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A new year brings new goals, dreams, and resolutions. If one of yours is to take control of your money and achieve your financial goals, then one of the first places to start is to have a financial plan. On the surface, financial planning sounds like a concept reserved for the uber rich, but in reality it is just the first step towards accomplishing your financial goals. Don’t worry if you have no idea how to go about it; you can utilize the same steps as any certified financial planner, to create a financial plan of your own. 

Understanding A Financial Plan

The first step is to understand exactly what a financial plan is. It’s really not complicated; it is a detailed document which outlines the strategy you’ll employ to reach your financial objectives. These plans encompass detailed information about all aspects of your finances, including income, expenses, assets, debt, tax considerations, your goals and objectives along with other relevant data points to provide a snapshot of your overall financial circumstance. This information is then used to develop a comprehensive strategy to act as a guide to help you reach your future financial goals. 

The Importance Of Having A Financial Plan

Having a financial plan is no different than embarking on a cross-country road trip. If you were driving from LA to New York, you’d rely on a map to guide you along the way. A financial plan acts the same way for your finances. It provides a roadmap for you to follow so that you reach your financial destination. In addition to charting a course, you’ll use it to track your progress and understand when course-corrections need to be made. And like any other aspect of life, when mapping out your goals, having a written financial plan in place increases your chances of achieving it.

How Does Financial Planning Work?

Don’t make the process of creating a financial plan more difficult than it needs to be. Simply utilize the same planning process that Certified FInancial Planners  (CFP’s) do. This is an industry-standard procedure that will help act as a guide for identifying financial goals, evaluating your current finances, creating a strategy to achieve your aims, and provide ways to track your progress.

Let’s break down these steps in more detail…

Get Clear About Your Current Finances

The first step in creating a plan for your financial future is to take stock of your current circumstances. To accomplish this, start by organizing your current finances. Gather together your (1) income and tax documents, (2) list out all of your assets and current value, (3) list your current debts and corresponding amounts, (4) any insurance documentation, and (5) your credit report + score. 

Work on Your Goals –– Financial and Otherwise

Once you’ve organized your documents, step two is to begin setting your goals. Ask yourself what you want for yourself (and family, if applicable) in the future. This goes beyond just financial. What kind of lifestyle do you envision for yourself? When would you like to retire? What kind of home do you want to live in? What kind of car do you want to drive? Do you want to get married? Have kids? Do you want to travel? Contribute to charitable causes? Start a business? Getting clear on how you see your future self and life, will help you get clear on what you’ll need in terms of finances in the future.

As you create your financial goals, divide them into short- (12 months or less), mid- (1-3 years), and long-term (3+ years) goals. Remember, financial goals should align with the vision you have for your future. Ultimately, your goals need to align with what you want your life to look like, so refer to the aforementioned questions, or continue to think of more on your own. 

As you develop a clearer picture of how you envision your life, you’ll get a better understanding of how to structure your financial goals. If for example, you’ve been saddled by a large amount of debt, probably one of your financial goals will be to pay off your debt completely. Some examples of financial goals could be: paying off debt, funding an emergency savings account, buying a home, contributing to a child’s education, etc…. After you’ve completed this step, you’ll move on to giving a timeframe and actionable steps to each goal… 


Now, armed with all of your financial information as well as your financial goals mapped out, step 3 is to crunch the numbers. As you analyze your data, try to determine the answers to some important questions: When reviewing your information, make sure you can determine:

  • What your net worth is
  • What and how well you’re doing  to currently manage your finances (budgeting, automated bill pay, savings and investments, etc…) 
  • What amount you currently have in cash, savings, and investments
  • If you have life insurance
  • If you have an estate plan in place

Getting clear about these items will help give you a deeper understanding of your own financial picture, including what steps you’re already taking to accomplish your goals and what items you still need to take action on. 

Develop Your Strategy

Everything you’ve worked on up until this point has been for this next, step 4: creating your financial plan. Here is where you put into detail your plan for accomplishing the financial goals that you created previously.

As you go through this part of developing your financial plan, you’ll need to make some assumptions, such as your future income and estimated rate of return for any investment goals. It’s advisable to aim high, but for planning purposes, estimate conservatively. Remember that your financial plan is not set in stone. You can always make adjustments over time and as you make progress over the months and years. You can utilize a financial calculator (many free options available online) to break down your goals into monthly or yearly steps. These can be very useful tools to get clear about exactly how much money you’ll need to save on a monthly basis to hit your goals, whether it’s for savings, retirement, paying down debt, or buying a home. 


At this point, if you had employed a professional, you would have a discussion with him/her about how the plan was created and structured. For you it will simply involve reviewing the plan you’ve set up for yourself. If you’re creating a financial plan with a spouse or partner, this would be the ideal time to review together to ensure that all of your bases are covered. 


Now comes the exciting part –– step 5: putting your plans into motion. You can plan and strategize endlessly, but until you actually take action on the goals that you’ve created, you’re not going to get anywhere.  What can be challenging about this part of the process is that the plan you’ve created may involve some adjustments on your part. You may not be used to saving, or perhaps you’ve only been making minimum payments on credit cards. Those habits may need to change for your goals to come to fruition; i.e., more money dedicated to savings goals and debt reduction, will likely reduce your discretionary income for other things. You’ll need to stay committed and be disciplined, and one way to do that is to keep revisiting the long-term goals and dreams you’ve identified. Your sacrifices now, will be rewarded later. Another smart action to take here is to automate as much of the process as you can. For example, automated bill-pay and savings transfers will make accomplishing your goals much easier, as it will save you time, and remove any anxiety about parting with your money. 

Remain Flexible

Remember earlier when it was mentioned that a financial plan is not set in stone? This is an important aspect of financial planning to keep in mind. Life rarely goes exactly according to plan, and often there are adjustments that will need to be made. This pertains equally to your personal and professional life as well as your finances. You may decide to change careers entirely in ten years. You may decide to have children at some point, even though you never imagined you would. Almost every aspect of your life touches your finances in some way, so it’s critical to set a consistent schedule for reviewing and making adjustments to your financial plan. Whether it’s monthly, quarterly or yearly –– or all three –– really is up to you, but whatever you decide, make sure that your financial plan and changes in life circumstances and goals are always aligned. 

It’s never too late to start taking control of your finances, and if this is the year you’ve resolved to do so, the first step is to create a financial plan for yourself. Don’t get scared off by the concept of financial planning; just follow these simple steps that professionals use, and you’ll be able to create one for yourself that will keep you on track to accomplishing all of your financial objectives.

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