I think it’s safe to say that we all have different financial goals and aspirations. Some of us want to retire before 40, others may want to make a large investment in real estate, or maybe you want to pay for your child(rens) college education. It doesn’t matter what your goals are, if you want to reach them, you need a financial plan. Keep reading to learn about the 5 steps you need to create a financial plan you can achieve.
What is a Financial Plan?
A financial plan is a tool used to assess one’s current financial situation, long-term financial goals, and steps necessary to achieve those goals. In other words, your financial plan will serve as a map or guide that will influence your financial decisions so that you can essentially reach whatever monetary objectives you’ve set for yourself.
Why You Need a Financial Plan:
I think that we’d all like to have a little (or a lot) more money in our lives. Unfortunately, making this a reality rarely happens by chance or overnight. People can reach their financial goals because they have a strategy in place. That strategy was likely created with a financial plan. A clear and realistic financial plan is the one thing you’ll need if you truly want to meet your financial goals.
HOW TO CREATE A FINANCIAL PLAN FOR YOUR FUTURE
Step one: Identify your financial goals
Not all financial plans are created equally. They need to reflect your goals and life plans. Close your eyes and visualize your goals. Do you want to get married? Have kids? Retire by 35? Buy a yacht so that you can sail around the world? How much would it take you to reach those goals? Identify those figures and tally them up. Now take those goals and get clear on what steps you’d need to take or what would need to happen to reach them.
Step Two: Assess your current financial situation
When creating a financial plan, it is important to have a clear picture of your current financial situation. Take time to review your current cash flow, how much money do you have coming in, and what is going out? How much debt do you have? Any investments? Are you preparing for retirement?
Next, remember those goals you listed out in step one? Compare your current financial situation to your future desired financial life. What steps do you need to take or what would need to happen to reach your goals and what can you get started on?
Step Three: Create a budget and stick to it
Next up, you need to create a budget. In my opinion, a financial plan rarely works without having a budget in place. To me, these two tools go hand in hand. Remember those steps you identified in step two? Integrate them into your budget. Remember, you have to make a plan for your money and stick to it so that your money can do all the things you want it to do!
Step Four: Execute on your Plan
Now that you’ve done your homework, identified your goals, and created a budget it is time to execute! As I stated earlier, your financial plan will vary from other, but here are some things you can do that will help you get there and stay on track.
- Set up an emergency fund
- Eliminate your debt
- Prepare for retirement
- Build up your investment portfolio
Step Five: Review and track your progress
It’s important to get in the habit of reviewing and tracking how you’re progressing towards your goals. Be sure to schedule a time to review at least quarterly. Identify areas that are working and try to improve on areas you’re struggling with.
Good luck friend, your future is looking bright especially with your new and amazing financial plan!