.  2 ). Appendix 1 summarises the articles in Appendix 2 based on the approaches of Paul and Mas ( 2019 ) and Harmeling et al. ( 2016 ). The articles are classified based on author citations, years, number of citations, methods, sample, related financial planning components and variables, and lastly findings. The findings of each article briefly explained how the construct of the TPB is a predictor or shows a significant effect on financial planning behaviour.

Based on this review, which begins from 2000 to 2020, the past two decades of research in the field of behavioural economics (later known as behavioural finance) have been on continuously identifying and explaining an individual's finances from an extended social science perspective, which includes psychology and sociology. Behavioural finance can be defined as the field of study where psychological factors affect an individual's financial behaviour (Shiller 2003 ). The combination of the TPB and financial planning has proven to be impactful with over 3000 citations among the 30 articles. The articles utilised four different methods: the quantitative approach ( n  = 24), the qualitative approach ( n  = 3), the mixed method approach ( n  = 1), and the conceptual approach ( n  = 2).

Lastly, the TPB (i.e. attitude, subjective norms, perceived behavioural control, and behavioural intention) has been found to be a good predictor of financial planning behaviour (i.e. cash flow planning, tax planning, risk management, investment planning, estate planning, and retirement planning) and possesses positive relationships with each component of financial planning. For example, the TPB was found to be positively related to the intention to invest, mental budgeting behavioural intention, influencing savings and investment, and the intention to prevent risky credit behaviour, among others.

Contextualising the TPB for financial planning behaviour

Table 2 and Fig.  3 show the contextualisation of the TPB for financial planning behaviour, leading to the establishment of the theory of financial planning behaviour. Pansari and Kumar ( 2017 ) suggest the use of such a table to compare and explain each construct of the framework. The table, which leverages the findings from the review depicted in Fig.  2 , clearly illustrates how the TPB can be contextualised to explain financial planning behaviour. Attitude can manifest as financial satisfaction, wherein individuals who are dissatisfied, not fully satisfied, or wish to be more satisfied with their financial state will develop a positive disposition towards financial planning. Subjective norms can manifest as financial socialisation, wherein individuals learn about societal expectations of financial planning when they socialise with others (e.g. family, friends, work colleagues). Perceived behavioural control can manifest as financial literacy, mental accounting, and financial cognition, wherein the effect of financial satisfaction and financial socialisation is mediated through financial literacy, which may be shaped by the capability to perform mental accounting and the capacity for financial cognition. These factors can collectively shape the individual's intention to engage in financial planning, which, in turn, motivates the actual behaviour of engaging in financial planning, which can take six forms, namely cash flow planning, tax planning, investment planning, risk management, estate planning, and retirement planning.

Visual representation of contextualising the TPB into the theory of financial planning behaviour

Reflections and ways forward

Behavioural decision-making has been one of the most significant research interests for economists over the past decades. Past researchers (Xiao and Wu 2006 ; East 1993 ; Bansal and Taylor 2002 ) have applied the TPB to financial behaviour. The three antecedents of the TPB (attitude, subjective norms, and perceived behavioural control) were found to be associated with the intention of an individual and contribute to financial behaviour (Shim et al. 2007 ; Xiao et al. 2007 ). Unlike other theories, the mediating effect of financial literacy can be applied to the TPB to explain financial behaviour intentions. The variables of mental accounting and financial cognition were not frequently used by the researchers in the study of financial planning, while in this study, both variables are positioned as relevant components of perceived behavioural control in the TPB.

The concept of mental accounting has been extensively studied in the research area of psychology on financial decisions (Mahapatra and Mishra 2020 ). However, past studies on mental accounting in financial planning are insufficient. The formation and influences of mental accounting as a cognitive process—which consists of the concepts of current income, current assets, and future income as well as mental budgeting—play an important role in the personal financial planning process to each individual. It serves as a guideline in the process of financial planning and provides useful insights. Budgeting plays a key role in managing the financial life of an individual in terms of short-term (e.g. prioritising spending in different categories) and long-term (e.g. setting aside money for investment and future use) financial planning.

Previous research has applied mental accounting with the theory of the behavioural life-cycle model. Shefrin and Thaler ( 1988 ) mentioned that people mentally divide their incomes into current income, current assets, and future income, where the marginal propensity to consume (MPC) for each account is relatively different. Mental accounting is helpful and crucial for individuals to plan for their future financial needs so that they can deal with any unexpected financial difficulties in the future. However, there are still gaps to fill to come out with optimal financial decisions. Therefore, given the need of individuals for personal financial planning, it is necessary to apply mental accounting to each individual by determining their spending and saving tendencies.

Moreover, the 2008 global financial crisis and the COVID-19 pandemic have also taught the world painful lessons; the need for financial literacy and cash flow control has been highlighted and considered by the public. A study conducted by Shahrabani ( 2012 ) on the effect of financial literacy and intention to control personal budget concludes that individuals with high levels of financial knowledge and literacy can influence the intention to have budgetary control. The study shows a positive relationship between the intention to budget and financial knowledge. Selvadurai and Siraj ( 2018 ) study financial literacy education and retirement planning in Malaysia. The authors mention that mental accounting is closely related to financial literacy education. Financial literacy can enhance mental accounting as it affects the behaviour of an individual in planning their savings and expenditure. In particular, individuals who acquire financial literacy education are most likely able to control their expenditure by not spending more than their income, which results in having sufficient savings in the long run. The relationship between mental accounting and financial literacy has been proven to be indispensable.

Cognitive ability also plays an important role in financial literacy as it entails understanding financial knowledge and the ability to perform with available resources. While the relationship between financial cognition and financial literacy is strong, individuals can use their cognitive abilities to solve financial problems. Yet, the cognitive biases exist and influence financial decision-making. Agarwal and Muzumder ( 2013 ) state that individuals with no cognitive ability are most likely to face difficulties while making financial decisions. Also, individuals must at least acquire good memory skills, conceptual ability, and financial sophistication to be involved in financial activities. According to Fu et al. ( 2010 ), understanding the attitude of an individual enables one to predict their intentions and behaviour. This could also influence the formation of their attitude. Lusardi and Mitchell ( 2014 ) mention that cognitive abilities are a significant component of financial literacy to determine desirable financial decision-making. In the case of financial literacy, a link between cognitive abilities and the adaptability of financial decision-making has been studied extensively in the field of personal finance. An individual must acquire cognitive skills to make a sound financial decision in an effortless way, which consists of the ability to recall and utilise financial knowledge (memory) and to implement various numerical operations (numeracy) (Chirstelis et al. 2010 ; McArdle et al. 2009 ). Three variables were discussed under the model of financial cognition: financial attitude, risk attitude, and financial knowledge.

Based on the information mentioned above, the mediating effect of financial literacy on mental accounting and financial cognition is indispensable. Policymakers and researchers should work on improving financial literacy and forming positive financial behaviours. Several studies have proven that financial literacy has slowly become a significant component of rational financial decision-making and that it also provides implications for financial behaviour. Individuals or families with higher levels of financial literacy will have an advantage compared to others and higher wealth accumulation as they have the knowledge and skills to participate in financial activities (Schmeiser and Seligman 2013 ). Past studies have proven that financial literacy plays a remarkable role in determining financial outcomes in terms of the components of financial planning (Hilgert et al. 2003 ). Hence, the need for financial literacy in financial planning is indispensable, and it should be considered by individuals as it affects their welfare.

However, no one has attempted to contextualise the TPB and financial planning with the variable of mental accounting and financial cognition with the mediating effect of financial literacy to understand and determine financial behaviour. Thus, this new theory clarifies the conceptualisation and operationalisation of the theory of financial planning behaviour between the variables of mental accounting and financial cognition, and, most importantly, the mediating effect of financial literacy. However, the new theory, in its present and encompassing form, has yet to be tested empirically, and therefore, this warrants future research across different financial products across countries and populations to establish its generalisability.

Discussion and conclusion

This study developed a new theory called the theory of financial planning behaviour using the TPB of Ajzen to understand the financial behaviour of individuals in managing their personal finances. This study examines how the TPB can be contextualised into a theory that more relevantly explains financial planning behaviour. The theoretical background section of this study presents a comprehensive review of the evolution of theories as well as theorisation for the TPB. With a systematic review of the literature, it can be concluded that the constructs of the TPB can be contextualised to better explain financial planning behaviour—that is, the review results showed how different concepts and factors affect the financial planning of an individual by substituting the original components of the TPB with financial variables. Moving on, this study concludes with an articulation of its implications for academics, consumers, and managers.

Implications for academics

The main theoretical contribution of this study is the establishment of the theory of financial planning behaviour. Noteworthily, this new theory represents a noteworthy attempt to demonstrate how a grand theory such as the TPB can be contextualised and thus transformed into a new theory that resonates with realities in the field, in this case, financial planning. The systematic literature review methodology has also proven itself as a useful approach to source for scholarly evidence to offer preliminary support for the new theory.

Another noteworthy contribution is the extrapolation of perceived behavioural control, which answers the call by Lim and Weissmann ( 2023 ) to identify or source for new forms of behavioural control, going beyond the traditional psychological conceptualisation of self-efficacy. Through this study, three types of perceived behavioural control were revealed: financial literacy, mental accounting, and financial cognition. Moreover, the interdependent relationships between these three forms of perceived behavioural control were also identified and theorised, wherein the capability of mental accounting and the capacity for financial cognition shape the financial literacy of the individual, which, in turn, mediates the effects of financial satisfaction (attitude) and financial socialisation (subjective norms) on that individual’s intention and actual behaviour to engage in financial planning.

For researchers seeking to apply the theory of financial planning behaviour in a study, they might operationalise the variables in the following way. Financial satisfaction, financial socialisation, and financial literacy could be assessed using the scales validated by Madinga et al. ( 2022 ). Financial cognition and mental accounting, being somewhat newer constructs in the literature, might require the development of new scales, which could be validated through exploratory and confirmatory factor analysis. For data analysis, researchers might employ a structural equation modelling (SEM) approach to test the relationships between these constructs, as SEM allows for the simultaneous examination of multiple relationships among observed and latent variables. This technique also enables researchers to test the mediating role of financial literacy in the relationship between financial satisfaction, financial socialisation, and financial planning behaviour, thereby assessing the robustness of the proposed theory. If researchers are interested in examining the moderating effects of certain variables (e.g. age, education, or household income), they could use moderation analysis to determine whether the strength or direction of these relationships varies under different conditions.

To this end, the theory of financial planning behaviour should serve as a useful foundational theory to understand a myriad of individual financial planning behaviour such as cash flow planning, tax planning, investment planning, risk management, estate planning, and retirement planning. In this regard, future research is encouraged to explore for new mechanisms that can positively influence or strengthen the variables espoused by the new theory, such as financial satisfaction (e.g. mechanisms that can prompt individuals to evaluate their financial satisfaction—e.g. advertising), financial socialisation (e.g. platforms to encourage individuals to socialise within a financial setting—e.g. metaverse and social media groups), and financial literacy (e.g. ways to enhance mental accounting capability and financial cognition capacity). Nonetheless, this study does not discount the possibility of discovering additional attitudinal, normative, and control variables, which could lead to possible extensions to the theory of financial planning behaviour, as in the case witnessed by TPB. Thus, the new theory herein is intended to inspire new ideas, not to limit them.

Implications for consumers

This study reaffirms the importance of financial planning to safeguard financial resilience in individuals' daily lives. Adopting financial planning entails endless benefits for consumers who do so. Noteworthily, it is important to determine short-term and long-term financial goals and to achieve them via financial planning. Having these goals in mind can provide a sense of direction and purpose in life.

This study is important for all consumers who wish to make ideal financial decisions. Consumers may adopt better cash flow management by implementing financial planning to have a stable financial flow. A cash flow plan can provide an estimation of future income and expenses to achieve financial efficiency and create an emergency fund. Hence, implementing financial planning may help to relieve financial stress and plan for future needs.

Also, consumers can not only gain monetary benefits but also improve their financial literacy. The world has slowly become more financialised, where financial products have developed rapidly and become more complex (Kumar et al. 2023 ; Goodell et al. 2021 ), which requires consumers to be financially literate before making ideal financial decisions (She et al. 2023 ; Bannier and Schwarz 2018 ). Thus, financial institution managers and policymakers are working on improving the financial literacy of consumers and forming positive financial behaviour.

Indeed, financial literacy is a significant component of rational financial decision-making, and it also provides implications towards financial behaviour. Individuals or families with higher levels of financial literacy will have an advantage compared to others as well as higher wealth accumulation as they have the knowledge and skills to participate in financial activities.

Crucial to developing financial literacy is the capability to do mental accounting and the capacity for financial cognition. That is to say, consumers must seek financial education, be it formally or informally, so that they are able to identify and evaluate the different options for financial planning. Similarly, consumers should allocate adequate resources (effort, time) to think about financial planning, which is not a low but rather high involvement process.

Implications for managers

Promoting financial planning has always been a major challenge for financial managers. The newly established theory of financial planning behaviour emerging from the grand TPB can be put into practice by authorities. The findings of this study can be used by financial managers to understand the financial planning behaviour of consumers.

Based on the results and implications of past studies, introducing financial planning behaviour can benefit banks as well as investment and insurance companies that aim to promote consumer financial well-being. It can provide insights into how different factors affect the intention and adoption of financial planning.

Financial literacy needs to be considered as it is an important mediating factor that influences the intentions and behaviour of consumers. For example, whenever a bank introduces financial products to a prospect, that bank must ensure that the prospect is financially literate or else provide sufficient financial knowledge before the prospect develop a financial plan or purchase any financial product from that bank. This is to ensure that their customers possess knowledge of and clarity on the program or product.

In addition, financial institution managers are encouraged to focus on factors (i.e. mental accounting, financial cognition, financial socialisation, financial satisfaction, and financial literacy) that influence customer behaviour towards financial planning before implementing financial programs. For example, understanding the budgeting styles and minimum level of financial satisfaction of customers may help to develop relevant and applicable financial plans for them. Consider a middle-aged client, John, who has recently experienced a job loss. John is feeling uncertain about his financial future and seeks advice from a financial advisor. The financial advisor, following the theory of financial planning behaviour, would first evaluate John's financial literacy level to assess his understanding of financial products and concepts. Then, the advisor would use the theory's constructs such as mental accounting (how John organises his finances and prioritises spending), financial cognition (how John understands his financial situation), and financial satisfaction (how content John is with his current financial state) to develop a comprehensive financial plan. For instance, the financial advisor may realise that John's financial cognition is low, indicating a lack of understanding of the severity of his financial situation. Therefore, to improve his financial cognition, the advisor would emphasise financial education and assist John in developing better mental accounting habits, such as setting up separate 'pots' for his savings, expenses, and investments. This approach is aligned with promoting financial literacy and ensuring the client's knowledge and clarity on his financial plan, which are aspects underscored in our theory.

