3 Phases of Financial Planning for Young Professionals (2024)

This post was originally written for and published on Beyond Your Hammock

There was a time, not too long ago, that serious financial planning for young professionals was something almost impossible to find.

Experienced financial experts gave advice and created financial plans for people, sure — but they only served older people on the brink of retirement, who were already wealthy.

I’ve always thought this was a weird way to approach something as important as financial planning.

Doesn’t it make more sense to focus on helping the people who need it most? The people who, with the right guidance, advice, and planning, have the potential to grow wealth not just for themselves but for the next generation, charities they care about, and causes they want to support?

If you ask me, that makes far more sense than telling someone in their 30s or 40s to go away and figure it out themselves — which is exactly what the financial planning industry has done for decades.

Thankfully, things have changed. You no longer need to be rich to appoint yourself with a financial planner — and there is such a thing as financial planning for young professionals; plans designed to fit your needs at this stage of life.

Not only does financial planning specifically for you exist, but I’d say it’s critical. Obviously, I’m biased because I provide expert advice and guidance for a living — but I also practice what I preach.

Financial planning has been transformational in my own personal life.

I could not have started my own business without a financial plan. We wouldn’t have the motivation to invest big percentages of our income to meet massive financial goals without a strategy and plan of action to guide us.

We wouldn’t have been able to feel confident about my wife, Kali, walking away from her own six-figure business to join me at BYH without running the projections in our financial planning software to evaluate potential outcomes of taking this risk.

Our planning allows us to be proactive instead of just reactive to what happens to us; we have more control over how we shape our lives because we’re in action and on the offensive.

We’re organized and aware of what our money is doing, and that’s a great feeling. We also get to spend energy building things up instead of putting out fire after fire.

Perhaps most importantly, our financial planning allows us to feel confident that we’re doing the right things now.

We get to fully and freely enjoy how we use our money today — because our financial plan shows us that we’re taking the right steps to be financially secure tomorrow, too.

See? I wasn’t kidding when I said financial planning is critical for people in their 30s and 40s! And again, it’s something that’s actually available to people like us now.

But the thing is, even as one of those young professionals, you might not have any idea about what financial planning looks like in action for you.

So let’s break it down here.

There are a lot of different ways you can get quality financial advice and support for your financial goals these days — and that’s ideal, because it means having a good fit for your needs no matter what phase you’re in with your finances.

But it also makes it difficult to figure out what kind of financial planning you truly need.

Can you get away with stashing some money onto a robo-advisor platform? Is your situation complex enough to demand one-on-one attention and a highly-detailed custom plan? Do you just need a sanity check every once in a while?

From our experience, you could organize financial planning for young professionals into 3 different phases or levels, and you can get support and help at every one.

Let’s take a closer look at each so you can identify where you are now — and where you might want to go to level up your financial life next.

Financial planning for young professionals starts with the basics. It should cover the fundamental steps you need to ensure you will be okay now and into the future.

In other words, Phase 1 of financial planning is to make sure you can survive and you won’t find yourself subsisting off cat food when you’re 80.

This is the bare minimum financial planning that anyone should be doing for themselves, and it’s the kind of work that you can do even when you’re early on in your career and perhaps not making quite as much as you would like to earn — but with the potential to earn more money as you go.

At this point, DIYing your financial plan is possible to do successfully, and probably makes sense. You don’t need a professional to tell you how to do the basics when there are countless free resources out there.

Some of our favorites for self-educating yourself on your money include:

Podcasts:

• The Money Guy Show
• So Money
• Afford Anything

Blogs (and Books):

• Broke Millennial (the blog and the books are a great place to start reading for personal finance fundamentals)
• A Wealth of Common Sense (same here — the blog and the book are great resources to learn more about investing and the markets)
• The One Page Financial Plan

And of course there’s this blog, which was nominated for Best Financial Planner blog in the 10th Annual Plutus Awards, as well as the Beyond Finances podcast. We publish new content each week to help people think differently about their money and what’s possible with their finances.

