A Sharia compliant financial plan is more than just a strategy to manage money – it is a spiritually aligned framework that safeguards family well-being, promotes ethical wealth accumulation, and ensures that every financial decision adheres to Islamic principles. For Muslim families, such a plan integrates faith, financial discipline, and long-term vision for education, housing, healthcare, retirement, and intergenerational equity.
This article outlines a practical, step-by-step approach to creating a Sharia compliant financial plan that is grounded in Sharia, socially responsible, and oriented toward barakah (divine blessing).
Key principles of Sharia-compliant financial planning
| Principle | Application |
| Avoid Riba (Interest) | Use Islamic banking or halal investment vehicles that do not involve interest. |
| Avoid Gharar (Uncertainty) | Ensure contracts are transparent and terms are known. Avoid high-risk speculative assets. |
| Avoid Haram (Unlawful) Investments | Do not invest in industries such as alcohol, gambling, pork, or conventional banking. |
| Zakat and Sadaqah | Incorporate obligatory and voluntary charitable giving as integral components. |
| Wealth as a Trust (Amanah) | Wealth must be earned, managed, and spent responsibly in a way that benefits society. |
Here are the 10 steps to building your Sharia compliant financial plan:
Step 1: Define family values & goals
Begin by aligning financial goals with Islamic values:
o Spiritual goals: e.g., Pilgrimage (Hajj, Umrah) regular sadaqah.
o Family goals: home ownership, education of children, healthcare, retirement.
o Social goals: supporting extended family, funding Waqf or charity projects.
Document your short-term (1–3 years), medium term (3–10 years) and long-term (10–30 years) goals.
Step 2: Plan your budget
You may use the 50/30/20 budgeting rule as a starting point:
o 50% Needs: Rent, food, transport, healthcare (all from halal sources).
o 30% Aspirations: Children’s extracurriculars, travel, home improvement. But, if you can moderate some of this part of the budget and spend more on charitable activities to help those who are poor then that would certainly be better.
“By no means shall you attain righteousness unless you give freely of that which you love, and whatever you give, Allah knows it well.” Qur’an 3:92
o 20% Financial goals:
• Savings (Sharia compliant)
• Investments (halal stocks, sukuk)
• Charity (Zakat and Sadaqah)
The above ratios may vary from one person to another, but moderation and remembering wealth is a blessing from Allah and one has responsibility to spend wisely.
“The example of those who spend their wealth in the way of Allah is like a seed [of grain] which grows seven spikes; in each spike is a hundred grains. And Allah multiplies [His reward] for whom He wills. And Allah is all-Encompassing and Knowing.” Qur’an 2:261
The use of Islamic finance budget planners or spreadsheets may be help you keep on top of your finances. It is important to live with what you have, so avoid credit cards or loans with interest. Live a debt free life!
Step 3: Build a Halal emergency fund
Maintain 3–6 months of expenses in a Sharia compliant current account for any immediate or unforeseen needs e.g. boiler breakdown, loss of income etc. There are number of Sharia compliant banks like Al Rayan Bank, BLME and others that offer Sharia compliant current accounts.
Step 4: Savings for short term (less than 5 years)
If you have savings that you can put away for over 3 months to 3-5 years, you may consider various Sharia compliant saving account options. For a quick comparison of Sharia compliant savings options, please view the following link: Shari’ah-Compliant Savings Accounts | September 2025
Step 5: Plan for children’s education
Education is an Islamic priority and is usually a medium to long term financial goal, where most would have over 5 years to plan and save. Consider investing for school education and Higher education. Key points to consider:
o Have a dedicated Islamic education investment account(s);
o Plan and invest as early as you can;
o Invest with tax efficiency – use your ISA allowances;
o Even if you do not have a lumpsum, you may invest regularly (e.g. monthly) in a suitable;
o Sharia compliant investment portfolio for compounding growth.
Step 6: Prepare for retirement – the Halal way
It is crucial that you have a retirement plan in place. One of the key objectives of any retirement plan is the provision of adequate income in retirement. The state pension has been shrinking in relation to average earnings for years, therefore anyone seeking a comfortable retirement will need their own provision. Retirement for many will mean living on a smaller income than previously enjoyed, but through effective financial planning it is possible to minimise the change in financial circumstances. Key points to consider:
o Must have a retirement plan – we can help with this;
o Make the most of pensions as a tax efficient way of saving for retirement;
o Invest your pension(s) in Sharia compliant investments and don’t forget to pay Zakat on defined contribution pension schemes like SIPPs.
Step 7: Goal-based investing in Sharia-compliant assets
With step 5 & 6, we can help you invest your money in a diversified portfolio consisting of Sharia compliant investments, including equities, sukuks and commodities. You may wish to consider either of the following two options, depending on the level of advice and support you prefer.
o Option 1: Online Advice Service
It is a low-cost way for you to invest your capital, or make regular savings, taking into account your investment objectives and the risk you are willing and prepared to take. You don’t have to worry about the headache of picking individual investments – we do that for you. You benefit from our investment expertise to meet your financial goals in line with your ethical values.
To learn more about different accounts offered through our online advice service, please view links shared below:
Personal Personal
Stocks & Shares ISA
General Investment Account
Ready to go…… you can sign up online and start your investment journey with us.
o Option 2 – Personal Financial Planning and Advice
For a more tailored approach, our standard financial plan may be suitable for you as it would help you understand your broader financial affairs and how best to manage your finances in a tax efficient manner to achieve your financial objectives. With this route, a financial adviser will assess your full financial picture, help you make the best decisions, and assist with setting up your investment arrangements. To learn more, please visit: Personal Financial Advice – Simply Ethical
Step 8: Fulfil Zakat & encourage Sadaqah
o Zakat:
• First and foremost, understand and know your Zakat obligations. To learn more about Zakat, please visit: Knowledge Bank | Learn more about Zakat | NZF;
• Calculate annually on your eligible wealth (cash, gold, investments). You can use this calculator: Zakat calculator – How much Zakat to pay – NZF;
• Pay directly to qualified recipients or credible registered charities for distribution to eligible recipients.
o Sadaqah:
• Give consistently;
• Teach children to give;
• Can be directed to support family, orphans, education, or Waqf projects
“Those who in charity spend of their goods by night and by day, in secret and in public, have their reward with their Lord: on them shall be no fear, nor shall they grieve.” Qur’an 2:274
Step 9: Islamic Inheritance & Wasiyyah (Will)
Without a Sharia-compliant will, local secular law i.e. intestacy rules may override Islamic distribution. Key points to consider:
o Draft an Islamic will (Wasiyyah) with professional legal advisers
o Allocate up to 1/3 of the estate to non-heirs (e.g., charities, Waqf)
o Ensure family knows about obligations (ghusl, burial, debt repayment)
Step 10: Review and Adjust Regularly
o Reassess goals annually or after life changes (birth, job loss, death);
o Review your investment strategy to ensure it’s in line with your objectives and risk profile;
o Getting professional financial advice is always helpful, so do consider appointing a Financial Adviser to help with financial matters.
A family focused Sharia compliant financial plan isn’t just about money – it’s a way to live in harmony with Islamic ethics while preparing for worldly responsibilities and spiritual goals. By avoiding Riba, investing ethically, and giving consistently, families can ensure long-term well-being, barakah, and intergenerational impact.
Financial empowerment in Islam is not merely permitted – it is encouraged, provided it remains within the boundaries of divine guidance.
To learn more about how we can help you and our investment approach, book a free initial consultation with one of our Financial Advisers.
Disclaimer
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