Implications for policymakers

The findings of this study serve to inform and guide policymaking in significant ways. Policymakers play a crucial role in shaping the financial landscape that influences financial planning behaviour. A key aspect is the importance of financial literacy, which suggests that national education policies should incorporate financial education from early learning stages. Special focus should be given to underprivileged and marginalised communities, who may lack access to financial literacy resources. This might involve legislation mandating financial institutions to fund these education programs as a part of their corporate social responsibility.

This study also illuminates the role of mental accounting and financial cognition in financial planning behaviour. This could inspire policymakers to collaborate with technology developers to create user-friendly digital tools and applications that promote mental accounting practices. Such initiatives should be supported by national policies encouraging technological innovation in the financial sector.

Furthermore, the impact of financial satisfaction on financial planning behaviour underscores the need for regulation in financial advertising. Policymakers should ensure that financial advertising does not create unrealistic expectations that lead to dissatisfaction, and transparency should be mandated, with severe penalties for institutions found to be misleading consumers.

Moreover, the study's findings encourage the creation of financial socialisation platforms. Policies should support the development of both online and offline platforms for learning, sharing, and discussing financial planning strategies and experiences. Policymakers should work with technology companies, local communities, and financial institutions to ensure these platforms are safe, accessible, and inclusive.

Lastly, the responsibility of policymakers extends to the protection of citizens from unfair financial practices. Legislation should ensure transparency in financial markets, particularly regarding fees, interest rates, and risks associated with financial products. Policymakers may also consider mandating financial counselling for complex financial decisions, such as mortgages or large investments, to increase financial satisfaction.

Limitations and future research directions

Notwithstanding the contributions of this study, several limitations exist that may pave the way for future research.

First, financial planning behaviour remains in the infant stage and thus the newly established theory was limited to available evidence. In this regard, this study does not discount the possibility of extending the theory of financial planning behaviour in enriching ways, such as by adding new dimensions of the original TPB components (e.g. additional forms of perceived behavioural control).

Second, the theory of financial planning behaviour has not been empirically examined in its entirety. Thus, future research is encouraged to adopt or adapt this newly established theory in empirical investigations to ascertain its reliability, validity, and generalisability.

Third, the systematic literature review herein was limited to a single theoretical lens (TPB). As indicated through the theoretical foundation discussion, multiple theories exist to explain financial planning behaviour. In this regard, it is important to acknowledge that the development of theories in this area is continuously evolving. As other theories mature, it would be beneficial for future research to consider conducting similar reviews using those theories, to provide a more comprehensive understanding of financial planning behaviour. This could potentially uncover novel insights and lead to the development of new frameworks that could more holistically explain individuals' financial behaviours.

Fourth, the outcomes of financial planning have not been theorised. While the assumption is that good financial planning results in financial resilience, further investigation is needed to empirically verify this assumption. Further exploration of other possible outcomes is also encouraged, both at the micro-level (e.g. life satisfaction, quality of life) and at the macro-level (e.g. country happiness and financial strength).

Fifth, the relationships in the theory of financial planning behaviour are inherently linear. Nonetheless, as experience in financial planning accumulates over time, this study does not discount the possibility of a cyclical loop that reinforces the said relationships. In this regard, future research that extrapolates the theory through a longitudinal perspective is also encouraged.

Sixth, the research landscape of financial behaviour is broad and includes other aspects such as financial counselling and financial therapy. Although these areas were not covered in this study, they may be relevant in the context of the TPB and could contribute to a more comprehensive understanding of financial behaviours. Thus, future research could consider investigating these areas using the TPB, which could also include other related theories, as a guiding theoretical framework. The expansion of search terms in subsequent studies would allow for a more diverse exploration of financial behaviours, potentially enhancing the generalisability and applicability of the findings. Furthermore, it may also reveal a broader range of factors influencing financial planning behaviour and related areas. Hence, researchers are encouraged to extend the current study by exploring the use of TPB alongside related theories in different areas of financial behaviour.

In closing, while this study viewed financial planning within the context of behavioural finance, it is crucial to underscore the fact that financial planning is a distinct profession with its own body of literature. Financial planning transcends the boundary of understanding and predicting individual financial behaviours. It encompasses a broad spectrum of activities, from cash flow management to estate planning, which are geared towards enhancing an individual's economic satisfaction. Each of these areas possesses a unique set of complexities and necessitates a specialised set of knowledge and skills. The profession of financial planning is dedicated to addressing these complexities and enhancing individuals' financial well-being. Our exploration of financial planning behaviour through behavioural finance should be seen as a facet of the broader, multi-dimensional discipline of financial planning. Future research should therefore endeavour to add to the rich and varied literature of financial planning to offer a more holistic and nuanced understanding of financial behaviour.

Based on a search for “personal finance” in the “title, abstract and keywords” and the subject area of “business, management and accounting” in Scopus on 25 December 2022.

Smooth consumption refers to consumption that balances or optimises spending and saving during different life phases to achieve the greatest overall standard of living (Morduch 1995 ).

Instead of Scopus or Web of Science, which are subscription-based, Google Scholar was used as the search mechanism because it is free to use and thus more accessible. Source quality can still be maintained by referring to Scimago Journal Ranks, which relies on Scopus, and Web of Science Master Journal List, albeit manually. With the journal lists acting as a cross-check mechanism and without the need for bibliometric data, Google Scholar is deemed to be adequate for the search and review. This practice is similar to that of existing reviews (e.g. Lim and Weissmann 2023 ; Lim et al. 2021 ).

Unlike Scopus or Web of Science, which use search string, Google Scholar use search keywords.

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Appendix 1: Articles on financial planning behaviour and TPB

• NA not available, TPB theory of planned behaviour.

Appendix 2: List of articles reviewed

Akhtar, F. and Das, N. (2019). Predictors of investment intention in Indian stock markets. International Journal of Bank Marketing 37(1): 97–119.

Ali, S., Zani, R. M., and Kasim, K. (2015). Factors influencing investors' behavior in Islamic unit trust: An application of theory of planned behavior. Journal of Islamic Economics Banking and Finance 10(2): 183–201.

Aziz, S., Md Husin, M. and Hussin, N. (2017). Conceptual framework of factors determining intentions towards the adoption of family takaful- An extension of decomposed theory of planned behaviour. International Journal of Organizational Leadership 6(3): 385–399.

Balushi, Y. A., Locke, S. and Boulanouar, Z. (2018). Islamic financial decision-making among SMEs in the Sultanate of Oman: An adaption of the theory of planned behaviour. Journal of Behavioral and Experimental Finance 20): 30–38.

Cloutier, J. and Roy, A. (2020). Consumer credit use of undergraduate, graduate and postgraduate students: An application of the theory of planned behaviour. Journal of Consumer Policy 43(3): 565–592.

Croy, G., Gerrans, P. and Speelman, C. (2012). Normative influence on retirement savings decisions: Do people care what employers and the government want? Australian Journal of Psychology 64(2): 83–91.

Danes, S.M. and Yang, Y. (2014). Assessment of the use of theories within the journal of financial counseling and planning and the contribution of the family financial socialization conceptual model. Journal of Financial Counseling and Planning 25: 53–68.

Gopi, M. and Ramayah, T. (2007). Applicability of theory of planned behavior in predicting intention to trade online. International Journal of Emerging Markets 2(4): 348–360.

Griffin, B., Loe, D. and Hesketh, B. (2012). Using proactivity, time discounting, and the theory of planned behavior to identify predictors of retirement planning. Educational Gerontology 38(12): 877–889.

Habibah, U., Hassan, I., Iqbal, M. S. and Naintara. (2018). Household behavior in practicing mental budgeting based on the theory of planned behavior. Financial Innovation 4(1): 1–14.

Hofmann, E., Hoelzl, E. and Kirchler, E. (2007). A comparison of models describing the impact of moral decision making on investment decisions. Journal of Business Ethics 82(1): 171–187.

Kimiyagahlam, F., Safari, M. and Mansori, S. (2019). Influential behavioral factors on retirement planning behavior: The case of Malaysia. Journal of Financial Counseling and Planning 30(2): 244–261.

Kimiyaghalam, F., Mansori, S., Safari, M. and Yap, S. (2017). Parents' influence on retirement planning in Malaysia. Family and Consumer Sciences Research Journal 45(3): 315–325.

Koropp, C., Kellermanns, F. W., Grichnik, D. and Stanley, L. (2014). Financial decision making in family firms. Family Business Review 27(4): 307–327.

Lai, C. P. (2019). Personality traits and stock investment of individuals. Sustainability 11(19): 5474.

Magwegwe, F. M. and Lim, H. (2020). Factors associated with the ownership of individual retirement accounts (IRAs): Applying the theory of planned behavior. Journal of Financial Counseling and Planning 32(1): 116–130.

Md Husin, M. and Ab Rahman, A. (2016). Predicting intention to participate in family takaful scheme using decomposed theory of planned behaviour. International Journal of Social Economics 43(12): 1351–1366.

Nosi, C., D'Agostino, A., Pagliuca, M. and Pratesi, C. (2017). Securing retirement at a young age: Exploring the intention to buy longevity annuities through an extended version of the theory of planned behavior. Sustainability 9(6): 1069.

Nurwanah, A., T., S., Rosidi, R. and Roekhudin, R. (2018). Determinants of tax compliance: theory of planned behavior and stakeholder theory perspective. Problems and Perspectives in Management 16(4): 395–407.

Paramita, S., Isbanah, Y., Kusumaningrum, T.M., Musdholifah, M. and Hartono, U. (2018). Young investor behavior: Implementation theory of planned behavior. International Journal of Civil Engineering and Technology 9(7): 733–746.

Raut, R. K., Das, N. and Kumar, R. (2018). Extending the theory of planned behaviour: Impact of past behavioural biases on the investment decision of Indian investors. Asian Journal of Business and Accounting 11(1): 265–291.

Rutherford, L.G. and DeVaney, S. (2009). Utilizing the theory of planned behavior to understand convenience use of credit cards. Journal of Financial Counseling and Planning 20(2): 48–63.

Shim, S., Barber, B. L., Card, N. A., Xiao, J. J. and Serido, J. (2009). Financial socialization of first-year college students: The roles of parents, work, and education. Journal of Youth and Adolescence 39(12): 1457–1470.

Sultana, S., Zulkifli, N. and Zainal, D. (2018). Environmental, social and governance (ESG) and investment decision in Bangladesh. Sustainability 10(6): 1831.

Taing, H. B. and Chang, Y. (2020). Determinants of tax compliance intention: Focus on the theory of planned behavior. International Journal of Public Administration 44(1): 62–73.

Warsame, M. H. and Ireri, E. M. (2016). Does the theory of planned behaviour (TPB) matter in Sukuk investment decisions?. Journal of Behavioral and Experimental Finance 12): 93–100.

Xiao, J. J. and Wu, J. (2006). Applying the theory of planned behavior to retain credit counseling clients. SSRN Electronic Journal .

Xiao, J. J., Tang, C., Serido, J. and Shim, S. (2011). Antecedents and consequences of risky credit behavior among college students: Application and extension of the theory of planned behavior. Journal of Public Policy & Marketing 30(2): 239–245.

Xiao, J.J. and Wu, G. (2008). Completing debt management plans in credit counseling: An application of the theory of planned behavior. Journal of Financial Counselling and Planning 19(2): 29–45.

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Yeo, K.H.K., Lim, W.M. & Yii, KJ. Financial planning behaviour: a systematic literature review and new theory development. J Financ Serv Mark (2023). https://doi.org/10.1057/s41264-023-00249-1

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What is a financial plan?

A financial plan is a comprehensive picture of your current finances, your financial goals and any strategies you've set to achieve those goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life.

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What is financial planning?

Financial planning is an ongoing process that looks at your entire financial situation in order to create strategies for achieving your short- and long-term goals. It can reduce your stress about money, support your current needs and help you build a nest egg for goals such as retirement.

Creating a financial plan is important because it allows you to make the most of your assets and gives you the confidence to weather any bumps along the way. You can make a financial plan yourself or get help from a financial planning professional. Online services like robo-advisors have also made getting assistance with financial planning more affordable and accessible than ever.

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via Zoe Financial

9 steps in financial planning

1. set financial goals.

A good financial plan is guided by your financial goals. If you approach your financial planning from the standpoint of what your money can do for you — whether that's buying a house or helping you retire early — you'll make saving feel more intentional.

Make your financial goals inspirational. Ask yourself: What do I want my life to look like in five years? What about in 10 and 20 years? Do I want to own a car, or a house? Do I want to be debt-free? Pay off my student loans? Are kids in the picture? How do I imagine my life in retirement?

Having concrete goals can make it easier to identify and complete the next steps, and provide a guiding light as you work to make those aims a reality.

Financial Goals: Where to Begin

How to Set Financial Goals

2. Track your money

Get a sense of your monthly cash flow — what’s coming in and what’s going out. An accurate picture is key to creating a financial plan and can reveal ways to direct more to savings or debt pay-down. Seeing where your money goes can help you develop immediate, medium-term and long-term plans.

For example, developing a budget is a typical immediate plan. NerdWallet recommends the 50/30/20 budget principles: Put 50% of your take-home pay toward needs (housing, utilities, transportation and other recurring payments), 30% toward wants (dining out, clothing, entertainment) and 20% toward savings and debt repayment. Reducing credit card or other high-interest debt is a common medium-term plan, and planning for retirement is a typical long-term plan.

Budgeting 101: How to Budget Money

Free Budget Planner Worksheet

3. Budget for emergencies

The bedrock of any financial plan is putting cash away for emergency expenses. You can start small — $500 is enough to cover small emergencies and repairs so that an unexpected bill doesn’t run up credit card debt. Your next goal could be $1,000, then one month’s basic living expenses, and so on.

Building credit is another way to shockproof your budget. Good credit gives you options when you need them, like the ability to get a decent rate on a car loan. It can also boost your budget by getting you cheaper rates on insurance and letting you skip utility deposits.

How to Build Credit

Emergency Fund: What It Is and Why It Matters

Emergency Fund Calculator

4. Tackle high-interest debt

A crucial step in any financial plan: Pay down high-interest debt, such as credit card balances, payday loans, title loans and rent-to-own payments. Interest rates on some of these may be so high that you end up repaying two or three times what you borrowed.

