Ten Steps to Creating a Solid Financial

Plan For Yourself

 By Bola Sokunbi. 
Updated on May 18, 2020

No one cares about your financial well-being more than you, so it's
important to have a financial plan for yourself. Having a solid financial plan
will allow you to save money, afford the things you really want, and achieve
long-term goals like saving for college and retirement.
This probably won’t come as a surprise, but everyone’s financial plan looks
different. So if you’re wondering how to create a financial plan, or why you
should do so, you’re in the right place.
We all want to be financially independent and build wealth. Deciding to
embark on the journey toward financial independence is a big deal! It
marks a fresh beginning with your money and it means that you’re setting
out to accomplish something that can change your life for the better.
In this post, I’ll take you through everything you need to know in order to
plan for your financial future. Keep reading, then get ready to take some
action to kick-start your own financial plan.
Contents:
 Create a list of things to plan for
 Determine the type of financial plan you need
 How to create a financial plan
 Tips on how to frequently review your financial plan
 
 This is an affiliate link from a brand we trust. We may earn a commission that helps us grow. Please see our
disclosures for more information.

Create a list of things to plan for

Let’s start by creating a list of things you’ll need to have or build on your
journey to financial security. These items below are essential to your
financial plan (Click the links below to delve deeper into each!):
 A monthly budget to help you keep your expenses below your
income
 A debt pay-off and spending plan (using your budget)
 An understanding of all your bills and their due dates
 A fully-funded emergency account
  Retirement savings
 A diversified portfolio of investments
 Multiple streams of income
 Savings for the other things you want (e.g. your short, mid-term and
long-term goals)
 The right type of insurance coverage (Life, health, disability, home,
etc.)
 

Determine the type of financial plan you need

Don’t think that it's too early or too late to have a financial plan. Quite the
contrary—now is the PERFECT time to start!
1. A plan for yourself
If you’re single, it's important to establish a financial plan that not only helps
you meet your immediate goals, but that ensures your future self will be
taken care of. This means doing all the things mentioned above without
making any assumptions that things will somehow work themselves out. A
big mistake? Assuming you'll meet someone who will take care of you and
deal with the finances in your relationship.
If your relationship status changes or you get married, you'll be well
equipped to plan your finances together if you already have things in place
for yourself.
2. A plan for your marriage
If you are married or have a significant other, then you need to participate
in your finances as a team. Discuss your budget and money goals and
make financial decisions together. Understand where your money is going
and how much money you have in savings and in investments.
- Should you have joint accounts or separate accounts?
Having joint accounts is great, but I also believe in having your
own personal savings accounts. As women, it’s important for us to build our
own sense of security and have "our own" that we bring to the table. But
don’t feel like you need to keep your personal accounts secret. Remember,
marriage and committed relationships thrive on openness and honesty.
Regardless of whether you team up with your partner or go it alone, the
path to financial independence is not always a smooth, perfectly paved
one. But don’t despair; it’s time to roll our sleeves up and get our hands
dirty. That’s right—it’s time to learn how to create a solid financial plan.
 

How to create a financial plan

Below, you’ll find ten steps to create a solid financial plan.
1. Write down your financial goals
Having financial goals is the foundation for your financial success. After all,
you have to know what you want to accomplish in order to actually
accomplish it. However, when it comes to setting goals, you want to make
sure your goals are well defined and prioritized accordingly. It's great to
have big, lofty goals! But be sure to break them down into smaller chunks.
That way, you’re not overwhelmed trying to accomplish them and you can
easily measure your progress.
2. Start an emergency fund
It's also really important that one of your goals includes a plan to deal with
emergencies. You want to make sure you are prepared to weather a storm.
Otherwise, you'll just end up in debt again.
3. Pay off debt
Sadly, you can't really kick-start your financial future if you're carrying a ton
of debt. Between sky-high interest rates, large minimum monthly payments
and the damage lots of debt can do to your credit score, you're better off
paying your debts first. Create a debt pay-off strategy and be patient but
consistent when working toward becoming debt-free.
4. Create a plan to invest
If you are serious about building wealth, then you're going to need to put
your money to work for you. This is where investing comes in. However,
before you put any of your hard-earned money into investments, it's
important to have well-defined objectives. Think about what the investment
is for when you'll need your money and what your risk tolerance.
Investing is a long-term activity, so you have to commit to it if you really
want to see your money grow. Worried that you'll need your money in the
short term? Well, that's what your savings accounts are for; to put aside
your emergency savings and money for your short-term goals (i.e. money
you'll need in 5 years or less).
You also want to make sure you have a basic understanding (at the
minimum) of any investment you put your money into (e.g. the stock
market, real estate or small business). Your plans to invest should be
included as a part of your monthly budget where you allocate a certain
percentage of your income toward your investment goals. 
5. Get the right insurance
After working so hard to earn your money, the last thing you want is an
unplanned occurrence to wipe you out. Insurance is essentially your back-
up plan that will protect your assets in the event a life circumstance
happens that requires a large amount of money to resolve.
Your insurance coverage should include health, auto, disability, life, home
or rental, and business. Basically, you want to protect anything of major
importance that has a high value to ensure that you (and your loved ones)
are protected financially.
Having the right insurance can turn what could otherwise be a major
disaster into a mere inconvenience.

