Easy Steps to create a financial plan

 Financial planning can have a significant impact on your peace of mind and confidence in achieving your goals. 1 But, do you need to hire a financial advisor to reap the full benefits of a financial plan? No, not always. You can do it yourself if you're up for the challenge and you might even enjoy it.

What exactly is a financial plan?
Easy Steps to create a financial plan
Easy Steps to create a financial plan

A financial plan is a blueprint for money management. It is frequently built on the following financial pillars: spending, saving for the future, debt management, protecting what you already have, and estate planning. However, your starting point and priorities are unique to you.

When it comes to planning, flexibility is key because your priorities may shift as your life progresses. For example, you may be focused on paying off debt and saving money to travel or purchase a home. But what if something unexpected happens? Having a plan in place can assist you in changing course because you will already know what you require to maintain your current lifestyle, where you stand in relation to your goals, and the safeguards you have in place in the form of insurance and savings.

A financial plan identifies, organizes, and prioritizes your financial goals before laying out the steps necessary to achieve them. They can also tell you if you're on track to meet your financial goals or if you need to make changes to your spending. These plans may include debt consolidation, opening bank or brokerage accounts, establishing a savings regime, or developing an investment strategy.

Depending on the time horizon of your goals, financial plans can span years, months, or decades. However, by taking seemingly insignificant steps such as setting a monthly savings goal or investing a portion of your paycheck, your financial plan can lead to much better future preparation.

Financial plans are typically flexible as well, allowing for any life changes or unexpected events. This could include an extended hospital stay, marriage, childbirth, a move, a new job, and other events.

What Are the Key Elements of a Financial Plan?

To ensure that your financial plan is as effective as possible for you and your family, you should create a comprehensive financial plan. You will need to include multiple aspects of your financial life, such as tax returns, retirement accounts, and investments, to do this correctly.

A good financial plan typically includes a number of key elements. Although they all have different effects on your money, the sum of their effects determines your financial future. The following are the financial categories and sub-categories to concentrate on:

Components of a Financial Plan


  • A cash flow statement that shows your income and expenses 
  • A balance sheet that shows your assets and liabilities
  • The advantages and disadvantages of your current financial situation
  • Education funding strategy


  • Reports on investment portfolio returns - Asset allocation plans
  • An overview of investments in retirement accounts

Retirement Preparation

  • Estimated post-retirement and Social Security income 
  • Post-retirement lifestyle plan

Estate Administration

  • Estimated estate/inheritance taxes 
  • Executed will 
  • Philanthropic gift planning

Tax Preparation

  • Contribution plan for 401(k) and IRA 
  • Capital gains and income tax returns

Management of Risk

  • Long-term care, disability, and life insurance 
  • Survivor and beneficiary benefit plans 
  • Annuities

How to create a financial plan

Technology has enabled some very cool do-it-yourself planning tools. Budgeting apps, robo advisors, and a plethora of financial calculators are available to assist you in reaching your objectives.

You can create your own financial plan with the right tools and a process for evaluating your situation and determining what to do next.

Consider the short- and long-term goals you want to prioritize. For example, you might know that you want to retire in 20 years or so. But first, you need to save for an emergency, pay off debt, and send your children to college. That's a lot to tackle all at once, so breaking it down into manageable chunks and tackling one goal at a time may make sense.

5 Steps to Developing a Financial Plan

Most people have a variety of short- and long-term financial goals, ranging from debt repayment to retirement planning to college savings. However, because everyone's personal situation is different, each financial plan will look a little different. However, there are five major steps to developing any comprehensive financial plan:
  1. Determine your financial objectives.
  2. Collect any relevant documents and account statements that depict your current financial situation.
  3. Make a short- and long-term plan to achieve your financial objectives.
  4. Begin implementing your financial plan.
  5. As your life and goals change, so should your financial plan.

Step 1: Outline Your Financial Objectives

When creating a financial plan, the first step is to determine exactly what you want to achieve. Begin by considering potential short- and long-term goals and objectives. These could include making a down payment on a house, repaying student loans, or purchasing a brand-new car. These objectives will serve as the driving force behind your financial plan.

When developing these objectives, consider your entire financial future. Because all of your finances are interconnected, don't focus solely on one. When it comes to family planning, for example, you may want to consider not only starting a college savings fund but also saving for a down payment on a house.

Step #2: Gather Financial and Investment Information

You can begin an overview of your financial situation once you've established goals and gotten help if necessary. Include all assets and liabilities, including real estate, investments, retirement accounts, and loans. Analyzing all of this data provides a more accurate picture of your current financial situation.

Begin by gathering data on items that are consistent, such as your rent or mortgage, utility bills, and other fixed expenses. Then examine your spending history to determine how much you typically spend on items such as groceries, entertainment, travel, clothing, and so on. Of course, you'll want to understand your income, including your paycheck as well as any investment or rental income.