If you’re struggling with revolving debt, a debt consolidation loan or debt management plan may help you wrap several expenses into one monthly bill at a lower interest rate.

Pay Off Debt: Tools and Tips

How to Pay Off Debt Fast: 7 Tips

5. Plan for retirement

If you visit a financial advisor , they will be sure to ask: Do you have an employer-sponsored retirement plan such as a 401(k) , and does your employer match any part of your contribution? True, 401(k) contributions decrease your take-home pay now, but it’s worth it to consider putting in enough to get the full matching amount. That match is free money.

If you have a 401(k), 403(b) or similar plan, financial advisors also generally suggest that you gradually expand your contributions toward the IRS limit. $23,000 in 2024 ($30,500 for those age 50 or older)

Another savings vehicle for retirement planning is an IRA , or individual retirement arrangement. These tax-advantaged investment accounts can further build retirement savings. The contribution limit is $7,000 in 2024 ($8,000 if age 50 or older) .

How Much Should I Contribute to a 401(k)?

IRA Contribution Limits Explained

6. Optimize your finances with tax planning

For many of us, taxes take center stage during filing season, but careful tax planning means looking beyond the Form 1040 you submit to the IRS each year.

For example, if you're netting a sizable refund each year, you may be needlessly living on less throughout the year. Learning how and when to review your W-4 , the form you fill out with employers, can help you to take control of your future. Adjust your withholdings on your W-4, and you either can keep more of your paycheck, or pay a smaller tax bill.

Getting cozy with the tax law also means looking into tax credits and deductions ahead of time to understand which tax breaks could make a difference when it comes time to file. The government offers many incentives for taxpayers who have children, invest in green home improvements or technologies, or are even pursuing higher education.

Tax Planning for Beginners: 6 Tax Strategies & Concepts to Know

Federal Brackets and Income Tax Rates

Popular Tax Deductions and Tax Credits

7. Invest to build your future goals

Investing might sound like something for rich people or for when you’re established in your career and family life. It’s not. Investing can be as simple as putting money in a 401(k) and as easy as opening a brokerage account (many have no minimum to get started). Financial plans use a variety of tools to invest for retirement, a house or college.

How to Invest Money: Choosing the Best Way To Invest for You

How To Invest in Stocks

Saving for Education: 529 Plan Rules and Contribution Limits

8. Grow your financial well-being

With each of these steps, you're protecting yourself from financial setbacks. If you can afford it, decide whether you'd like to do more, such as:

Increasing contributions to your retirement accounts.

Padding your emergency fund until you have three to six months of essential living expenses.

Using insurance to protect your financial stability, so a car crash or illness doesn’t derail you. Life insurance protects loved ones who depend on your income. Term life insurance, covering 10-year to 30-year periods, is a good fit for most people’s needs.

Backdoor Roth IRA: What It Is and How to Set One Up

What Is Life Insurance and How Does It Work?

9. Estate planning: Protect your financial well-being

Financial planning also means looking out for your future needs, as well as mapping things out for your loved ones. Creating a will can help ensure your assets are distributed according to your wishes. Other types of estate-planning documents can also provide your relatives with clarity on how you would like to be cared for, and who should manage your affairs.

Estate Planning Checklist

Estate Tax Planning: How Does Your Strategy Look?

Types of financial planning help

A financial plan isn’t a static document — it's a tool to track your progress, and one you should adjust as your life evolves. It's helpful to reevaluate your financial plan after major life milestones, such as getting married, starting a new job, having a child or losing a loved one.

If you're not the DIY type — or if you want professional help managing some tasks and not others — you don't have to go it alone. Consider what kind of help you need:

Complete financial plan and investment advice

Online financial planning services offer virtual access to human advisors. A basic service would include automated investment management (like you’d get from a robo-advisor), plus the ability to consult with a team of financial advisors when you have other financial questions. More comprehensive providers basically mirror the level of service offered by traditional financial planners : You're matched with a dedicated human financial advisor who will manage your investments, create a comprehensive financial plan for you, and do regular check-ins to see if you're on track or need to adjust your financial plan.

» Want to work with a local advisor ? Learn how to find a financial advisor near you

Specialized guidance and/or want to meet with an advisor face-to-face

If you have a complicated financial situation or need a specialist in estate planning, tax planning or insurance, a traditional financial advisor in your area may fit the bill. To avoid conflicts of interest, consider fee-only financial advisors who are fiduciaries (meaning they've signed an oath to act in the client's best interest). Note that some traditional financial advisors decline clients who don’t have enough to invest; the definition of “enough” varies, but many advisors require $250,000 or more. If you want to know more about how much seeing an advisor will cost, read our guide to financial advisor fees .

» Need some help? Check out our roundup of the best wealth advisors

Portfolio management only

Robo-advisors offer simplified, low-cost online investment management. Computer algorithms build an investment portfolio based on goals you set, and your answers to questions about your risk tolerance. After that, the service monitors and regularly rebalances your investment mix to ensure you stay on track. Because it's all digital, it comes at a much lower cost than hiring a human portfolio manager.

» Need help investing? See our list of the best robo-advisors

Why is financial planning important?

Financial planning can help you feel more confident about navigating bumps in the road — like, say, a recession or historic inflation . According to Charles Schwab's 2023 Modern Wealth Survey, Americans who have a written financial plan feel more in control of their finances compared with those without a plan [0] Charles Schwab . Charles Schwab Modern Wealth Survey 2023 . Accessed Aug 7, 2023. View all sources .

Once your basic needs and short-term goals have been addressed, a financial plan can also help you tackle big-picture goals. Thoughtful investing, for example, can help build generational wealth , and careful estate planning can ensure that wealth gets passed down to your loved ones.

On a similar note...

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What is financial planning?

Key takeaways

• Financial planning involves defining your goals, understanding your financial picture, and taking steps to advance those goals.
• Financial planning professionals can help you with a variety of needs, including budgeting, investment management, and retirement planning.
• Wherever you are on your financial journey, a sound financial plan can give you peace of mind and confidence.

Financial planning can help you chart a course to get what you want out of life. By helping you figure out how much money you have and where it should go, financial planning is a way to set goals and get on a path to achieve them.

Feed your brain. Fund your future.

Financial planning is creating a comprehensive plan to reach your financial goals. By considering your whole financial life, it provides guidance on reaching both small, short-term targets as well as larger, long-term ones.

You can create a financial plan on your own or work with a professional financial planner who has the knowledge and time to integrate many aspects of finances into a plan, can identify risks and opportunities, and can help keep you on track in making progress toward your goals.

Why is financial planning important?

Financial planning is important because it helps you identify and prioritize your goals. It also aims to give you a complete picture of where you stand financially and identify changes you may need to make to increase the likelihood of achieving your goals—for example, which account types and financial products make sense for your personal situation. Some advantages of investing like compounding potential returns are realized over time so having a plan and starting early is important for the long term.

A financial plan can also help you uncover vulnerabilities, like not having enough saved in emergency savings or being underinsured. And it may make you feel more confident and comfortable with the choices in your investment portfolio when the markets go up and down. That's why having a financial plan is important for people of all ages and financial backgrounds—not just older, wealthy people. Note that a financial plan is not a set-it-and-forget-it exercise, but an ongoing process that changes as your circumstances do. Your goals as a single person may be different from those of a married couple with children, for example.

Types of financial planning

Financial planning is a broad term that can cover a range of different techniques and goals. Most financial plans include multiple types of financial planning to take a holistic view and may address some or all of the following.

Cash-flow analysis

You may think of this as budgeting . Cash flow analysis helps you get a sense of what you have coming in each month and how you're using it. You need positive cash flow so that you can generate funds to pay down debt, build emergency savings, or invest. By getting into the nitty-gritty of your cash flow, you can make conscious choices about where you want your money going and identify areas you may be able to trim or cut out entirely.

Debt management When you have multiple types of debt repayments competing for your dollars (think: credit card debt, student loans , and a mortgage), it can be difficult to figure out which you should prioritize paying first. Financial planning focused on debt management can help you identify ways to lower interest payments and strategize ways to repay your debts that work best for you while keeping you on track to meet your other financial goals and budgeting demands.

Retirement planning We all know we should be saving for later, but the question of how much to save for retirement —and in what accounts—can be tricky, particularly as you get closer to the age you hope to set up your permanent out-of-office message.

Retirement planning for those decades from retirement may be as simple as working their way up to contributing the maximum pre-tax salary allowance to a retirement account, like a 401(k) or individual retirement account (IRA) . For those near retirement, it may involve how to generate retirement income, such as figuring out which retirement accounts to draw from first, covering essential expenses, and how to manage Social Security income. A plan could give you peace of mind that you won't outlive your assets.

Investment planning Both retirement savers and those who are looking to build wealth outside of a retirement account can benefit from investment planning that aligns with their time horizon, financial situation, and risk tolerance . Investment planning can help you analyze and manage your portfolio holdings to better ensure your investments are working as well as they can for you. It may also reinforce the nature of market cycles—short-term downturns are expected but have historically always been followed by upturns, for example. Good investment planning may help keep you calm during rough stretches in the market and resist panic selling.

Education planning There are no ifs, ands, or buts—paying for an education is expensive. And it becomes even pricier if you're hoping to set aside enough for multiple children's educations. Education planning helps you figure out how much you need to save and the best strategies and accounts to cover education costs from pre-K to post-grad.

Tax planning If you're a W-2 worker (most 9-to-5ers are) without a complex financial situation, you may not need much more to do your taxes than self-service tax software. But for those with more complicated finances or people trying to determine the best way to manage income in retirement, financial planning can help you figure out the most tax-efficient way to manage your money. From taking advantage of tax deferral for savings goals, to qualifying for deductions and credits, to minimizing taxes to heirs, taxes touch many areas of financial planning.

Estate planning Don't let the name fool you. When it comes to financial planning, estate planning is less about sprawling manor homes and more about making sure you make your wishes known through documents like wills and trusts. Many estate planning techniques start with careful planning while you're living. Planning for what happens after you or your partner is gone can be hard to think about, but it's an important step in financial planning for all types of people, even those who are younger and who don't have large bank balances. It also helps you plan for who makes decisions if you become unable to and who becomes guardian for your children if necessary—important things regardless of wealth level.

Insurance planning Managing risk is fundamental so you don't encounter financial catastrophe that prevents you from achieving your goals. You probably know the importance of having health insurance, but there are countless other types of insurance that might help you during times of hardship. Financial planning can make sure you understand how disability and  life insurance , as well as long-term care coverage, among other types of insurance, fit into your financial picture to help protect you and those you love.

How much does financial planning cost?

How much financial planning costs depends on whether you decide to go it alone or work with a professional. If you DIY, there are low- to no-cost online tools and resources that can help you put together your own financial plan . For instance, Fidelity has a range of online calculators you can use to estimate how much you need to save to retire by a certain age, or you could a use a robo-advisor to manage your investments. If you prefer to work with a pro, they may charge based on a percentage of the assets they handle for you, by the hour, or a one-time flat fee.

How to create a financial plan

Ready to start financial planning ? Check out our guide on how to make a financial plan . As you draft your plan, either on your own or with a pro, remember that a solid financial plan is more than just numbers. It's a map that puts you in the driver's seat to fund the life you envision for yourself now and in the future.

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Home / Budgeting / What Is a Financial Plan? A Beginner’s Guide to Financial Planning

Jan 3, 2024

What Is a Financial Plan? A Beginner’s Guide to Financial Planning

A financial plan is a way to assess your current financial situation, identify long-term financial goals , and create a road map to achieve them. A good financial plan not only considers your current finances—including your cash flow, budget, debt, and savings—but also your long-term financial goals like saving for retirement . 

In this post, we’ll break down the necessary steps to create a financial plan, including:

1. Find your net worth 

2. examine your cash flow .

• 3. Identify your financial goals

4. Build an emergency fund 

• 5. Contribute to an employer-sponsored retirement plan
• 6. Pay down high-interest debt  
• 7. Invest to build wealth 

8. Periodically review and adjust your financial plan 

Dive into a more thorough breakdown below as we help answer the question: what is a financial plan? 

8 essential financial planning components

Financial planning is like a road map to help you meet both your short-term needs and long-term goals. While every financial plan is different, they typically include the following: 

• Your net worth: your assets (things you own) minus your liabilities (debts) 
• Cash flow and spending analysis: your flow of money coming in and out each month (or year) and analysis of spending patterns
• Financial goals and priorities: your financial goals, both big and small, short term and long term 
• Budget and savings plan: your current cash flow and financial goals can guide how you set up your monthly budget 
• Debt management: any debts you currently have and a plan to pay them down. 
• Retirement plan: a plan for saving a portion of your income (15–20%) for retirement, ideally in an employer-sponsored retirement account like a 401(k) or IRA
• Long-term investing: additional outside investments to further build wealth, such as index or mutual funds  
• Tax reduction strategy: a strategy for minimizing taxes on personal income

Remember, there’s no template for the perfect financial plan—it should be customized to fit your unique circumstances and priorities. Review each financial plan component and adjust as necessary. 

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How to create a financial plan in 8 steps

Personal financial planning is an ongoing process and should be highly unique to your needs. That said, addressing the following steps can help you create a well-rounded plan. 

Find your net worth by assessing your current assets and liabilities. Assets are anything of value that you own, like a home, car, cash savings, or investments. Liabilities include anything you owe money on, like credit card debt, student loans, car loans, or mortgages. 

To find your net worth, subtract the total value of your liabilities from the  total value of your assets. This gives you a clearer picture of your current financial health and tracking your net worth over time gives you a snapshot of your financial progress from a high level.

A financial plan can’t exist without first knowing where your money is going each month. Review how much you earn and spend to determine how much you could reasonably save and invest on a monthly basis—or where you could cut back to save and invest more.

Start by documenting your mandatory monthly expenses like rent or mortgage payments, home or car insurance, bills, and utilities. Then, factor in other costs like food and groceries, transportation, and subscriptions before moving onto additional spending categories like clothes, travel, and entertainment. Subtract your expenses from your income to see what’s leftover. 

This should give you a better idea of exactly where your money is going each month. From here, you can assess if your current spending aligns with the financial goals you’ll outline in the next step. 

3. Identify your financial goals  

You can’t make a financial plan without first knowing what your financial goals are. Your financial goals are simply the things you hope to accomplish with your money, both short term and long term . Ultimately, it means considering what you want in life and how you can put your money to work to get there. On a high level, consider the following: 

• What do I want to achieve? 
• What’s most important to me? 
• What type of lifestyle do I want to lead? 