6. Create a plan for retirement

In order to have the lifestyle you dream of in retirement, you need to plan
adequately for it. You'll need to determine how much you are going to need
to retire, of course taking inflation into consideration,  and how you plan to
save and invest in advance for that period of your life.
While retirement might seem like a lifetime away, it's never too early to
start!
7. Plan for taxes
Yup, taxes! Taxes are annoying, but they're certainly not going away
anytime soon. So make sure your long-term income projections include
taxes. Not planning for taxes can impact your cash flow in a major way.
In addition, you definitely want to look into tax savings investment options
and stay up to speed on any relevant tax deductions you can apply to help
you save money on tax payments. You can plan to sit with a tax accountant
or financial planner to help ensure your plan for taxes is adequate. You
should also check out our blog post on how to reduce your taxable income!
8. Create an estate plan
Estate planning is not something a lot of people like to think about, but it's
essential! It allows you to determine exactly what happens to your assets
after you are gone. It involves listing out all your assets, creating a will, and
making it accessible to the people who need to have access to it. A
financial planner or estate lawyer can help you set things up correctly.
9. Review your plan frequently
Once you have your financial plan outlined and churning along, it's
important to review your plan frequently and make the necessary
adjustments if your goals or the circumstances around your life change.
For instance, maybe your insurance needs change, your risk tolerance
changes, or you get married or have kids. At a minimum, you want to check
in on your overall financial plan at least every six months.
When you check infrequently, it's easier for you to deal with unplanned life
occurrences, bounce back from setbacks and accomplish your financial
goals.

Think about what you do to maintain your personal health - You brush your
teeth and shower regularly to keep yourself clean and avoid unnecessary
illnesses because we all know that falling sick can lead to other health
complications and you definitely don't want that. And also because you do
it so often, it's now part of your everyday health maintenance habit - well,
the same applies to your finances!

10. Stay the course, avoid overspending and learn from your
mistakes
Your journey to financial independence won’t always be easy. There will be
some tough days, weeks and even months. Pursuing a goal of financial
independence that's very much tied to delayed gratification is not always
fun, but it’s completely doable. Have a solid plan for your finances, be
disciplined and avoid overspending. You’ll find out how great you’ll feel
when you really make a concerted effort to stick to your budget.
As you work on your finances, you may still make mistakes with your
money, and that's okay. Sometimes you might be unable to resist the urge
to buy something that isn't in your immediate budget. And sometimes you
will feel like ripping your entire financial plan to bits because it just doesn't
seem like fun.
However, as long as you keep your reasons WHY you want to be
financially free in focus and make an effort to rebound quickly from your
mistakes, you'll do just fine. It's all about assessing the mistakes you made,
understanding why you made them and making a plan to avoid making
them again. Then, you’ll need to take those lessons and apply them to your
future success.
 

Tips on how to frequently review your financial plan

Here are some tips to help you check up on your financial plans.

1. Establish a routine
Allocate some time each week or at the minimum once a month, unfailingly,
to go over your finances. Make it a coffee date with yourself or put on some
nice music and grab a warm cup of tea at home and spend some time
checking in on things. It's a good idea to set a reminder on your calendar
so you don't forget this check-in.
2. Set and review your financial goals
If you haven't already, it's important that you layout your short and long-
term financial goals so you know exactly what you are working towards with
your money. As time progresses, you want to make sure you review and
reassess your goals to make sure they are still things you want to
accomplish and that you are on track to meet them.
3. Reconcile your bank accounts and bill payments
Check your bank account debits against any bills payments you previously
scheduled or sent out. Make sure any pending bills/debt repayments have
been paid or scheduled.