With Phase 1, your financial planning will most likely revolve around taking the following steps:

1. Spending less than you earn.
2. Learning to manage your cash flow, which is a combination of reducing or controlling expenses and increasing or maintaining your income.
3. Taking the difference between what you earn and what you spend, and saving and investing it in steps 4–6.
4. Building an emergency reserve fund of cash available in case things go sideways.
5. Contributing to your retirement accounts.
6. Contributing to other shorter-term savings goals, either in savings accounts, investing, or both.

Again, these are all things you can learn more about if you need to, and then DIY. You likely don’t need to hire someone to help you if you’re at this point.

At a fundamental level, these are all simple and easy to understand steps. They are not necessarily easy steps to take, but they are not complex or beyond what you can figure out on your own.

The most complicated step on this list is 6 if you get to the “investing” bit — but at this point, simply starting is more important than investing with a complex strategy.

If you’re brand-new to investing, using a robo-advisor like Betterment might be a fine solution for now. Robo-advisors make it extremely easy to get started, and again, that’s probably the most important thing you can do at this point.

If you feel a little more confident about your ability to manage your money in the market, you might want to try a low-cost, buy-and-hold indexing strategy through a brokerage like Vanguard, Schwab, or Fidelity. All offer very low-cost index funds and make it simple to get started.

Mastering Phase 1 is an excellent starting point — but the main goal at this stage is to feel confident that you’re going to be okay.

And the thing is, most of the 30- and 40-somethings I know have no interest in being “just okay.” They want to thrive.

Enter Phase 2 of financial planning for young professionals.

Once you reach Phase 2, you probably know the financial basics and are on very solid financial footing:

• You know how to control your cash flow, and you don’t overspend.
• You have some cash in emergency reserves, and while you probably have some financial fears, you feel more capable of dealing with the many requirements of “adulting.”
• You increased your earnings or advanced in your career, and you don’t just break even each month — you have money left over and available to use.
• You contribute to your retirement accounts (and maybe even max them out).
• You feel good about your current lifestyle; it might not be extravagant, but you rarely feel deprived or strapped for cash.

This is a very good position to be in, because “just being okay” or “surviving” isn’t much of a concern anymore. You know you can do that…

…now it’s about learning to truly thrive.

Financial planning at this stage should start to show you how to use your money as a tool to get more value from every dollar you have.

A good plan will point out opportunities to take advantage of and help you uncover blind spots so you can avoid common money mistakes that others trip up over.

It should go beyond simple money advice like “hey, don’t spend so much,” or “contribute to your 401(k).” You know that. The question now is, what’s next?

Like Biggie said, mo’ money, mo’ problems. It’s true even if you’re not an OG.

When you earn more money, you have more money to make decisions with… and for every additional choice and decision you make, you open the door that much wider for missteps and mistakes that can cost you when you get things wrong.

Getting to a point where you actually have money left over each month and you’re not sure of the best use of that cash is a great sign that it’s time to work one-on-one with a financial planner.

It’s still possible to figure this out on your own at this phase. If you’re a committed DIYer and want to devote the time, energy, and work it takes to manage your finances at a higher level without an outside, objective perspective to check in with, more power to you.

(Just keep in mind that there’s a reason elite athletes have coaches and successful businesspeople have mentors. It’s worth considering why people performing at high levels build supportive teams of experts around them.)

Working with a planner can give you a specific, customized, and detailed plan that provides a strategy with action steps along with expert guidance and advice to implement your plan along the way.

You have a lot of options when you start looking for planning support. If you’re just getting started, working with a planner on an hourly basis or engaging them for a QuickStart sessionmight make the most sense.

But if you want to fully commit to maximizing your potential and leveraging your money to create your own wealth, then working with a financial advisor on an ongoing basis may provide you with a better end result. (You might be ready for Phase 3 in this case.)

Before choosing a finanical advisor, make sure you know what to look for. These resources can help you understand what makes a good planner… and what indicates major red flags:

• How to Run an Investment Advisor Search: 7 Things You Must Know to Find the Right Advisor
• Financial Advisor Vs Planner: What’s the Difference?

Making it to this point and investing in yourself by hiring a planner and getting a financial strategy in place is a huge accomplishment.