Use these questions to make a list of goals, and break them down by short term, medium term, and long term: 

• Short-term financial goals can be achieved in one to three years (i.e., building an emergency fund).
• Medium-term financial goals can be achieved in 3-5 years (i.e., saving for a down payment on a home).
• Long-term financial goals can be achieved in 10+ years (i.e., retiring by 45).

Are you hoping to pay off debt or build an emergency fund? Those are examples of short-term goals. Long-term goals could include saving for retirement, saving for your future children’s college funds, or building a dream home in a new city. 

Determine how much each goal will cost and the time frame for when you hope to achieve it. The more specific your goals are, the easier it will be to take action on them. 

If you don’t already have an emergency fund, prioritize building one. Ideally, it should be enough to cover three to six months of living expenses, but if you can’t afford that yet, you can start small and add more over time. Stashing away even just $1,000 can help cover any small emergencies, sudden medical procedures, or unexpected repairs. You can incrementally add more to your fund over time. 

5. Contribute to an employer-sponsored retirement plan  

If it’s available to you, the next step is to ensure you’re contributing to an employer-sponsored retirement plan like a 401(k) —especially if your employer offers a matching contribution. If they do, prioritize contributing at least the minimum amount needed to get the match, as that match is essentially free money. 

Even if you have high-interest debt, you should still prioritize contributing to an employer-sponsored retirement account (at least the minimum amount to get the match). The reason is because employer matching funds are tax-free, risk-free, guaranteed returns—often at a higher rate than your debts.   

If your employer does not offer a 401(k) then consider making an IRA contribution to invest and save money in a tax-advantaged way.

6. Pay down high-interest debt 

Once you’re taking advantage of your employer match, you should make a plan for tackling any debt . Prioritize high-interest debt first, as you could be paying double or triple what you actually owe due to high interest rates. In any case, a good starting point is to make the minimum monthly payments on all of your debts. 

There are a variety of approaches to paying off debt, from increasing your monthly credit card payments, getting a debt consolidation loan, or using the snowball method or avalanche method . Choose the approach that works best for you, but remember to pay off the most demanding debt first. Ultimately, the goal is to become debt-free as soon as possible, so figure out how much you can feasibly allocate toward debts each month and get started. 

7. Invest to build wealth  

Make a plan to invest in the stock market based on your financial goals and risk tolerance . Regardless of your specific long-term financial goals , planning to have enough income in retirement is key to any well-rounded financial plan. 

This could include various savings accounts and retirement accounts like 401(k)s and individual retirement accounts ( IRAs ), which are a good starting point for your retirement savings. From there, you can add other accounts to fit your goals. While there are countless ways to invest, ETFs or mutual funds make excellent long-term investments due to their stable growth over time. 

Rather than putting all your eggs in one basket by investing in a single stock, ETFs or mutual funds contain shares of hundreds of different companies within a single fund, instantly diversifying your portfolio. This makes them a great choice for new investors who don’t have the time or experience to analyze individual stocks but want a reliable way to invest for the long term. A diversified portfolio will help you grow your investments by spreading them across different companies, industries, and countries.

Regularly check in on your financial plan to track your progress toward goals and make any adjustments. This may include altering timelines for certain goals, setting higher savings minimums, or increasing your investments or rebalancing your portfolio . 

You might find that you don’t have the same priorities five years down the road, and life is full of unexpected circumstances that can impact your plan. Stay flexible and expect to revise your plan based on your unique experiences. 

Here are some check-in questions to consider (or questions to regularly ask a financial advisor): 

• Is my current portfolio aligned with my goals?
• What major life events are approaching (if any) that I should plan for (starting a family, moving cities, starting a business, etc.)? 
• Are my current spending and saving habits serving the lifestyle I want to live?
• Can I optimize my current budget?
• Are there any upcoming big purchases (over $500) that I should be aware of?
• What is my top spending category? Does this feel aligned with what I value?
• Can I increase my automated savings/investments?

Committing to annual check-ins ensures your financial plan remains aligned with your goals. 

Additional financial planning considerations 

The steps above will position you for financial success early on. 

Once you’ve made progress with your initial goals and investments, consider these additional financial plan components:

• Risk management planning: you may already have home or car insurance, but don’t forget about life and disability insurance , personal liability coverage, and property coverage to further protect you in the event of unexpected emergencies. 
• Tax reduction planning: once your investments are set, you can move on to more advanced goals like creating a tax reduction strategy to minimize taxes on personal income. 
• Estate planning: having a plan for who will inherit your estate (your possessions and valuables) might seem irrelevant if you’re young, but you’ll eventually need to consider this important financial plan component. This ties into your generational wealth goals that will directly impact your family and loved ones, including your will . 

Remember, the only asset more valuable than money is time . The steps above are key to protecting all the hard work you’ll put into the rest of your financial plan. If you’re feeling overwhelmed at the thought of navigating a financial plan on your own, a financial advisor can be an incredible resource. 

Eventually, you may consider eliciting some outside help from any of the following types of financial advisors: 

• Traditional financial advisor: a financial advisor can help with all aspects of your financial life, including saving, investing, insurance, and other forms of planning. If you have a complicated financial situation, they also offer specialized services like tax preparation and reduction or estate planning. 
• Online financial planning services: instead of visiting a financial planner in person, you can access the same services virtually. Most offer the same services as a traditional advisor, such as investment management and helping you build a financial plan. 
• Robo-advisor: if you’re only looking for help managing or building your investment portfolio, a robo-advisor can help—and at a low cost. A robo-advisor automatically builds your portfolio based on your investment preferences, and manages it on your behalf. Robo-advisors can be a less expensive, more accessible avenue for investors who don’t want to cover the cost of a personal financial advisor.

If you choose to go with a traditional financial advisor, we recommend fee-only advisors who are fiduciaries —meaning they’re legally obligated to act in your best interests. When looking for a financial advisor , be sure to find one who cares about your big picture : paying off debt, having emergency savings, covering tax bases, and building wealth for the long term.

At the end of your financial plan, you’ll have a strong understanding of where you are financially, where you want to be, and how you’ll get there. While finances as a whole can be complicated, the financial plan components are quite simple—and once you get started, you’ll feel more empowered to build the financial life you deserve. Successful wealth building doesn’t happen overnight, but planning for the long-term will pay off in big ways down the road. 

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FAQs about financial planning

Find answers to any lingering questions about financial planning below.

What is the purpose of a financial plan?

A financial plan is a road map for putting your money to work in a way that serves the life you want to lead, both now and in the future. Achieving short-term and long-term goals, gaining control over your finances, and ensuring financial security during retirement are all key purposes of a financial plan. 

Why is financial planning important? 

Financial planning is more than just accumulating wealth—it’s about using that wealth intentionally in a way that supports your core values and dreams in life. When you have a financial plan, you’re more likely to put your money toward only the things that serve your highest goals. Financial planning also helps reduce stress about money. 

What are the types of financial planning?  

There are a variety of types of financial planning, including cash flow planning (your monthly income and expenses), investment planning (using index or mutual funds to achieve long-term wealth goals), insurance planning (prioritizing health and life insurance), tax planning (strategically minimizing income taxes), and estate planning (ensuring your assets pass to your survivors as you intend, including minimizing taxes and fees taken from their inheritance)

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Sarah Spagnolo

Sarah Spagnolo serves as Managing Editor, Head of Brand at Stash, the investing app that helps people achieve their financial goals. As Managing Editor, Sarah oversees all personal finance content and brand experiences, ranging from partnerships to influencer marketing and webinars, and is the editor of the Stash 100, Stash’s annual collection of the best money tips for hardworking Americans. She has two decades of experience working in brand, communications, and content for companies across media, tech, travel, design, and finance. Over the course of her career, she has appeared as an on-air expert in outlets including The Today Show, Good Morning America, CNN, MSNBC, Dr. Oz, the Weather Channel, Cheddar, and many local news channels, and has been quoted in Axios, The Information, CoinDesk, the Wall Street Journal, and dozens more. A graduate of Syracuse University, she lives in Brooklyn with her husband and family.

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Financial Planning

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on February 15, 2024

Get Any Financial Question Answered

Table of contents, what is financial planning.

Financial planning is essential for achieving financial stability and success. Financial planning involves the strategic management of financial resources to achieve specific financial goals. It encompasses saving, investing, budgeting, and risk management, among other aspects.

A well-executed financial plan helps individuals attain financial security and build wealth over time. Proper financial planning allows individuals to make informed decisions about their financial future . It helps in managing income, building assets, and ensuring financial stability .

Financial planning also mitigates risks and prepares individuals for unforeseen events and emergencies. Financial planning aims to achieve various objectives, including managing cash flow , building an emergency fund, and planning for retirement.

It also focuses on reducing debt, minimizing taxes, and ensuring proper insurance coverage. Ultimately, financial planning helps individuals maintain a desired standard of living and achieve long-term financial goals.

Principles of Financial Planning

This section outlines the key principles of financial planning, which provide a solid foundation for a successful financial plan.

Budgeting and Cash Flow Management

Budgeting is crucial for understanding and controlling personal finances . Creating and following a budget helps individuals allocate resources efficiently, track expenses, and save for future financial goals.

Saving and Investing

Saving and investing are essential for building wealth and securing one's financial future. Saving involves setting aside a portion of income for future use, while investing entails allocating funds to various assets to generate returns.

Risk Management and Insurance

Risk management involves identifying and addressing potential financial risks. Insurance plays a crucial role in risk management by providing financial protection against unexpected events, such as accidents, illness, or property damage.

Tax Planning

Tax planning aims to minimize tax liability and maximize tax benefits. It includes strategies such as income splitting, tax-deferred investments, and tax credits. Effective tax planning ensures compliance with tax laws while optimizing one's financial position.

Retirement Planning

Retirement planning is the process of preparing for financial security during retirement . This includes setting retirement goals, estimating expenses, and creating a savings and investment plan. Early and consistent retirement planning ensures a comfortable and financially secure retirement.

Estate Planning

Estate planning involves arranging the management and distribution of assets upon one's death. It includes creating a will , designating beneficiaries, and establishing trusts .

Proper estate planning ensures that one's assets are distributed according to their wishes while minimizing tax liabilities and legal complications.

Financial Planning Process

The financial planning process provides a roadmap for achieving financial goals. It involves several steps, from assessing the current financial situation to monitoring and adjusting the plan as needed.

Assessing Current Financial Situation

The first step in financial planning is evaluating one's current financial status. This includes reviewing income, expenses, assets, liabilities, and insurance coverage.

A comprehensive understanding of one's financial situation serves as a starting point for setting realistic financial goals.

Identifying Financial Goals

After assessing the current financial situation, individuals must identify their short-term and long-term financial goals.

These can include buying a home, paying off debt, or funding a child's education. Clearly defined financial goals provide direction and motivation for the financial planning process.

Developing a Financial Plan

With financial goals in place, individuals can create a comprehensive financial plan . This plan outlines the strategies and steps required to achieve the goals, such as saving and investment plans, debt reduction strategies, and insurance coverage.

Implementing the Financial Plan

Once the financial plan is created, it must be put into action. This involves following the budget, implementing saving and investment strategies, and obtaining the necessary insurance coverage. Consistent implementation is critical for achieving the desired financial outcomes.

Monitoring and Adjusting the Financial Plan

Regular monitoring and evaluation of the financial plan are crucial for staying on track with financial goals .

This involves reviewing the plan's progress, assessing changes in personal circumstances, and adjusting the strategies as needed. Periodic adjustments ensure that the financial plan remains relevant and effective.

Tools for Financial Planning

Various tools and software can help streamline the financial planning process and improve its accuracy and efficiency.

Budgeting Tools

Budgeting tools, such as spreadsheets or dedicated apps, facilitate the creation and management of budgets.

They help individuals track income and expenses, set spending limits, and monitor progress toward financial goals. Using budgeting tools can simplify financial planning and promote better money management habits .

Investment Analysis Tools

Investment analysis tools help individuals make informed decisions about their investments. These tools provide valuable insights into the performance, risks, and potential returns of various investment options.

Utilizing investment analysis tools can optimize investment strategies and enhance portfolio performance.

Insurance Calculators

Insurance calculators assist individuals in determining the appropriate amount of insurance coverage required for various needs, such as life , health , or property insurance .

These calculators take into account factors like income, expenses, and assets, providing personalized recommendations for insurance policies.

Tax Planning Software

Tax planning software simplifies the process of managing and filing taxes. These tools help individuals identify deductions, credits, and other tax-saving strategies while ensuring compliance with tax laws. Utilizing tax planning software can save time and money.

Retirement Planning Tools

Retirement planning tools help individuals estimate their retirement needs and create a savings and investment plan.

These tools consider factors such as income, expenses, and retirement goals, providing personalized projections and recommendations. Using retirement planning tools can ensure a comfortable and financially secure retirement.

Estate Planning Software

Estate planning software streamlines the process of creating and managing estate planning documents, such as wills and trusts .

These tools help individuals ensure that their assets are distributed according to their wishes while minimizing legal complications and tax liabilities. Utilizing estate planning software can simplify the estate planning process and provide peace of mind.

Challenges and Opportunities in Financial Planning

Financial planning involves navigating various challenges and opportunities, such as market volatility, changing economic conditions, and planning for life events and emergencies.

Navigating Market Volatility

Market volatility can significantly impact investment performance and financial planning. Developing a diversified investment portfolio and maintaining a long-term perspective can help mitigate the effects of market fluctuations.

Adapting to Changing Economic Conditions

Economic conditions, such as interest rates, inflation, and job market trends, can influence financial planning. Staying informed about economic developments and adjusting financial plans accordingly can help individuals navigate these changes and maintain financial stability.

Planning for Life Events and Emergencies

Life events, such as marriage, childbirth, or job loss, can have significant financial implications. Establishing an emergency fund and incorporating life event planning into the financial plan can provide a financial cushion during unforeseen circumstances and ensure continued progress.

Keeping Up With Financial Regulations and Legislation

Financial regulations and legislation can impact tax liabilities, investment options, and insurance coverage. Staying informed about relevant laws and regulations can help individuals adapt their financial plans and optimize their financial position.

Financial planning is a continuous process that requires discipline, adaptability, and a commitment to learning. Maintaining financial discipline, such as consistently following a budget and saving for long-term goals, is crucial for achieving financial success.

Developing good financial habits and staying committed to the financial plan can help individuals overcome obstacles and stay on track with their goals. Proper financial planning offers numerous benefits, such as increased financial security, reduced stress, and improved quality of life.