Knowing where you are now will help you determine the next steps you need to take to reach your objectives. Based on your starting point, you can adjust your goals or timeline to determine their practicality and feasibility.

Step 3: Develop a Comprehensive Financial Plan

You can begin developing the actionable steps of your financial plan once you have defined your financial situation and goals. This will most likely include saving for retirement, an emergency fund, or a large purchase. Investing will also most likely play a significant role in your financial plan; in the long run, investing in the market is the most effective way to grow your wealth.

Your investment strategy will be determined by your personal preferences and risk tolerance. If you work with a financial advisor, she can help you determine the best asset allocation for your preferences among large and small-cap stocks, bonds, cash, and alternative investments.

If one of your goals is to make a large purchase, such as a house or a new car, you should also include steps to improve your credit in your plan. If you already have an excellent credit rating, you won't need to do much. If your credit score isn't where it should be, part of your strategy should include on-time payment of credit card bills and student loans, as well as other methods of credit building.

Finally, If you have a lot of debt, one of your goals will be to pay it off. How you go about it — whether you get a consolidation loan or not, whether you increase your monthly payment or keep it the same, etc. - will depend on your situation.

A financial advisor can assist you with your financial planning by making recommendations based on your financial situation. They are there to assist, whether it is suggesting a savings minimum or a debt repayment timeline. Consider any risks or alternatives they suggest. If your financial plan ever needs to be changed, following these steps will help you avoid getting stuck.

Step 4: Incorporate Your Financial Plan Into Your Daily Life

After you've developed your strategy, it's time to put it into action. It may be easier to start small rather than diving headfirst into the deep end. Instead of saving half of your paycheck all at once, start saving in small increments.

Because the timeline of your financial plan can span years, there may be no immediate results. But if you stick to the steps outlined in your plan, you'll be there in no time.

It is critical to stick to the steps outlined in your financial plan. However, it is equally important to recognize that unexpected events do occur, from starting a new job to experiencing a medical emergency. Any unexpected situation can have an impact on your finances, so you should adjust your plan accordingly. This allows it to better reflect your financial situation.

Step 5: Review Your Long-Term Financial Plan on a Regular Basis

Of course, financial changes may have an impact on your ability to meet your financial objectives. You'll want to double-check your plan to see if you can still meet your objectives after those unexpected setbacks. If not, you can easily alter your strategy. You can change your timeline, set a higher savings minimum, or change your goal entirely.

It can be beneficial to meet with your financial advisor every few months. If necessary, they can assist you in making changes to your plan to get you back on track. When it comes to revising your plan in response to new objectives or setbacks, be adaptable and open with your advisor.

Financial Advice from a Financial Advisor

While it is possible to create a financial plan on your own, it is an extremely difficult process. This is where a financial advisor who specializes in financial planning can help.

Financial advisors are distinct from specialized professionals such as estate planning attorneys in that they focus on a more comprehensive view of financial planning. They provide not only an overall assessment of your situation, but also detailed advice to help you achieve your objectives. They can also assist you in developing a tax-efficient strategy.

Look for financial advisors who have certifications such as certified financial planners (CFP) or chartered financial consultants (CFC) when creating a financial plan (ChFC). These certifications ensure that the advisor has received the necessary education and experience in the field of financial planning. However, just because an advisor lacks these certifications does not mean they are unqualified to assist you.

Though financial advisors frequently have a broad understanding of financial planning, the majority work in specific financial fields. For example, an advisor may specialize in services for those nearing retirement, whereas others work with clients who are younger. As a result, choose an advisor who is a good fit for where you are in life.

In conclusion

A financial plan assists you in managing your money responsibly and planning for the future. Making a plan may take some time and effort, but it will most likely pay off in the long run. As a result, you and your family will have a clearer path to the future. If you're unsure where to start with your financial plan, don't be afraid to seek the advice of a financial advisor.

Financial Planning Suggestions

  • Financial plans can become complicated, so enlisting the assistance of a professional can be extremely beneficial. Financial advisors frequently offer financial planning services as well as investment advice if necessary. SmartAsset's free tool matches you with up to three local financial advisors, and you can interview your advisor matches for free to determine which one is best for you. Get started now if you're ready to find an advisor who can help you achieve your financial goals.
  • Do you want to start your own investing? Begin by opening a brokerage account and deciding on an asset allocation based on your risk tolerance. A robo-advisor service can help you simplify your investments even more by investing your money using proprietary algorithms.
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Mira Sandra
Mira Sandra I am Mira Sandra. A blogger, YouTuber, trader, and owner of the blog Recordmeteo.com. Starting to know online business since 2014 and continue to learn about internet business until now. Currently active as a trader and content writer at Recordmeteo.com.

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