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A stable personal financial plan is the first step among many towards reaching your financial goals. Your financial plan details a strategy you’ll use to check-off these goals you've set. You can use personal financial information to construct a plan to get from where you are to where you want to be.
It is crucial to have a financial plan because it creates a direct path towards achieving your financial goals. A written plan will help you track your progress and increase the likelihood of achieving those goals.
You can either ask a professional for help or do it yourself. There are so many resources to help get you started. I even have some great free resources to help you out!
Before you get started using your plan it’s good to know how to create the plan in the first place. Below are five steps to start making a financial plan for yourself!
1. Assess Your Situation
The first step towards creating a financial plan is to understand where you currently stand. Do this by gathering all your current financial information. This information includes documents relating to your income and tax information, insurance plans, credit reports, etc.
You can use a great tool like Rocket Money to help figure out what you’re currently paying in bills and subscriptions so you can know where your current paychecks are going.
Make a list of financial assets and their estimated value such as real estate and any investing accounts. Make a second list of all your debts and each of their amounts. It’ll benefit you if you have this financial information organized.
It can be either digital or physical information depending on your preferences. If you prefer digital, check out this free debt tracker to help you get your debt organized!
2. Review Your Financial Data
Reviewing your current financial data will give you insight and guide your finances. It can influence the goals you set and how you accomplish them. You’ve already collected all the data and organized it, so these next steps will be much easier.
It’s time for another round of questions to answer. What’s your net worth? Do you have life insurance? You need insight into your finances to be able to set goals accordingly.
3. Set Financial Goals
Next, ask yourself this question: What do you want your financial situation to look like in the future?
Write down both short-term and long-term goals that will help you get to the life you want. Whether your goal is to pay off debt or save for retirement, you can accomplish it if you work towards it. Figure out a timeline for your goals and take action!
4. Make A Plan
Now it’s time to outline a financial plan. Write down a goal and decide what steps you need to take to accomplish it. Detail each of these steps to have a better understanding of exactly what you need to do to be successful.
Consider what you need to do on a weekly, monthly, and yearly basis. Your plan can be as complicated or as simple as you’d like. As long as it works for you and your financial situation.
If you are married, you will want to make sure you make this financial plan together. Whether your finances are joint or separate, you still want to make sure that you are on the same page as your spouse. You may even want to set goals that you will reach together like having a plan for your future family!
5. Check + Edit Your Plan
You're almost done! You have a plan that fits your current lifestyle but life can be unexpected. Make it a habit to consistently check your financial progress and make any adjustments based on changes in your lifestyle or priorities.
Life changes can range from getting married, having kids, changing careers, retiring, etc. You can review your financial progress monthly, quarterly, or yearly and adjust your goal accordingly.
Whether it’s being debt free, saving for college for the kids, or starting a business, having a plan can turn those things from dreams to your financial reality!
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