By following a well-structured financial plan, individuals can achieve their financial goals and enjoy the rewards of their hard work and dedication. Financial planning requires ongoing learning and adaptation to changing circumstances, market conditions, and personal needs.

Embracing a growth mindset and staying informed about financial trends and developments can help individuals make informed decisions and continuously improve their financial plans.

Financial Planning FAQs

What is financial planning.

Financial planning is the process of setting financial goals, creating a plan to achieve them, and regularly reviewing and adjusting the plan to ensure that you stay on track.

What are the benefits of financial planning?

Financial planning can help you achieve your financial goals, whether they be short-term or long-term, and help you feel more secure and in control of your finances.

What are some common financial planning goals?

Common financial planning goals include saving for retirement, paying off debt, creating an emergency fund, and saving for a down payment on a house.

What are the key principles of financial planning?

The key principles of financial planning include setting specific and measurable goals, creating a budget and sticking to it, investing wisely, managing debt, and regularly reviewing and adjusting your plan.

What tools can I use to help with financial planning?

There are many tools available to help with financial planning, including budgeting apps, investment calculators, retirement planning tools, and debt payoff calculators. Consult with a financial advisor to determine which tools are best for you.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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Part 1: Tell Us More About Yourself

Do you own a business, which activity is most important to you during retirement.

• Giving back / charity
• Spending time with family and friends
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Part 2: Your Current Nest Egg

Part 3: confidence going into retirement, how comfortable are you with investing.

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• Minimal: $50 - $200
• Steady Saver: $200 - $500
• Serious Planner: $500 - $1,000
• Aggressive Saver: $1,000+

How much will you need each month during retirement?

• Bare Necessities: $1,500 - $2,500
• Moderate Comfort: $2,500 - $3,500
• Comfortable Lifestyle: $3,500 - $5,500
• Affluent Living: $5,500 - $8,000
• Luxury Lifestyle: $8,000+

Part 4: Getting Your Retirement Ready

What is your current financial priority.

• Getting out of debt
• Growing my wealth
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8 Keys to Good Financial Plans

While there are many ways to go about developing a financial plan—do it yourself, use a robo-advisor, work with a financial planner, or a combination thereof—Schwab has identified eight critical components every plan should include, regardless of the method used to create it. So, what does a good financial plan look like?

1. Setting financial goals

You can't make a financial plan until you know what you want to accomplish with your money—so whether you're creating it yourself or working with a professional, your plan should start with a list of your goals, both big and small, and the time horizons to accomplish them. Doing so can help to organize each objective by how soon you'll need the money:

• Short-term goals are those you hope to achieve in the next five years, such as paying off debt or building an emergency fund.
• Medium-term goals are those you hope to achieve in the next five to 10 years, such as the down payment on a home or starting your own business.
• Long-term goals are those that are 10 or more years away, including saving for college and, of course, retirement.

For each goal, specify a dollar figure and a target date. "The more specific your goals, the easier it is to measure your progress toward them," said Rob Williams, managing director of financial planning at the Schwab Center for Financial Research.

A host of online tools can help you run the numbers, weigh competing priorities, and determine the best course of action for you. Also, if you have multiple goals to work toward, a robo-advisor, or automated investing platform, can help you weigh the importance of each goal, ranking them by needs, wants, and wishes.

Any time is a good time to establish a financial plan.

Ideally, you start investing for financial goals early in life, but any time is a good time to check in on your current financial situation and assess how you're doing. Are you still on track? Do you have other goals you hadn't previously considered? Having a financial plan helps you assess where you are today and where you want to go next.

2. Net worth statement

Knowing your net worth today can serve as a baseline for framing your financial goals and setting a target for your net worth at some point in the future, like in retirement. To determine your net worth, make a list of all your assets (bank and investment accounts, real estate, valuable personal property) and another one of all your debt (credit cards, mortgages, or student loans). Your assets minus your liabilities equals your net worth.

"Don't be discouraged if your liabilities outweigh your assets," Rob said. "That's not uncommon when you're just starting out—especially if you have a mortgage and student loans."

3. Budget and cash flow planning

Your budget is really where the rubber meets the road, planning-wise. It can help you determine where your money is going each month and where you can cut back to meet your goals.

A budget calculator can help ensure you don't overlook irregular but important expenses, such as car repairs, out-of-pocket health care costs, and real estate taxes. As you're compiling your list, separate your expenses into two buckets: must-have items like groceries and rent, and nice-to-haves like eating out and gym memberships.

When considering how your goals fit into your budget, you may want to pressure-test it using "what if" scenarios: What if you want or need to retire earlier? What if you downsized your mortgage? Some robo-advisors offer tools that allow you to adjust certain assumptions to see how they could affect your savings strategy.

4. Debt management plan

Debt is sometimes treated like a four-letter word, but not all debt is bad debt. A mortgage, for example, can help build equity—and boost your credit score in the bargain. High-interest consumer debt like credit cards, on the other hand, can weigh heavily on your credit score. Plus, every dollar you pay in finance charges and interest is one you can't put toward other goals.

If you have high-interest debt, make sure you create a plan that can help you pay it off as quickly as possible. If you're not sure where to start, a financial advisor can help you prioritize, then determine how much of your budget should go toward your debt each month.

5. Retirement plan

An old guideline says you'll need approximately 80% of your present income in retirement. However, this assumes that retiring will free you from any work-related expenses, that you've paid off your mortgage, that any children will be financially independent, and you'll likely fall into a lower tax bracket.

It's also important to keep in mind that Medicare doesn't cover everything, and health care expenses that Medicare doesn't cover—such as long-term care—can add up quickly. You also might spend more on other things in retirement, like travel, dining out, gifts, or financial support to a relative or friend.

Plugging in different scenarios into a retirement savings calculator can help you figure out what you may need in retirement. 

Don't count on the 80% rule 

If you're saving 20% – 30% of your pre-retirement income, then the 80% income-replacement rule is a good place to start. Otherwise, it's safer to aim at covering 100% of your pre-retirement income, minus whatever you're saving for retirement . As with any general rule, there are plenty of exceptions. So be sure to sit down and fine-tune your retirement budget as the time draws near. This should be your top priority because you can borrow for most other goals but not for retirement.

6. Emergency funds

When something unexpected happens—say you lose your job or get hit with an unexpected medical bill—an emergency fund can help you avoid tapping your long-term savings to make ends meet.

It's generally a good idea to save enough to cover at least three months'—but ideally six months'—worth of essential living expenses (for example, groceries, housing, transportation, and utilities). Save this money in a checking or savings account so you can access it in a hurry should the need arise.

7. Insurance coverage

Insurance is an important part of protecting your financial downside—but try to ensure you're not overpaying for coverage you don't need and make sure to cover all your bases:

• Health insurance : Without it, even routine care can cost a pretty penny, while a serious injury or hospital stay could set you back tens of thousands of dollars. As you get older, you may want to consider long-term care insurance , as well.
• Disability insurance : This coverage protects you and your family in case you're unable to work. Employer-provided disability insurance typically replaces about 60% of your salary.
• Auto and homeowners'/renters' insurance : If you own a car or home—or rent and can't afford to replace possessions out of pocket—make sure you're adequately protected.
• Life insurance : This is generally a good idea for those with dependents. Work with an insurance agent to understand what type of—and how much—coverage makes the most sense for you.

8. Estate plan

At a minimum, most people want a will in place, which states your final wishes with regards to your assets, dependents, and who you want to administer your estate. You should also keep the beneficiaries of your insurance policies and retirement accounts up to date. Also consider establishing powers of attorney for financial and health care decisions, in case you become incapacitated.

For help getting started or tackling more complex estate-planning tasks, consider working with an estate attorney or a qualified financial planner.

Learn more about financial planning

5 times in life when financial planning matters most.

Free Financial Planning Templates

By Andy Marker | September 21, 2017

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Whether you’re starting a business or looking for ways to grow an existing company, creating and following a financial plan can help ensure success. An effective plan can inform business decisions, provide documentation for investors and other stakeholders, and serve as a guide to help you reach objectives. Some businesses may choose to work with financial consultants or use software to manage financials, but for some teams, templates offer an easy method to begin strategic planning. Below, you’ll find multiple free financial planning templates for both business and personal use.

These free templates are designed for users with a wide range of experience levels, and offer professional quality along with simplicity. You’ll find templates for goal planning, financial projections, budget planning, retirement calculations, and more.

Business Financial Planning Templates

Business budget template - excel.

Download Business Budget Template

Excel | Smartsheet

This business budget template provides a mix of detailed spreadsheets and graphical data reports. You can estimate expenses, track actual expenditures, and view variances, all of which are summarized by month and visually represented in charts. This information allows you to create a comprehensive business financial plan template.

Project Budget Template - Excel

Download Project Budget Template

Designed for projects, this template allows you to list costs for each task. Depending on the type of project, you may include hourly services that contract employees provide, equipment costs, or other expenses. Create an estimated budget and then compare actual expenses to help with financial planning on future projects.

12-Month Sales Forecast Template - Excel

Download 12-Month Sales Forecast Template

Use this sales forecast template to create financial projections for individual products on a monthly and annual basis. You can also track sales performance over time and compare figures from previous years. Color-coded cells make it easy to view data for each month, and the template calculates monthly and annual totals.

Event Budget Template - Excel

Download Event Budget Template

Whether you’re planning a conference, company party, fundraiser, or wedding, any tool that helps organize your event planning process can reduce stress and aid in creating a successful event. This budget template lists the many expenses involved in an event, from venue rentals to programming and advertising. It also compiles the data you enter into visual charts so that you can quickly get an idea of your event budget allocation.

Financial Management Plan - Word

Download Financial Management Plan

Word | Smartsheet

Create a financial strategic action plan with this Word template. You’ll find a basic outline to follow, including sections for an overview of your business or project, assumptions, risks, financial management methods, and more. Once you have created a comprehensive financial plan, use it as a living document, just like you would a business plan. You should review and update financial templates regularly in order to assess progress, provide accountability and accuracy, and ensure that it continues to meet your needs.

Financial Dashboard Template - Excel

‌ Download Financial Dashboard Template - Excel

This template provides a summary report of financial data with a dashboard view, which makes it easy to compile and quickly review information. You’ll get a combination of bar charts, a pie chart, and a graph to compare statistics over time. Use the template to measure product performance, view sales data, and chart annual revenues or other financial information.

Startup Expenses Template - Excel

‌ Download Startup Expenses Template - Excel

If you’re starting a business, this template can help you identify potential funding sources as well as necessary expenses to get your venture up and running. Similar to a budget template, you can track both estimated and actual costs, and make adjustments as needed. Identifying startup expenses can support your business planning process and help ensure that you have adequate financial resources to reach your goals.

Break-Even Analysis Template - Excel

Download Break-Even Analysis Template

A break-even analysis shows when a business will meet all of its expenses and begin to reach financial profitability. To do this analysis, enter your fixed and variable expenses into the template and the pre-set formulas will calculate how much revenue a business needs to break even.

Financial Report Template - Excel

Download Financial Report Template

Create an annual financial report for your business that shows key metrics in an easy-to-read format. Getting a financial overview allows you to track performance over a given time period, and a summary report simplifies communication with stakeholders. You can easily print and share this Excel template as a PDF document.

Marketing Budget Template - Excel

‌ Download Marketing Budget Template - Excel

Create a comprehensive marketing budget plan with monthly, quarterly, and annual views on one template. In the first column, you’ll find a list of marketing expenses that include public relations, social media, advertising, online content, and more. There is also a section for listing specific marketing campaigns so that you can estimate and compare costs for each.

Personal Financial Planning Templates

One-page financial plan template.

Download One-Page Financial Plan Template

Excel  |  PDF

Individuals can also benefit from strategic financial plans. This one-page template allows you to create a personal financial plan that is concise yet comprehensive. Determine your current financial situation, create an action plan for reaching goals, and use the plan to track implementation and progress. If needed, you can include numbers for life insurance or estate planning.

Family Budget Planner Template - Excel

‌ Download Family Budget Planner Template - Excel

Families can use this planner to track household expenses and create a monthly balanced budget. You’ll find a list of common expenses including housing, transportation, healthcare, and entertainment, but you can also edit these categories to align with your specific monthly costs. The template also includes a section for savings to help you plan for retirement, create an emergency fund, and track investments.

Financial Goals Worksheet

Download Financial Goals Worksheet

Excel  | Word |  PDF

Goals are only dreams unless you take steps to achieve them. Use this worksheet to clarify your top goals, identify potential roadblocks, and list actions you can take to overcome obstacles and reach your desired outcome. Goal planning can help prioritize objectives, create a realistic timeline, and provide accountability.

Personal Monthly Budget - Excel

‌ Download Personal Monthly Budget - Excel

This monthly financial planner template provides a detailed budget along with a visual summary of your data. It includes sections for listing all sources of income, different savings accounts, and all of the expenses required to meet basic needs and support your lifestyle. You can use this template to plan for each month as well as to track earnings and expenditures over time.

Investment Planning Template

Download Investment Planning Template

Word  |  PDF

Use this template to analyze your financial situation, assess your investment strategies, and determine investment goals. This worksheet can help clarify where to make changes in your current strategies and identify your comfort level with different approaches to investing. Even if you don’t have any investments, this template can provide a starting point for thinking about and planning your goals.

Retirement Planning Worksheet - Excel

‌ Download Retirement Planning Worksheet - Excel

This template serves as a retirement calculator and budget worksheet that you can use to plan for retirement while accounting for inflation. If you are already retired, use the template to create a weekly, monthly, or annual budget based on your current income and expenses. You may want to consult with a financial planner to ensure that you are maximizing your income and saving sufficiently for retirement, but this template provides a basic financial planning and management tool that can help kickstart the conversation.

Personal Financial Statement - Excel

‌ Download Personal Financial Statement - Excel

Determine your personal net worth with this simple yet detailed template. Enter your assets and liabilities - from cash and retirement savings to credit card debt and mortgages - and the template will automatically calculate your net worth. These details provide a quick look at your current financial standing. If you’re starting a business and seeking funding from lenders or investors, you may need to provide the information you collect in this template.

Simple Financial Template - Excel

‌ Download Simple Financial Template - Excel

If you want to create a streamlined budget, use this simple financial template to see the difference between your income and expenses. Sections are provided for an itemized list of each, and a pie chart displays the balance between the two. This template may be helpful for individuals who are building a budget for the first time, or for those without complicated finances who just want to see how much they spend each month.

