Build a Strong Financial Plan: 8 Essential Steps

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Financial freedom and happiness – those are life goals, right?

You’d be hard-pressed to find someone who didn’t want either!

But have you ever heard the phrase “a dream without a plan is just a wish”?

It’s all well and good wanting your life to look a certain way, but you need a plan to bring it to fruition.

It’s really easy to get caught up in day-to-day challenges and not change anything for your long-term success.

A solid financial plan will help you create a secure future for you and your family and increase your wealth going forward.

Ready to get planning some financial goals?

Let’s dive in on creating a bulletproof financial plan! 

What is a Financial Plan?

A financial plan is a thought-out, detailed list of how you are going to achieve your goals– not just what you want, but how to get it.

It seems like a lot, but creating a financial plan can make your life run more smoothly and set you up for financial success!

It’s important to plan for the future and have set goals in mind- otherwise, time will pass and you won’t have improved your finances.

You can think of financial plans as a roadmap to get you from where you are now to where you want to be.

8 Steps to a Solid, Successful Financial Plan

1. Define Your Financial Goals & Priorities

What is important to you right now and what’s going to be important for the future?

The most important step to creating a financial plan is to define what your financial goals are and what you’ll do with your money.

Start looking at your short-term goals, like paying bills and saving for a vacation, and then at your long-term goals.

Do you want a house, a new car, kids? If so, when?

Your goals can be for the next 5 years, the next decade, or the next few decades. 

It may feel a little strange to imagine what life will be like so far into the future, but the further you think, the further you can plan for.

It should be exciting to work on plans for the future you!

If you are doing this as a couple, make sure you sit down together and do this step as a pair so you can make sure you’re on the same page.

2. Create An Emergency Fund

Creating an emergency fund needs to be one of the first things you do with your financial plan.

An emergency fund is a fund of money that you have saved for emergencies like surprise medical bills, house issues, or anything else that may come out of the blue.

Emergencies are classed as those expenses that you can’t plan for like your oven breaking or a loved one’s funeral- you don’t expect it, but somebody’s gotta pay for it all!

The amount that you keep in your emergency fund depends on what you feel comfortable with, but $1000 is a good financial goal to give yourself a bit of wiggle room.

When you are planning your financial journey, you don’t want any problems that arise to stop you from getting to where you want to be.

Don’t let an extra bill keep you from saving up for your new car or house, or any other long-term goals you want to achieve.

3. Pay Off Your Debt- And Quick!

Paying off your debt needs to be a high priority when it comes to planning your best financial future. This was one of our financial goals, and it feels amazing to be debt-free!

Debt is money that you haven’t paid back yet, so planning for your future can be hindered by this.

Not only that, but the high-interest debt from a credit card or a student loan is likely eating into your money right now!

Paying off your debt quicker will mean that you spend less on interest over time and therefore have more money in your pocket.

It’s time to create a financial plan to pay off debt.

There are 2 main methods that are widely recommended:

• Debt snowball – throw your money and pay off the smallest debt first (while still paying the minimum balances on the others)
• Debt avalanche – start with the debt with the highest interest rate

The debt snowball is cited as the best debt payment method for the most psychological benefits and the debt avalanche is for saving you the most interest in total.

Once your debt is paid off, you will have more income each month to put towards your goals.

4. Create Investment Plans & Make More Money

If you aren’t yet investing, you need to be! Earning extra money can be beneficial to any financial plans you create!

A lot of people think that you need to be wealthy to invest, but that isn’t the case.

How you invest is dependent on your risk tolerance, but there are many opportunities for anyone looking to make more money.

The sooner you start investing, the better, thanks to the power of compound interest.

Your money will keep growing and growing without you having to do anything.

Some investment platforms that we recommend include:

• Acorns
• Robinhood– get the skinny on Robinhood
• Betterment– get the skinny on Betterment
• M1 Finance– get the skinny on M1 Finance

Already an investor? Make sure that you check in on your portfolio and check that you are with the best company in terms of returns and fees.

5. Get The Insurance You Need

Although we don’t like to think that bad things will happen, it’s best to be prepared just in case. It’s one of the reasons why financial planning is so essential for your life.

Part of being prepared for a worst-case scenario is making sure you have the right insurance.

Everyone should have health insurance at the very least, and other types to consider for long-term or bigger issues are life insurance, home insurance, and vehicle insurance.

We recommend all of those, but we know for long-term goals, life insurance may be the most important.

I want to know when I’m gone that my loved ones won’t have to worry about finances and will be taken care of when I’m not here.

Check with your insurance company that all of your information is correct and you have the right amount of coverage for any of your policies- no need to pay for what you don’t need.

The less you spend on non-essentials, the more money you have to reach your financial goals!

If you’re unsure where to start, check our review on Haven Life insurance it’s really our personal experience and may help you figure out your own needs.

6. Get Ready For Retirement

It may feel like retirement is a long time away but the sooner you start planning, the better!

Finance experts suggest opening retirement accounts young to get as much as you can out of your money, and create more wealth for yourself.

You need to make sure that you are paying into a 401(k) or an IRA- maybe even both.

Speak to a financial advisor to find out which options are the best for you.

Try and put as much as you can into a retirement fund and factor it into your budget- that way you’re paying money now to have more down the road.

