Simple Guide to Create a Solid Financial Plan

How to Make a Financial Plan in Easy Steps

      

       It's important to have a financial plan for yourself. Having a solid financial plan will allow you to save money, buy the things you really want, and achieve long-term goals such as saving for college and retirement. Everyone's financial plan is certainly different. So if you are wondering how to create a financial plan, you are at the right place.

People want to be financially independent and build riches. Deciding to embark on a journey to financial independence is a big deal! It marks a fresh start with your money, and it means that you are ready to achieve something that can change your life for the better.

When it comes to financial planning, women have something to celebrate. For women, letting their husbands do all the planning and investing is a thing of the past.

Women are now a major component of the American corporate and global business landscape. Their emergence as entrepreneurs, leaders and innovators has made them an integral part of our country's economic health and the future of global business. More women are taking over the management of family finances and business.

What is a Financial Plan? 

A financial plan is a review of your financial goals, and the ways you should take to achieve them. These plans are for current, and future financial goals, and how to achieve them. It can be a short or long term method to manage your money wisely. You can make your own financial planning, or with professional help. There are some general strategies that everyone should adopt when making a financial plan.

Steps to Create a Solid Financial Plan

Take the lesson of money to heart.
Women need to understand where their attitudes and habits regarding finances are coming from, and if necessary, write another story. For example, as a young woman you may have witnessed your father risking money, or spending money foolishly while your mother remained silent. This can be an inspiration for you to be more firm in financial matters.

Write your financial goals
Having a financial goal is the foundation for your financial success. After all, you have to know what you want to achieve to actually achieve it. However, when it comes to setting goals, you need to make sure they are well defined and prioritized. It's great to have goals big and high! But be sure to break it down into smaller pieces. That way, you won't be overwhelmed to achieve it, and you can easily measure your progress.

Emergency fund
It is also important that one of your goals includes a plan for dealing with an emergency. You want to make sure you're prepared for the storm. If you don't, you'll just end up in debt again.

Pay off debt
You can't really get started on your financial future if you have a lot of debt. Between exorbitant interest rates, large minimum monthly payments, and the damage that a lot of debt can do to your credit score, it's best if you pay off your debt first. Create a debt repayment strategy, and be patient, but consistent when trying to be debt free.

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Tackle high-interest debt 

An important step in any financial plan: Pay off “toxic” high-interest debt, such as credit card balances, payday loans, mortgage loans, and rent-to-own payments. Interest rates on some of these may be so high that you end up paying double or triple the amount you borrowed. If you're struggling with revolving debt, a debt consolidation loan or debt management plan can help you wrap multiple expenses into a single monthly bill at a lower interest rate.

Plan to invest
If you want to build wealth, then you must use your money to work for you. This is where the investment comes in. Before you put your hard-earned money into an investment, it is important to have a well-defined goal. Think about what to invest in, when you need your money, and what your risk tolerance is.

Investing is a long term financial activity, you must commit if you really want to see money grow. Worried you will need your money in the short term? So that's what your savings account is for; set aside your savings and emergency money for your short-term goals (you'll need it in five years or less).

You'll also want to make sure you have a basic understanding of any investment you're putting your money into (real estate, stock market, or business). Your plan to invest should be included as part of your monthly budget in which you allocate a certain percentage of your income to your investment goals.

Get your retirement savings on track

Whatever your age, retirement savings need to be part of your financial plan. The earlier you start, the less likely it is that you will have to save each year. You may be surprised at how much you'll need—especially when you factor in healthcare costs. But if you start saving early, you might be surprised to find that just a little over time can make a big difference.

Calculate how much you'll need and donate to a 401(k) or other employer-sponsored plan (at least enough to catch an employer match) or IRA. Save what you can, and gradually try to increase the amount of your savings as your income increases. Whatever you do, don't procrastinate.