Compare your receipts against your credit card transactions and confirm
the balance. Review your budget and compare your actual spending to
what you budgeted for. Once a month establish your budget for the
upcoming month.

4. Review your savings and investments

If you have automated transactions set up to make transfers to your
savings or investment accounts be sure to check in on them. This would
also include any automatic deposits you have set up to go into your
retirement accounts etc.

If you don't have automation set up, make or schedule your manual
transfers to your savings and investment accounts and be sure to check
and make sure the transactions went in successfully.

Also, plan to review your overall investment portfolio to rebalance and

diversify as needed and be sure to review your fees too!

5. Review your insurance policies

You also want to make sure you have the right type of insurance for your
life. This includes health, auto, life, disability, home, personal property,
business, etc. Set a reminder for twice a year where you sit down and
evaluate the costs of your various policies and shop around to see what
else is out there.

Reconciling your accounts and planning your finances out, ensures you are
aware of everything happening with your money and that you are on the
right path to accomplish your goals.

6. Check your net-worth

Your net worth can almost be described as the thermometer used to
measure your financial health and you want to keep track of it. Your main
priority should be to pay off as much debt as possible, starting with your
high-interest debt, grow your assets and over time, your net worth will start
to grow.

It's also important to track your net worth over time to ensure you are in line
with your long-term goals and financial objectives that you've set out to
accomplish.

Many people start out with a negative net worth as they start out working
on improving their finances but given time and the continuing of practice
good financial habits, this will change.

Questions to ask when you review your financial plan

Some questions to help you along with the process could include:

1. What steps did I take this past month that got me closer to my goals?
2. What things happened that have put me further away from my goals?
3. Was my spending in line with my core values?
4. What money mistakes have I made in the last month?
5. Why did I make them?
6. Are my financial goals still realistic?
7. What big expenses are coming up soon?
8. Is my emergency fund fully funded with 6 to 9 months of expenses
based on the current basics needs I have today?
9. Am I saving enough to retire comfortably based on my ideal
retirement amount?
Don’t know your amount?
10. Am I meeting my other short-term savings and investment
goals
11. Am I on track with my savings for my children?
12. What steps can I take to make sure I have a better month next
month?
Tip: Keep a journal where you answer these questions and then review
your past entries every few months, it’s a great way to stay motivated
especially as you see the progress you are making over time, and if you
stay committed to improving your finances, you WILL see progress.
In closing
Remember, this is your journey and not anyone else's so having a plan to
succeed with your finances is super important. Planning ahead for the life
you desire is 100% worth it.
 Part 1
Determining Your Goals
1.

1
Assess your current financial situation. In order to write a financial plan, you'll first have to
have a clear picture of where your finances are now. To do so, start by calculating your net
worth. To do so, you will need to calculate your total assets, which include everything from
money in checking or investment accounts to your equity in your house and car. Then, you'll
have to calculate your liabilities, including how much you still owe on your house and car,
and any other outstanding debts like student loans or unpaid bills. The different (assets -
liabilities) is your net worth.[1]
2.

2
Make a budget. Start by noting every expense you have over the course of a month. If it
helps, carry around a small notebook and record every time you spend money, including the
amount spent and what you spent it on. At the end of the month, write down your expenses
and separate them into categories like living expenses, entertainment, and so on. Then,
compare the total of these amounts to your monthly, after-tax income.
 The point here isn't to cut expenses, but rather to simply identify where you
spend your money. You will have the option to cut expenses later on in your
planning if you need to do so.
 Budgets can be made using a spreadsheet program, a personal finance app, or
by hand.[2]
 If you have any debts that are increasing in size or currently going unpaid,
prioritize paying these first over putting money into savings. Your debts will likely
increase at a faster rate that your savings can, so be sure to take care of these first.
3.
3
Identify your goals. Be clear about why you are implementing a financial plan and what you
hope to accomplish with it. What are you saving for? This can always be multiple things, like
saving for a car in a few years while continuing to save up for the down payment on a home
down the road. Think about everything you want to accomplish within the scope of your
financial plan and be sure to include it.[3]
 If it helps, split up your goals into short term (under 2 years), medium term (2
to 5 years), and long term (over 5 years), goals. For example, maybe you want to
pay off your credit card debt in the short term, save for a down payment on a house
in the medium term, and save for retirement for the next 40 years.[4]
4.