7. Don’t Forget About Taxes

Not all parts of your financial plan are going to be the most interesting things ever – and taxes certainly won’t be!

Even though they aren’t very exciting, taxes are a necessary part of our finances and we need to be prepared for them.

Make sure you check your taxes are correct or go through an accountant if you want to get the most back each year.

It may cost more to go through an account, but long-term you’ll likely get your money back- and prevent any problems since they’re less likely to make mistakes!

8. Create An Estate Plan

An estate plan is a plan for your assets after you’ve passed away. It helps your family and takes one thing off their plate during a difficult time.

Something you could add to your estate plan is an advanced healthcare directive, then assign power of attorney for your estate, for when you may be unable to make decisions for yourself.

As discussed in the insurance section, you may want to include life insurance to round out your estate plan and help pay for any expenses at the end of your life.

Another important piece is putting together a will. This makes sure that your finances and sentimental treasures go where you want them to.

Once you have these setup, routinely check is that your beneficiaries are up to date on any documents or accounts, like your retirement accounts.

Understanding Your Financial Plan

There are certain things that you will want to include in your financial plan to give you maximum success.

Consider each of these with your financial planning, plus check further down for additional tips to obtain your long-term goals.

Net Worth

Net worth is how much you are deemed to be worth judging by your assets.

The way to calculate your net worth is to:

• List your assets (the things that you own, e.g. cash, investments, car, etc.)
• List any liabilities (things that you owe money on e.g. car payments, mortgage, debt)
• Subtract your liabilities from your assets and that will give you your net worth number

Calculating your net worth is a good financial move to see where you stand financially at the start of your financial planning.

Cash Flow

Cash flow is the money that you have coming in and out. This will help you to see an overall picture of what your money is doing.

• List out all of your income sources, like the side hustles or companies where your cash flow comes from
• List what your income is from each job
• List out how much you are spending each month

Putting together a budget is really important in a good financial plan. We recommend looking at Personal Capital or Mint to help you with this.

Your Priorities & Goals

The financial plan that you create will be personal to you and your family- it’s all about what you want for the future.

You will want to work as a team to decide on the priorities and goals that you have together.

Only by working as a team will you reach these financial goals.

Tips For A Successful Financial Future

1. Review Your Plan Frequently- Keep Focused On Your Future!

When you first get started on your financial plan, it will probably feel really exciting to have a happy financial future thought out.

As time passes, you may find that your initial excitement fizzles out a bit.

It’s important to not lose focus!

You could have frequent meetings with your partner so that you can both discuss your progress and support each other. You’ll want to be able to discuss when things aren’t going exactly as planned.

There may be things that need to be changed or added to your plan as things happen.

You may decide that you want to get more aggressive with your savings, meaning your financial plan will require some tweaking.

Your financial plan isn’t written in stone- it will adapt to how you live your life, so as you grow and change, make sure your plan does the same.

2. Keep An Eye On Your Credit Score

Something else that you can keep track of is your credit score, which is essentially your revolving credit from your credit card or loans.

Your credit score is important for future purchases, such as for buying a house obtaining loans, or business needs.

Keeping an eye on your credit score can help flag any errors or fraud that you may not have otherwise known about.

Use Credit Karma to truly understand your credit score and how to improve it.

3. Spend Less & Never Stop Saving

This isn’t a ‘set it and forget it’ plan – you will need to keep on working hard towards your goals.

Look for ways to save money on your everyday expenses, as it will mean that you have more to put towards your goals.

You don’t have to live a restricted life in order to complete your financial plan- but living frugally can make your financial life better long-term!

There are ways that you can save money without having to cut back on everything. But maybe you will want to cut back occasionally so that you reach a certain goal faster.

Look through all of your expenses and see where you can get them cheaper or get rid of them altogether.

We recommend using services such as Trim to cut down on your bills with little effort on your part. You can also check out Mint to keep track of your bank transactions and make budgeting a breeze!

4. Be Prepared With A Backup Plan

As much as we’d like to think that we have everything planned out for the future, we can’t predict what’s going to happen.

It’s always important to have a backup plan just in case anything goes wrong or off track.

Speak to your partner or loved ones and discuss how to put together a plan B for the future.

Maybe you want to include more passive income streams instead of assuming that you will keep your job.

You can still have a positive and optimistic outlook but be prepared for the future.

Hiring a Professional Planner

As we’ve discussed in this article, it’s easy to put together a financial plan by yourself – and much cheaper! But some things are harder than others.

Should you hire a professional financial planner? There are certain parts of your financial planning basics that you may want more help with.

For example, if you have a large family and a complicated estate then you may want support to have it properly prepared for everyone.

The best time to hire a professional financial planner is if you feel that you need further guidance; perhaps you have a large sum of money and you’re unsure what to do.

Final Thoughts On Your Financial Plan

Creating a financial plan should be fun and exciting! Your plan may take time and effort to make, but it will save you time and money in the long run.

Make it a special thing with your partner and avoid fighting about money– grab some delicious food and have a good mindset whilst you’re chatting about your financial goals and life aspirations.

Try and see how it goes putting together your financial plan yourself, and if you need additional help, call in a financial planner.

Use this article as a financial plan template for step-by-step financial planning by yourself.