Buy the right insurance
After working so hard for money, the last thing you want is an unplanned event to destroy you. Insurance is basically your backup plan that will protect your assets, in case of any life circumstances that require a large amount of money to settle. Insurance coverage must cover life, health, disability, car, home and business. Basically, you want to protect something very important, which has a high value in making sure that you are protected financially. Having the right insurance can turn what should have been a huge disaster into a mere inconvenience.

Estate plan
Real estate planning is not something that many people want to think about, but it is important. A real plan allows you to determine what happens to your assets after you leave. It involves listing all your assets, creating a will and making them accessible to those who need to have access to them. A financial planner or real estate attorney can help you fix this.

Taxes

Taxes are annoying, but they certainly aren't going away any time soon. So, your projected long-term income should include taxes. Not taking taxes into account can have a big impact on your cash flow.

Also, you'll want to look at tax saving investment options and stay aware of the relevant tax deductions you can apply to help you save money on tax payments. You may plan to sit down with your tax accountant or financial planner to help ensure your tax plan is adequate.

Review your cash flow
Cash flow means money coming in (your income) and money going out (your expenses). How much money do you make monthly? Make sure to include all income sources. Now take a look at what you spend each month, including any expenses that may only show up once or twice a year. Are you consistently spending too much money? How much are you saving? Do you often have extra cash you can direct towards your goals?

Review your financial plan frequently

Once you have a financial plan outlined and in motion, it is important to review your plan frequently and make any necessary adjustments. If your goals, or the circumstances surrounding your life change, perhaps your insurance needs to change, your risk tolerance changes, etc.

At a minimum, you want to review your overall financial plan at least every six months.

If you rarely check your financial plans, it's easier for you to deal with life's unplanned events, bounce back from setbacks, and achieve your financial goals.

Don’t ignore risk.
Market risk describes the fluctuations in the price of a security, as a result of market activity and expectations. But market risk isn't the only factor that can impact your balance sheet or financial well-being. Because women have longer life expectancies, and often lower retirement account balances than men, they also need to be mindful of inflation risks and longevity risks. For this, it is important for women not to invest conservatively. Age 60 same as new 40. Take for example my grandmother, who lived to be 94 years old: she ate Greek yogurt and did yoga in the 70s before she became cool!

Recognize your needs and motivations.

Some people see money as a status sign, or defining success. Women need to understand what is motivating them to spend and save money. Be realistic about your needs and wants, as well as identify and prioritize your financial goals.

Create a Financial Plan Exit Strategy

You'll want to plan an exit strategy to match each savings and investment goal in your financial plan. An exit strategy has two components: how you allocate the money and how you can access it. Let's say you want to buy a house in ten years' time. You may need to allocate less money to your investment portfolio, and keep more money in short term accounts like money market.

When it comes time to buy your home, make sure that it is easy to withdraw your down payment. It means checking your account withdrawal fees and penalties. Similarly if you are going to need tuition for the kids, or retirement, be sure to have an exit strategy for the money. Also consider the inheritance plan for your heirs.

Don’t lose sight of what you value.

The financial choices you make determine what is important. Buying the latest designer handbags, for example, may sound like fun, but take a step back, and think about what your future holds. Will this purchase put your financial independence or retirement savings at risk?

Avoid overspending and learn from your mistakes

The journey to financial independence is not always an easy one. There will be hard days. Pursuing the goal of financial independence so closely linked to delayed gratification isn't always fun, but it's totally doable. Have a solid plan for your finances, be disciplined and avoid excessive spending. You'll find out how great you feel when you really put a concerted effort into meeting your budget.

When you're managing your finances, you may still make mistakes, and that's OK. Sometimes you might not be able to resist the urge to buy something that doesn't fit your budget. And sometimes you'll feel like tearing your entire financial plan to smithereens 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 strive to recover quickly from your mistakes, you'll be fine. It's all about assessing the mistakes you make, understanding why you're making them, and making a plan to avoid making the same mistakes. Then, you have to take those lessons, and apply them to your future success.