4
Clarify each goal. Look at your goals and try to assign an estimated cost to each one. Be
specific: your goals shouldn't be to "have a lot of money," but rather to "have $100,000 in a
retirement account" or "pay off the house completely in 10 years." This will help you plan
your monthly savings amounts. In addition, make sure that your goals are attainable given
your expected income and other goals.[5]
Part 2
Making a Plan
1.

1
Analyze potential returns. Any leftover money you have each month can be invested or put
into savings, where it will earn interest. Depending on where you put the money and how
long you are saving for, this money can earn a significant amount of interest over time.
Calculating exactly how much interest you will earn can be tricky, but it's safe to estimate
that a good stock portfolio can earn you 8 or 9 percent per year on average. However, there
may be years of economic downturns that will earn small or negative returns, and no returns
are guaranteed.[6]
  Investment accounts can be useful for retirement savings, college funds, and
other long-term goals. This type of account is not recommended for short or
medium term goals.
 For more, see how to invest in stocks.
 A savings account will earn significantly less money than an investment
account. However, the money in savings will be easier to access in an emergency
and at very low (almost non-existent) risk for loss.
2.

2
Calculate monthly savings or contributions to meet your goals. Once you know what type
of return you will get, if any, you can calculate how much you need to input each month
using a compound interest calculation. If you are not investing, and instead paying off debt,
you can estimate how much you will need to pay each month using the same calculations
(just make the "principal" input a negative number). If you have multiple savings goals, add
up the monthly cost of each to arrive at a total number.
 If you are saving for retirement, be sure to take into consideration any
contribution matching that your employer offers. This can reduce your side of the
savings burden.[7]
3.

3
Come up with several savings strategies. Next, you'll have to figure out options for getting
that extra savings amount each month. Come up with several ways to do this. For example,
you could look through your budget and see if there are areas where you can cut your
expenses. Alternately, you can take on a second job or otherwise increase your income. Your
strategies can either focus on cutting expenses, earning more income, or a combination of the
two.
 You can also consider moving your savings directly to an investment account.
This might introduce more risk but give you the chance to earn more interest.[8]
4.
4
Figure out which strategy is best. Identify several specific strategies that can be used to
reach your goals and compare them to each other. For example, would it be more unpleasant
to cut out your entertainment expenses or work more hours each week? Look at the pros and
cons of each option and decide for yourself which course of action to take.[9]
5.

5
Prepare your financial plan. Write down exactly how you plan to go about saving each
month. Make a well-defined target for saving, both in amount and time. Set milestones for
your goals and points in your timeframe to reassess your plan. If you're married, discuss the
financial plan with your spouse and make sure they are on board.[10]
Part 3
Implementing Your Plan
1.

1
Start your plan immediately. Immediately start using the strategy you decided on to start
working towards your goals. Keep yourself in check by reviewing your budget each month to
make sure you saved enough and the savings went to the right places. In order to do certain
parts of your plan, you may need the help of a professional. For example, you will likely need
to hire an investment broker to invest your savings in securities (stocks or bonds).[11]
2.

2
Track your progress. Keep track of milestones as you go along. For example, take note
when your investment account reaches half or a quarter of your goal value. Celebrate any
achievements, like a reached milestone or the completion of a short term goal. This can help
you stay motivated to complete your longer term goals.[12]
 3.

3
Review your plan if necessary. It's inevitable that your situation will change unexpectedly,
for better or for worse, over the course of a long term financial plan. You may get a big
promotion and earn more, or you might lose your job. You expenses might unexpectedly
jump. In any case, you'll have to reevaluate your financial plan to address changes in your
situation. If necessary, go through the planning process again to figure out a new way to deal
with changing circumstances.[13]
 You may also find that your chosen strategy is ineffective in helping you reach
goals. In this case, reevaluate your strategies and select a new one that you think
will be more effective.
4.

4
Create an exit strategy. This is your plan for taking money out of savings to make a large
purchase or to fund your retirement. Think of how you will take the money out when you
need it, and if there will be any tax consequences for doing so. Figuring this out may require
the assistance of a tax professional.[14]