College Student Budget Template - Excel

‌ Download College Student Budget Template - Excel

This template includes a list of potential expenses for college students. Use the details it reveals  to determine how to pay for each item or where to cut costs. It also allows you to create a budget for each semester, weighing income against expenses to ensure that you have adequate funds. By creating a balanced budget, college students can focus on school responsibilities rather than worrying about finances, and also ensure that spending money is available for entertainment and wellness needs.

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The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

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Long-Term Financial Planning

Beyond the annual budget cycle and multi-year capital plan, governments need to identify long-term financial trends. Long-term financial planning involves projecting revenues, expenses, and key factors that have a financial impact on the organization. Understanding long-term trends and potential risk factors that may impact overall financial sustainability allows the finance officer to proactively address these issues. Going through a long-term financial planning process allows decision makers to focus on long-term objectives, encourages strategic thinking, and promotes overall awareness for financial literacy in an organization.  Long-term financial planning creates commitment and motivation to provide a guide for decision-making.

Long-term financial planning relates to strategic planning, developing financial policies, capital improvement planning, and budgeting, but it is inherently different, as shown in the table below.  Each process fulfills a different combination of planning purposes. As such, long-term financial planning is most valuable when accompanied by these other planning processes and often communicated together.

GFOA recommends that all governments prepare and maintain a long-term financial plan that projects revenues, expenses, financial position, and external factors for all key funds and government operations at least five years into the future. Governments that utilize debt financing and/or utility rate setting should consider a long-term financial plan greater than five years. The plan should be reviewed on an annual basis and updated as needed or as major assumptions change.  Long-term financial planning should be the starting point for capital planning, developing operating budgets, estimating revenue, and other planning processes.

When fully embraced by an organization, long-term financial planning can have many benefits including:

• Creating a long-term outlook into other planning processes like budgeting, capital planning, and revenue forecasting
• Helping to diagnose potential risks and causes of fiscal distress
• Stimulating “big-picture thinking”
• Providing a tool for evaluating long-term compliance with financial policies
• Allowing for pre-emptive action to mitigate forecasted financial distress
• Defining parameters for decision-making
• Communicating long-term financial position to residents and other stakeholders, including rating agencies and bond investors.
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• How to Invest for Short-Term or Long-Term Goals

Short-Term Goals

Intermediate-term goals, long-term goals, how to use a robo advisor to set goals, is investing good for long-term goals, what is a valid long-term investing goal, what are the best short-term investments, the bottom line.

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How to Invest for Short-Term and Long-Term Goals

Learn the best strategies for your short- and long-term investing goals

If you are looking to invest, it’s important to know if you are investing for a short-term or a long-term goal. Investors need to consider three fundamental elements when deciding to invest their money: time horizon, goals, and risk tolerance. The time horizon in which you will need to access your money will determine the type of investment best to meet that goal. Money that you will need access to in a very short period of time should not be in the stock market; whereas money that you won’t need for a long time, such as retirement, should be invested in the stock market to take advantage of the potential for greater returns. 

How to Invest for Your Short-Term or Long-Term Goals

Short-term goals are generally thought of as goals that you are investing in for less than five years, but depending on your investment goal that definition can differ and be as short as three to six months. Perhaps you are looking to save for a vacation, a down payment on a car, home improvements, or to buy a new appliance. These short-term goals typically involve amounts of money that you can realistically save relatively quickly. Principle preservation is also of paramount importance, so choosing less risky investments is key.

Long-term goals are usually in place for ten or more years. Money invested for long-term goals has a much longer time horizon and can withstand fluctuations in the stock market. Historically, the U.S. stock market trends higher over time. However, while the overall direction of the stock market is higher, there can be dips and downturns in the short term that can negatively affect your portfolio. Having time to allow for the market to go up again is critical for obtaining long-term investing goals.

When saving money for short-term goals, it is important to put money in less risky investments that will earn money, but also preserve the principle. Because you are saving for an objective that you need to meet relatively quickly, such as a vacation, a down payment on a car, or buying a new television, you can’t lock your money up into investments with long-term maturities , nor do you want to invest in the stock market, which can be volatile. Even though there is potential for your money to earn more in long-term investment vehicles, you must prioritize principle preservation with less risky investments. 

The following are great investment vehicles to help you reach your short-term goals:

Cash Management Accounts

Cash management accounts incorporate features of checking and savings accounts with benefits such as competitive interest rates and little to no fees.

High-Yield Savings

With the rise of online banking, financial institutions have become more competitive by offering high-yield savings accounts , which can pay up to approximately ten times more than a traditional savings account.

Money Market Mutual Funds

Unlike a typical money market, which is an FDIC-insured cash account, money market mutual funds are a basket of investments that hold your money in high-quality, short-term debt instruments, cash, and cash equivalents and are not insured by the FDIC.

Building a rainy day or emergency fund can be done with a mix of cash and short-to-intermediate-term investments. Because you want to be able to access these funds immediately if necessary, but you are also hoping to allow this money to grow, we will look at some investments to help reach those immediate-term goals.

Certificates of Deposit

Certificates of deposit (CDs) can be very short-term, starting at just a few months and ranging to several years. An investor could choose to have several CDs on a rolling maturation schedule to always have access to cash, and if it is not needed at the time, it can be invested into another CD.

This type of investment is sometimes called a debt fund because it is an investment vehicle that utilizes bonds of all types–government, municipal, corporate, convertible, and mortgage-backed. Because the main goal of a bond fund is generating monthly income for investors, they are good instruments to provide monthly cash for immediate use.

Long-term investors utilize money that they won’t need for several years or even decades. When investing long-term, you want to invest with growth in mind, not the day-to-day fluctuations in the market. You want investments allocated across different asset classes, including cash and cash equivalents , stocks, and fixed income. Your exact mix of investments will be dependent upon your time horizon and risk tolerance.  

Individual stocks can be very powerful long-term investment tools. There is the potential for steady growth in value, as well as growth by dividends. Some companies will issue a cash dividend , while others may issue a stock dividend or additional shares of stock. Shareholders invested for the long-term are likely to see overall growth of the stock price, and with an increased number of shares, making stocks a beneficial long-term investment.

Exchange-Traded Funds

Exchange-traded funds (ETFs) are much like mutual funds, which are also a basket of investment securities. ETFs typically track a particular index, sector, commodity, or other asset and can be bought and sold on a stock exchange, just like an individual stock.

Mutual Funds

This type of investment is a pool of stocks, bonds, or money market assets and is structured by a money manager to meet the fund investment objectives. 

Investors can choose from a variety of funds, including but not limited to :

• Income Funds
• Money Market Funds
• Stock Funds
• International/Global Funds
• Specialty Funds
• Balanced Funds

For instance, a stock fund would be more suitable for someone with a longer time horizon until retirement; whereas a bond fund would be a more conservative choice for someone nearing retirement.

A robo-advisor is an account that you can set up and have investments chosen automatically for you in an algorithm-based platform. During account setup, you will answer several questions regarding your investing goals, time horizon, and risk tolerance. Based on those answers, the robo-advisor will choose a mix of investments, often based on modern portfolio theory , that fits the criteria and will rebalance and reallocate your portfolio to stay on target with your selected financial goals. Utilizing modern portfolio theory, investors can create portfolios that maximize return for a specific level of risk. 

 The best robo-advisor companies make setting up an account a quick and easy process that can be done completely online. 

Yes, investing is good for long-term goals, such as planning for retirement or saving to pay for a child’s college education. Having investments and a plan in place for several years can certainly help your money grow and prepare for those types of big expenses in life. Investing for the long-term can help lessen the anxiety of day-to-day market fluctuations. If you don’t need the money for several years, you can ride out the ups and downs of the market. 

Investing goals will vary from person to person. However, many people will invest long-term to save money to be financially secure in the future. Paying off a house, saving for retirement, and ensuring that you have enough money to pay for your child’s college education are among some of the most common long-term investing goals.

Short-term investments like Treasury bills, high-yield savings accounts, short-dated CDs, money market accounts, and government bonds offer some of the best interest rates or rates of return over holding periods of less than three years.

It is important for your financial well-being that you are able to determine what constitutes short-term, intermediate-term, and long-term investing goals. Each type of investment horizon requires a different strategy and set of investments . Some investments that are suitable for your short-term horizon are unsuitable for the longer term and vice versa.

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Keep calm and allocate capital: Six process improvements

Most large corporations have annual processes to allocate capital and other resources across business units and for strategic initiatives enterprise-wide. The typical practice is to begin with a strategy or “strategic refresh,” develop a long-term (three- to seven-year) financial plan, and lay out a highly detailed budget for the first year of the plan. Unfortunately, the processes are often both muddled and rigid; they typically take months to iterate, generate reams of distracting detail—and then fail to allow for sufficient flexibility to adjust resource allocation over the year. The result: a failure to align resources with strategy.

Every company faces unique challenges. Not all of the measures we describe in this article will be appropriate in every situation, and there’s no one-size-fits-all list of process improvements. However, we find that in most cases, senior leaders should do the following:

• As part of the strategy or strategic refresh, identify the role of each business in realizing the company’s strategy (for example, to accelerate growth, improve ROIC, or to divest) and the company’s ten to 30 most important initiatives.
• Use a streamlined approach to develop the company’s long-term financial plan by employing a value driver model, with only a few line items for each individual business unit or product line.
• Ensure that the long-term financial plan allocates resources to the company’s ten to 30 most important initiatives.
• Match next year’s budget to the first year of the long-term financial plan.
• Keep to a compact planning schedule.
• Design in-year flexibility, at a regular cadence, to allocate more (or less) resources to existing or new initiatives.

In this article, which is part of our ongoing “Strategy to action” to help companies improve resource allocation, we explain each of these six critical process improvements.

1. Identify each business unit’s role and the most important enterprise initiatives

Every strategic refresh should address two fundamental questions: first, what is the role of each business in realizing company strategy (such as to accelerate growth, improve ROIC, or divest), and second, which specific initiatives are the highest priority for the company, within that business and across the enterprise. In our experience, we have found that the sweet spot for companies is ten to 30 essential initiatives. If the list is longer than that, it can diffuse attention and become impractical to manage. If it’s shorter, it probably misses some important initiatives that top management should be involved with.

For example, a company may announce that its strategy is to grow in Latin America. That may be a terrific idea, but without more detail it isn’t actionable. Resources can’t be allocated to catchphrases. What would a practical Latin America growth strategy look like? To start, the company should identify the specific countries it will focus on. Next, it should spell out the major considerations, such as whether the company intends to enter a country on its own (perhaps using a team in a country relatively near where it already has a presence), partner with an existing player in that market, or make an acquisition. The company should also allocate the capital needed for whichever of those options (or others) it intends to pursue. Nor is money enough. The company should identify which business or team will be accountable, name a full-time team leader, be clear about which steps are needed (for example, identifying targets and building relationships), and make sure that the initiative is not starved of money or senior-management attention.

2. Focus on a small number of key value drivers for the long-term financial plan

Most companies’ long-term financial plans include too many line items. This kind of detail slows down the process, makes iteration difficult, and can obscure the true drivers of value.

To be effective, a long-term financial plan needs to be concise. For example, there is no need for ten or more items under general and administrative (G&A) expenses; the G&A line can stand alone. In most cases, income statements for each business should include only revenues, cost of goods sold, sales and marketing, R&D, and overhead costs—without disaggregating detail. An enterprise runs on value drivers, not accounting items. An effective financial plan clearly lays out the most important value drivers for each business unit, surfacing the few key elements that are most important for profitable growth, return on capital, and other company imperatives.

What do key value drivers look like? Consider a filmmaking company: there is a lot that goes into creating successful movies over a multiyear period. But cut to the chase (as they say in Hollywood), and its model can be simplified to producing three blockbusters and five smaller films. Its most impactful value drivers are the average budgets for large and small films, marketing costs, and overhead expenses. A music subscription business, for its part, would have similarly compact but completely different key drivers: the number of subscribers, revenue per customer, and customer churn.

Many senior leaders push back on “keep it simple,” saying that it is impossible to distill their businesses into just a few drivers. But these leaders are mistaking the forest for the trees—and underestimating the costs of examining too many trees.

In our experience, many senior leaders push back on “keep it simple,” saying that it is impossible to distill their businesses into just a few drivers. But these leaders are mistaking the forest for the trees—and underestimating the costs of examining too many trees. It isn’t possible to achieve 100 percent certainty in a complex business; regardless of industry, a competitive landscape is constantly shifting and usually can’t be predicted to a few percentage points. Parsing excessive line items, meanwhile, takes away time that could be better spent managing issues that have more of an impact, and yields diminishing returns. Often, the extra detail delivers no benefits at all.

While the number of line items should be kept to a minimum, the number of business units or product lines should be sufficiently granular to aid the allocation of resources based on the roles, objectives, and needs of each business unit. For example, a division with a fast-growing business unit and a mature or shrinking business should be divided into two businesses, so that top management can ensure that each has the right goals and resources (even if the division leader remains responsible for execution). In practice, a large corporation’s long-range financial plan should typically cover 20 to 50 product lines or business units.

3. Ensure that resources are allocated to the most important priorities

We’ve been surveying senior leaders for years, and a majority of them report that their organizations are underinvesting. Digging deeper, this usually means that companies don’t allocate the proper resources to the most important strategic initiatives, especially growth initiatives. Often, the long-range financial plan simply states the targets and financial projections for each business unit.

A better approach is to be clear on targets and have the long-range financial plan highlight the specific resources that are allocated to the highest-priority initiatives, whether they are enterprise-wide or within a particular business unit, to make sure those targets are met. This typically requires the company to allocate resources among its business units differently from how it had in prior years, regardless of legacy spending or “fairness.”

For example, one major consumer-packaged-goods company took away the “base” level of spending for some of its legacy European operations because of their lack of growth and relatively low returns on capital. Instead, the company allocated those resources to three specific initiatives in Latin America. And at one leading retailer, the CEO personally ensures the full funding and management of the company’s top six enterprise initiatives, in addition to spending almost one day per week on those initiatives.

4. Base this year’s budget on the first year of the long-term financial plan

Remarkably, the prolonged financial-planning process usually ends with a year one budget that does not tie to the long-range financial plan; instead, the year one budget is often closer to the last year’s budget. In a McKinsey survey of over 1,200 executives, less than one-third  of participants reported that their company’s budgets were similar or very similar to their most recent strategic plans. 1 “ The finer points of linking resource allocation to value creation ,” McKinsey, March 29, 2017. Another study revealed a striking 90 percent correlation in investment spending from year to year. 2 Tim Koller, Marc Goedhart, and David Wessels, Valuation: Measuring and Managing the Value of Companies , New York, NY: John Wiley & Sons, 2020. While some degree of year-to-year correlation is to be expected, it’s clearly impossible for a company to boldly reallocate capital (an approach that our research shows creates the most value  for companies on the whole) when it keeps allocating capital to essentially the exact same things.