Taking all these steps and following the action plan laid out in an initial financial plan will help you build security while positioning you for success with your most important goals.

But progress doesn’t have to end here. If you’re motivated to reach even higher and go from well-off to truly wealthy, Phase 3 is for you.

Most people feel pretty satisfied once they make it to Phase 2 of financial planning for young professionals.

At that point, you can likely accomplish your biggest goals now (like buying a house) and in the future (like sending your kids to college and retiring at a normal age).

But just like some people are not satisfied with being “just okay,” some people don’t want to settle for the usual goals.

I get it — I’m one of those people myself. That’s why financial independence is one of my biggest goals, and why I also refuse to compromise on my life today to get there.

You might be in a position where you need to answer questions like:

• If I max out my 401(k) and still have money to save, where’s the best place to put it?
• Should I contribute to a Roth or traditional IRA? Can I even contribute to a Roth or do I earn too much?
• How do I manage my ESPP or stock options? Am I over-concentrated in my company’s stock and lacking diversification?
• Is my investment portfolio globally diversified or too dependent on a basic index like the S&P 500?
• Am I invested according to my personal needs, goals, and challenges?
• I understand how I feel about risk… but what about my true capacity to take risk?
• Can I afford to start a business?
• Can I afford to take a lower-paying job that I enjoy more, or will that hurt my future financial security?
• How much do I need to invest each year?
• Am I saving too much? Do I have too much in cash?
• How do my current financial choices impact my taxes?
• What would happen to my family if something happened to me?
• Can I retire early? How about quit my job for a year to travel around the world?
• Should I pay off debt faster or invest more?

…and the list goes on and on. The tricky thing to most of these questions is that there isn’t oneright answer.

There are a lot of options, choices, and paths you could feasibly take. This is where getting more personalized, custom advice on an ongoing basis starts to make even more sense.

Your situation is more complex; there are more moving parts and bigger consequences to each of your actions and choices. The beauty of more complex financial planning is that your advisor can actually model various scenarios for you to consider, and present likely outcomes to each.

That gives you the power to make a more informed choice that best aligns with what you need, what you want, and what you hope to accomplish in your life.

Financial planning at this level becomes a process you engage with, not just an hour-long session to answer a few basic questions.

I know this firsthand and engage in this process myself. I’m willing to do the work and planning to enjoy life today while still ensuring financial freedom for myself in the near future — and most of my clients who work together with us in the Financially Sound and Investment Management programs feel the same.

Phase 3 of financial planning is advanced. It’s not for everyone.

It’s for the people who want to create their own wealth so they can live freely and to the fullest. It’s for people who don’t want to wait for retirement before they get to reclaim their time and do what they want.

It’s for those of us who want to enjoy our lifestyle and go beyond just setting ourselves up nicely — we want to create the kind of wealth that will benefit multiple people, from our own families to the causes and communities we want to care for during our lifetimes and even after.

Creating wealth for yourself and others requires advanced techniques, complex projections, and sophisticated investing strategies. It requires you to minimize mistakes and maximize every opportunity that comes your way.

It’s not easy to get to this level — and it’s even harder to maintain this trajectory over time. Why? Because it’s after that initial excitement of diving in and making big leaps of progress that most people tend to fail.

The challenge is not in reaching a successful place. It’s in maintaining your position there, and continuing to elevate yourself to higher and higher levels.

Entropy affects everything — even your financial systems. Things will tend toward decay and disorder if we just let them ride on their own.

In this case, that means missing the financial actions, allocations, strategies, decisions, necessary to continue to expand how you use your money as a tool to live a great life.

Any phase of financial planning will allow you to make progress and advancements toward a better life.

That’s because the act of planning — from the simple stuff you can DIY to the complex, confusing strategies that are best executed with the guidance of an expert — take you from being reactive to proactive.

You go from sitting around with your finances and waiting for something to happen, then trying to figure out how to deal with it, to acting before things need to be fixed, before something happens, before things go wrong.

It’s about taking control of your financial situation and creating the life that you want to live, both today and tomorrow.

Want to take your financial planning to the next level? Start here.