While the year one budget should be more detailed than the long-term financial plan, the top-line revenues, profits, and cash flows for each unit should always match year one of the long-term plan. Two techniques are useful for making this happen. First, start building the budget based on the initial year of the financial plan, rather than on last year’s budget or current year’s results. Second, require that only the CEO and CFO have authority to approve deviations from the long-range plan. Without that rigor, resource allocation tends to dissipate in a fog of war.

5. Compress the time frame for the entire planning process

Financial planning can be a never-ending story. A senior team starts with a strategic refresh in the first quarter, followed by a long-term financial plan that kicks off in the second quarter, and finishes toward the end of the third quarter. Meanwhile, the budget for the next year begins in the third quarter and wraps up at the turn of the year—or even later. This prolonged timeline invites unnecessary draft turning and complexity, and diminishes the forcing-mechanism value of having to make a decision on the most important initiatives and value drivers.

The resource allocation process should be synchronized and as short as possible, with each step taking a maximum of two months. These steps should be scheduled as late in the year as possible, while still allowing ample time for rigorous analysis and meaningful debate. The entire process should also be contiguous.

One consumer retail company’s process serves as an example of an inefficient resource allocation timeline. The company conducts its annual strategic refresh in April or May, followed by long-term financial planning in September and October. Finally, after about two more months of hiatus, the budgeting process takes place from December until March for the calendar year that has already begun. Each step in the process is excessively time consuming and remarkably disconnected from one another. A consumer-packaged-goods company, by contrast, demonstrates a more effective resource allocation timeline. The company initiates its annual strategic refresh in May, which drives the long-term strategic financial plan and resource allocation process conducted from June until September. The long-term strategic financial plan flows into the annual budgeting process, which starts in October and ends in November.

A process that runs from May to November is better than one that runs all year long and into the next, but it can still be significantly improved. First, any gaps in the processes should be eliminated; the longer plans sit, the more stale and less urgent they become. Second, decision makers should realize that multiple iterations are a tax on their time—they should receive one or two bites of the apple, and put in the work up front to make sure there aren’t excessive numbers of drafts. Finally, the second quarter is simply too soon to start; it provides an unnecessary cushion, at the expense of harder deadlines and greater focus.

Nothing so concentrates the mind as 24 weeks to finish a strategic refresh, a long-term financial plan, and year one of next year’s budget.

Precise timelines will vary depending on the enterprise—which in turn depends on its industry (technology companies, for example, move much faster). But to borrow from the old saying, nothing so concentrates the mind as 24 weeks to finish a strategic refresh, a long-term financial plan, and year one of next year’s budget. In most cases, a company should begin its strategic refresh shortly after midyear and complete the refresh before the end of the third quarter; immediately commence its long-term strategic financial plan once the refresh is completed; and then, when the long-term strategic plan is done, immediately turn to its budget for the upcoming year. For a company whose fiscal year matches the calendar year, the process would begin after midyear and finish in mid-December (exhibit). Across industries, CFOs of companies that have more compact timelines  report that they outperform their peers on numerous dimensions. 3 For more on the benefits of nimbler resource allocation processes, see the McKinsey Global Publishing survey, “ Tying short-term decisions to long-term strategy ,” McKinsey, May 20, 2024.

6. Build in year-round resource allocation

Budgets are never perfect—which is exactly what one would expect, since circumstances change over the course of the year. For many companies, the approach to in-year flexibility is to allocate the resources to each division or unit leader and give them the decision rights to reallocate among lines they control, as they see fit. This, however, creates a perverse incentive for divisions or business units to hoard resources they don’t need, spend it on lower-priority items or, even worse, underinvest in strategic initiatives to meet short-term targets.

To prepare for inevitable changes in the number of resources needed and available during the year, the authority for meaningful flexibility in resource allocation should belong only to senior leaders, at the enterprise level. An investment committee , including the CEO and CFO (and ideally only one to three additional voting members, with the CEO making the deciding call) should meet monthly to make important in-year investment decisions. 4 For more on the governance of capital allocation, see Aaron De Smet and Tim Koller, “ Capital allocation starts with governance—and should be led by the CEO ,” McKinsey, June 22, 2023. These monthly meetings should be for decisions , not for progress updates or general reviews. The agenda should address only those matters that require a decision—and the result should never be “deciding to decide.” Key decisions that the committee may make during these meetings can involve allocating funds for stage-gated projects or projects that were provisionally approved during the annual planning process, discontinuing projects that aren’t likely to meet their objectives, and approving new projects that arose after the annual planning cycle.

Flexibility usually requires setting a reserve of unallocated funds that can be used during the year for new initiatives that were not anticipated during the planning process. Withdrawals from the reserve should be authorized only by the CEO or investment committee and must align with well-defined criteria, such as affirming that the release is for a strategically vital initiative or covering essential external costs, such as dealing with natural disasters. While there is no universally applicable percentage for the “right” amount to reserve, a general guideline is to set aside 5 to 20 percent of the corporation’s budget. For businesses operating in sectors with longer project lead times and minimal market volatility, such as utilities, a strategic reserve of about 5 percent of the budget may be sufficient. Conversely, industries characterized by rapid market changes and fluid resource allocation, like software, may find a reserve of approximately 20 percent more appropriate. Consumer-packaged-goods companies, for example, may encounter a newly launched campaign that fails to meet its targets or a competitor that launches a new product that senior leaders did not anticipate. As situations arise, the investment committee should reallocate resources quickly, opening up opportunities for other businesses and initiatives throughout the year.

Certain projects are easier to stage-gate during the formal planning cycle, such as pharmaceutical companies preparing to make significant investments in marketing once regulatory approvals are obtained. Other allocations of capital may be approved only provisionally because they require further analysis (for example, proof of concept for a new technology, or decisions to drill to a gas or petroleum deposit); in those cases, the investment committee should withhold that capital for in-year allocation. The key is to build in flexibility. An effective resource allocation process anticipates change and maintains at least a monthly cadence—and ideally, one that is more frequent than that.

The processes for turning strategy into action should be radically simple. The most effective processes clearly spell out the strategy and the role of each business in achieving that strategy, identify the most important value drivers, ensure that the most important initiatives have the resources they need, insist that the budget matches the first year of the long-term financial plan, keep to a compact planning schedule, and design and demonstrate in-year flexibility. After all, managing a large corporation is already complicated enough.

Tim Koller is a partner in McKinsey’s Denver office, and Zuzanna Kraszewska is an associate partner in the Warsaw office.

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• Best overall
• Most affordable
• Best no medical exam
• Best for customer service
• Best for whole life conversions
• Best for seniors
• Best for foreign nationals
• Best for military personnel
• Best for low-income parents
• How we review term life insurance

Best Term Life Insurance of June 2024

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate insurance products to write unbiased product reviews.

If you're looking for a starter life insurance policy, term life insurance may be your most affordable option. While term life insurance lacks the benefits of cash value insurance and whole life insurance , it's an affordable way to protect your family in the event of your untimely death in your prime earning years. 

Compare Term Life Insurance Policies

Because term life insurance is temporary, the standards by which a good term life insurance policy is measured is different than a whole life policy. While we look at eligibility requirements and premium rates, we also looked at policies on conversions as well as companies that cover spec ifc groups of people, such as military personnel and low-income parents.

Here are our picks for the best term life insurance policies in 2024.

Best overall: Banner

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Affordable insurance rates for adults up to age 75, 85 for universal policies
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No maximum coverage on some policies
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. High financial stability
• con icon Two crossed lines that form an 'X'. Low coverage amounts on universal policies
• con icon Two crossed lines that form an 'X'. Limited riders to customize coverage

Banner Life Insurance's OpTerm policy has affordable life insurance rates for all ages and approved health classifications. Unfortunately, shoppers with a history of severe health complications, including HIV, cancer, etc., do not qualify for Banner Life policies. Shoppers ages 20 to 75 years old may be eligible for coverage with no maximum and up to 40 years of coverage. You can also expect fast approval and may qualify for a medical exam waiver with the Banner Life OpTerm plan.

Read our Banner Life review here.

Most affordable: Protective

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Customizable term, whole, and universal life insurance plans
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Life insurance options for older adults
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. High customer satisfaction according to JD Power
• con icon Two crossed lines that form an 'X'. Basic terms expire at 65, and Protective Life may not offer whole or universal policies for older adults
• con icon Two crossed lines that form an 'X'. Does not offer policies for special groups

Protective Life Insurance's Class Choice Term plan has some of the most affordable rates for the best value in the life insurance market. The average life insurance cost for 35-year-old males and females (with a standard 20-year term length and a life insurance benefit of $1,000,000) is about $52 and $43 monthly, respectively.

At Protective, the same life insurance policy for a male applicant would cost $46.63 monthly. A policy for a female applicant quotes at $38.44 monthly. Both of these rates are below the industry average. So while you can find cheaper, you get the most out of your buck with Protective.

Protective's Classic Choice Term is excellent for its customizability and range of options. This plan offers $100,000 to $50 million in coverage, some of the highest life insurance benefits in the market. Additionally, you have several term options ranging from 10 to 40 years.

You may fancy Protective's a la carte of riders, including its child and disability riders. Protective also offers an income provider option endorsement, which allows you to decide how to allocate your death benefit among your beneficiaries.

Read our Protective Life review here.

Best no medical exam: Brighthouse

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Affordable rates with term and whole life options
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Available in all 50 states
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Strong company culture for knowledgeable and helpful insurance agents
• con icon Two crossed lines that form an 'X'. Limited plans that may not fit unique buyers' needs
• con icon Two crossed lines that form an 'X'. Does not offer unique plans for senior or other buyers

Brighthouse Financial's SimplySelect term offers best-in-class coverage even without undergoing a physical exam. The company also received an A rating from AM Best and a 739 rating with JD Power, according to its 2023 life insurance study.

This policy allows instant approval with some of the most affordable life insurance rates. You can get anywhere from $100,000 to $3 million in coverage with term lengths of 10, 20, or 30 years. However, higher policy limits may be subject to stricter underwriting. Also, its convertible and renewable rider options allow you to extend your coverage or convert your policy to a whole life insurance plan. See our guide to the best no medical exam insurance companies for more options to compare.

If your health isn't at its best, you might lean towards insurance requiring no medical exam , though your health status won't be ignored. No medical exam policies still ask health questions, and the company can look at past medical records. So these policies are more frequently issued with lower death benefits to young, healthy applicants. Of course, when you're working with a company like Brighthouse Financial, life insurance agents can run a preliminary application to see your chances of success. If you don't qualify for a no medical exam policy, Brighthouse Financial agents can quote other term or whole life options to fit your needs.

Best for customer service: State Farm

Bundling is standard, and agents often quote with multiple discounts.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Best in JD Power customer service ratings
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Company offers a range of different insurance products to meet buyer needs
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Agents are knowledgeable about its products
• con icon Two crossed lines that form an 'X'. Life insurance products are conservative and limited
• con icon Two crossed lines that form an 'X'. Buyers may be subject to multi-year waiting periods before they qualify for full payouts on life insurance policies
• con icon Two crossed lines that form an 'X'. State Farm agents cannot offer alternative options if State Farm is unable to bind a life insurance policy

State Farm is one of the insurance industry's most prominent insurers offering auto, home, and other insurance. Bundling is standard, and agents often quote with multiple discounts. Its term, universal, and whole life insurance products are no exception.

• Life insurance products include term and permanent life
• Ranks highly for customer satisfaction

Reliability and trustworthiness are imperative for a long-standing insurance company, and it doesn't get any better than State Farm. Included among our guides on the best life insurance and the best cheap life insurance , State Farm's life insurance earned an A++ for financial stability with AMs Best. It also received 843 out of 1,000 in 2023 for overall customer satisfaction with JD Power, landing it in the no. 1 spot for customer service among its industry competitors.

State Farm sells property and casualty products, including home, renters, and auto insurance. So, you can pair your life insurance with another insurance product to reduce your premium.

Read our State Farm Life Insurance review here.

Best for whole life conversions: Pacific Life

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Offers universal and term life insurance products
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Easy online calculators to estimate your life insurance needs
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Available in all states except New York
• con icon Two crossed lines that form an 'X'. No whole life policies currently available meaning fewer guarantees on permanent policies
• con icon Two crossed lines that form an 'X'. Limited riders to address unique family situations, focused mostly on locking in benefits as you age

A conversion from term to whole life insurance  allows you to extend your coverage and take advantage of those coveted cash-value benefits. Pacific Elite Term offers some of the best options if you're planning on purchasing a whole, universal, or variable life insurance plan eventually. With this term life plan, you can convert after the first ten years of term coverage. This policy also adds cash credit to your permanent policy after conversion, which may reduce the overall cost of your premium.

Keep in mind a term to whole life conversion is not guaranteed. Your insurance agent can advise when to submit an application to convert. Once you do, underwriting will assess your health and risk at the time of application (not when you originally applied for your term policy). Insurance companies will also set rates based on your current application.

With competitive rates and availability in all 50 states, Pacific Life may be your pick of the litter for policy convertibility. Additionally, Pacific Life has outstanding customer satisfaction and financial strength scores, ranking sixth place with JD Power (above the the industry average) and A+ with AM Best. Pacific Life may also allow qualifying buyers to forgo a medical exam.

Read our Pacific Life Insurance review here.

Best for seniors: Prudential

Offers aggressive financial plans.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Available in all 50 states (New York residents may have different plans)
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Buyers can withdraw money to pay for nursing home bills due to severe illness or disability
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Knowledgeable agents who can walk you through your options
• con icon Two crossed lines that form an 'X'. Financial returns are limited
• con icon Two crossed lines that form an 'X'. Limited policy options for seniors and other groups who might struggle to find life insurance

The aggressive financial plans offered by Prudential may appeal to many younger buyers and those with a stable income. However, those with lower income or buyers who aren't sure about the financial system may be more hesitant to engage with Prudential. Like many other industry giants, Prudential is working to change this perception.

For seniors, getting life insurance at an affordable rate can be challenging. However, Prudential's Term Essential is an excellent option for shoppers over 60 needing short-term coverage at a competitive price.

Prudential's Term Essential allows for higher age limits than many of its competitors. As a result, underwriters may overlook minor age-related conditions. Exclusions for terminal or costly illnesses like cancer, multiple sclerosis, and HIV may still apply. The plan provides coverage as little as $100,000 up to $1 million and term lengths of 10, 15, 20, or 30 years. Additionally, this policy offers a Living Needs Benefit rider, free of charge, with all of Prudential's term life policies. This rider gives you access to a portion of your death policy if you become terminally ill, a beneficial option for senior retirees.

Not all senior applicants will qualify for a life insurance policy with Prudential Term Essential. But options may be more flexible than it would be with competitors. See our guide to the best life insurance for seniors for more information.

Read our Prudential Life Insurance review .

Best for foreign nationals: Transamerica

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Wide range of life insurance products including term, universal, foreign nationals, and more
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Policies available for foreign nationals
• con icon Two crossed lines that form an 'X'. Can only be quoted and sold by licensed Transamerica life insurance agents
• con icon Two crossed lines that form an 'X'. Life insurance not available for certain high-risk clients

Life insurance can be an invaluable tool, but it may be hard to qualify for those who don't have U.S. citizenship. As one of the oldest and largest life insurance carriers, Transamerica accommodates foreign nationals within the U.S. to offer the best coverage options.

Transamerica Trendsetter Super is a term life policy providing some of the most competitive rates. If you're 18 to 80-years-old, you can get coverage of as little as $25,000 up to $2 million. Qualifying applicants may also waive the medical exam requirement. We recommend talking to a licensed insurance agent if you are still determining if you qualify.

Read our Transamerica Life Insurance review here.

Best for military personnel: USAA

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Affordable pricing starting with $12/month on some policies
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. May offer coverage to military members other companies won't cover
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Offers term and permanent life insurance options
• con icon Two crossed lines that form an 'X'. 2 year waiting period for full benefits on some policies
• con icon Two crossed lines that form an 'X'. May focus on death benefits only more than other companies
• con icon Two crossed lines that form an 'X'. All permanent policies are underwritten and serviced by other companies, not by USAA
• USAA offers life insurance for the military, veterans, and the public.

USAA is one of the nation's leading insurance providers, created with active military members and veterans in mind. With USAA, military members and veterans may appreciate the unique benefits of purchasing its Level Term V policy. This plan doesn't require a medical exam, but you may have to answer a health questionnaire online.

USAA's equivalent of a guaranteed insurability rider is its Life Event Option rider. For qualifying life events (like getting married or having a child), you can get up to $100,000 of coverage. While many insurance companies offer this add-on at an additional cost, USAA's Life Event Option rider is built into the policy without the extra fee. Also, if you're injured in the line of duty, USAA helps pay for your medical bills and even replaces your health coverage if you retire or leave the military.

The critical thing separating USAA from other life insurance companies is its options for active duty military members outside of SGLI (a group life policy tied to your service in the military), i.e., you lose it once you separate from the military). As a result, its death benefits may be lower compared to some competitors. But active duty military members, particularly if deployed, will not qualify for coverage at all with other life insurance providers.

Read our USAA Life Insurance review here.

Best for low-income parents: MassMutual 

A++ (Superior)

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Wide array of term and permanent life coverage options 
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Established life insurance carrier with a strong reputation
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Competitive insurance premiums for both permanent and term policies
• con icon Two crossed lines that form an 'X'. May not be available for seniors above age 65
• con icon Two crossed lines that form an 'X'. Policies must be purchased through an agent
• Life insurance provider offering term and permanent policies
• LifeBridge program for low-income parents and guardians
• High marks in customer satisfaction

For many families, getting life insurance isn't in the budget or may not be a financial priority. Fortunately, MassMutual created the LifeBridge program to assist low-income families with affordable coverage.

With MassMutual's LifeBridge program, qualifying parents and guardians get a free 10-year life insurance policy. In addition, this policy pays your designated beneficiary a $50,000 death benefit.

While MassMutual's term coverage through the LifeBridge program isn't as elaborate as some of the options on this list, this free plan will cover your dependent's educational expenses and sustain a good living if you pass away.

Read our MassMutual Life Insurance review here.

Why You Should Trust Us: How We Reviewed the Best Term Life Insurance

We choose our picks for the best term life products best on a company's customer satisfaction points, company offerings, financial stability ratings, and affordability.

• Customer satisfaction: We use JD Power's life insurance customer satisfaction survey to assess a company's customer service practices. Life insurance companies with ratings of more than 774 out of 1000 are considered above the industry standard.
• Company offerings: We compare each company's offerings. These include but are not limited to riders, policy flexibility, no medical exam options, and instant approvals.
• Financial stability ratings: We use AM Best, an industry-leading credit rating agency, to assess an insurance company's financial health. A company with an A++ to B+ is stable and likely to be around for years. On the other hand, anything lower than a B means a company is unstable or unable to meet its financial obligations.
• Affordability : According to our article on average life insurance rates , a reasonable monthly premium is on par with or below the average cost of life insurance, which is between $40 to $55 a month.

Check out the details of our insurance rating methodology to learn more.

What is Term Life Insurance?

Term life insurance offers temporary protection over a set amount of time, usually between 10-30 years, though you can find shorter and longer terms. Because a payout isn't guaranteed under these policies (in fact most term life insurance policies never pay out), premiums are cheaper than permanent life insurance policies. 

Term life insurance policies are great if you need coverage for a specific period in your life or you have a temporary financial obligation. For example, if you're paying off a mortgage or your child's college tuition, a term life policy will ease your loved ones financial burdens if you're no longer around to pay them off. 

Best Term Life Insurance FAQs

The best company for term life insurance will be the one that offers you the best coverage and claims experience at the best price. That said, we found that Banner Life Insurance's OpTerm policy had affordable yet comprehensive coverage for a wide range of age groups.

When selecting your death benefit amount, the rule of thumb is to select 10 times your annual income. But in general, you probably should get as much coverage as you can comfortably afford.

Yes, term life insurance will protect your family. In the unfortunate event you pass away during its active period, it will help your beneficiaries cover costs like funeral expenses and outstanding debts and can replace lost income. However, if you pass away after its expiration, your beneficiaries will not be paid.

Whole life insurance offers more comprehensive coverage and comes with cash-value benefits. By the time the policy is paid, permanent policies are frequently cheaper for the benefit you get. That said, affordable term life insurance is more immediately available.

If you outlive your term life insurance, your coverage will expire, and you or your beneficiaries won't receive a payout. The funds will simply go into the company's profits. However, if you purchased a return of premium rider, you may get your money back at the end of your policy.

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Everton Transfer DealSheet: Financial uncertainty hampers long-term planning

What to expect from Everton this summer?

Well, almost certainly more of the same. With budgets tight and an investment process ongoing, the club’s initial outlay was just £2million ($2.5m) last summer.

Fast forward 12 months and not much has changed, with a failed takeover process casting uncertainty over the club.

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That means the summer remains something of a moveable feast, with the outcome of Moshiri’s search for new investment likely to have an impact on what can be done in the market.

Big questions remain. Can Everton avoid a third consecutive breach of Profit and Sustainability rules (PSR)? Will they be able to keep hold of key names like Jarrad Branthwaite and Amadou Onana ? And will manager Sean Dyche be handed the resources needed to help the team kick on?

Here, The Athletic previews Everton’s summer transfer window.

What positions are they looking at this summer?

As it stands, Everton’s priority positions are central midfield and the right wing.

Two players may be needed to fill the gap centrally if Onana departs, while the expiration of Arnaut Danjuma and Jack Harrison ’s loan deals leaves Dwight McNeil and Lewis Dobbin as the only two recognised wide midfielders in Dyche’s squad.

There is a feeling that Everton need to add extra dynamism and goal threat out wide. The midfield puzzle is slightly more complicated and may depend on other business done. Abdoulaye Doucoure , a No 10 this season, could play deeper, opening up the possibility of an addition in more advanced areas.

Everton would have been keen on a move for Lazio’s soon-to-be free agent Daichi Kamada , a prime target during the January window, but the Japanese favours a reunion with his former Eintracht Frankfurt manager Oliver Glasner at Crystal Palace.

Which players are they looking at?

Everton are exploring a potential loan move for Kalvin Phillips , with the midfielder set to return to parent club Manchester City after a disappointing loan at West Ham . They are expected to face significant competition for his signature and would likely have to come to an arrangement with City to cover his lofty wages.

Benfica midfielder Florentino Luis was a January target, but the two clubs were unable to strike a deal. That kind of transfer remains challenging unless funds are raised elsewhere. Wilfred Ndidi , a free agent when his Leicester contract expires at the end of the month, has also been linked but reports in France suggest Lyon are favourites for his signature.

Everton and Leeds have been in talks over Harrison’s future, with the winger settled on Merseyside and keen on a return.

They are long-term admirers of another Leeds player, Willy Gnonto, and Iliman Ndiaye of Marseille but are not thought to possess the finances to pursue either as it stands.

Lyon centre-back Jake O’Brien has been monitored but a new centre-back would only be needed if another defender left this summer.

Who will make the key decisions this summer?

Director of football Kevin Thelwell is a key figure. The former Wolves and Red Bull New York chief liaises with Everton’s interim board on budgets and Dyche on both potential targets and contract renewals. The manager possesses the power of veto in certain situations.

Recruitment has often been a collaborative — read muddled — process at Goodison during owner Farhad Moshiri’s tenure, with the British-Iranian and late chairman Bill Kenwright previously playing an active role in proceedings.

Moshiri is looking to sell the club, but an element of collaboration remains elsewhere. Danjuma, for example, was a long-time recruitment favourite; seen as one of the best available options in the loan market last summer prior to his temporary move from Villarreal . Dyche’s former Watford team-mate Ashley Young , meanwhile, joined last summer on a free.

Thelwell leans heavily on head of recruitment Dan Purdy and his network when it comes to talent identification, with Onana one such player flagged by scouts.

What moves have they made already, and which players’ contracts are expiring?

The priority so far has been to make decisions on players whose contracts expire this summer.

Everton have already activated their option to extend midfielder Idrissa Gueye ’s contract by a further year, with veteran pair Seamus Coleman and Young both offered new deals. The latter has already indicated his desire to continue at Goodison while club captain Coleman is yet to make a decision but has also made positive noises about extending.

With the reduction of the wage bill still a priority, Andre Gomes and backup goalkeeper Andy Lonergan have not been retained. It is hoped the saving made on Gomes’ sizeable salary  — comfortably in excess of £100,000 per week — will free up room in the wage bill.

Dele Alli ’s future is yet to be resolved. Everton would be keen to take another look at him in pre-season but have to pay Tottenham a significant lump sum if he signs a new deal. The two clubs have spoken in an attempt to find a solution but one is yet to be found.

In the meantime, the 28-year-old will stay at the club and continue his rehabilitation.

What is their PSR position? What do they have to do before June 30?

A key question, but not the only financial consideration for Everton this summer with the process of identifying new owners ongoing.

The club breached PSR in both the 2021-22 and 2022-23 seasons and are expected to do business again ahead of June 30 in an attempt to improve their position.

Everton must avoid a PSR deficit of £38million or greater this season to avoid another breach, with the 2022-23 accounts showing a PSR loss of £62.7m.

That makes further business necessary, with Thelwell indicating in a May communication to fans that departures would be needed “to protect the long-term stability of the club”. Everton have played down suggestions of a fire sale and insist they are confident of resolving their PSR position.

PSR is only part of the story here, though. Given the protracted takeover saga and Moshiri’s desire to sell, cash flow is also likely to be a consideration.

Who will they be looking to sell?

Onana is considered the most likely sale, with the midfielder having received significant attention already from Premier League and European clubs.

Manchester United , Arsenal and Newcastle have previously been credited with an interest, while Bayern Munich and Barcelona are also known admirers, but the latter are not currently thought to possess the finances to meet Everton’s lofty valuation.

The sale of the Belgium international before June 30 is far from a given due to his participation at the European Championships this month, but would go a long way to addressing any PSR concerns.

Everton are aware that the average spend on midfielders of Onana’s ability has been between £60-70million over the past couple of years and would expect a similar fee for the Belgian. Former club Lille are entitled to 20 per cent of the profit made on any sale, with the midfielder having joined for an initial £30m in the summer of 2022.

Jarrad Branthwaite has also attracted interest from Manchester United, among others, but Everton’s preference would be for the young defender to stay and develop for one more season at least. The 21-year-old is happy on Merseyside and has been rewarded for his progress this season with a call-up for England ’s provisional squad for the summer’s European Championship . The priority for Everton to keep what was the fourth-best defence in the league last season together if possible, giving them solid foundations for the new campaign.

There is an acceptance, though, that the club are not out of the woods financially just yet and that the sale of one key asset per season may well be needed to get them back on an even keel. Their position is such that all significant bids will have to be entertained out of necessity.

In Branthwaite’s case, Everton have looked at other notable transfers to top clubs involving Josko Gvardiol , Wesley Fofana and Harry Maguire , and value him in a similar bracket (£70-80m).

Everton are keen to tie Dominic Calvert-Lewin , Ben Godfrey and Dobbin to new deals and have discussed terms, with the trio’s current deals expiring next June, although no significant progress has yet been made.

Their challenge will be convincing players to extend their deals given the uncertainty at the club, with Newcastle among Calvert-Lewin’s long-term admirers.

Brentford decided not to exercise their option to buy Neal Maupay for a fee in the region of £9-10m, but it remains to be seen if they or others come back with a smaller offer.

Defender Mason Holgate has 12 months left on his deal and is surplus to requirements but England Under-17 goalkeeper Doug Lukjanciks, who has been linked with Manchester City, is currently expected to remain at the club.

What sort of budget do they have?

A year ago, Everton’s recruitment team were waiting for clarity on MSP’s investment in the club so they could push on with their plans in the market. It is a similar situation again 12 months on, only this time after the failure of 777’s takeover bid.

In the absence of an obvious easy resolution, they are having to act as though nothing will happen and money will again be tight.

With 777’s loans having helped fund cash flow, any considerable expenditure seems unlikely. This is gearing up to be a window in distinct sections: before June 30 and after June 30, pre-sales and post-sales.

Everton’s recruitment team are having to plan for a number of eventualities, but for now loans and frees will likely be the order of the day once more.

(Top photo: Lewis Storey/Getty Images)

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Patrick Boyland has been The Athletic's Everton correspondent since 2019. Prior to joining the company, he worked for ESPN, Mail Online and press agency Sportsbeat, where he covered numerous major sporting events. Boyland's views on Everton have been sought out by local and national media, while he is also a regular on a number of podcasts focusing on the club. Follow him on Twitter: @Paddy_Boyland