5 Steps for Starting a Financial Plan

Money By Maryam Fouad October 8, 2021

Are you looking to get a better hold on your finances, both current and future?

Starting a financial plan is one of the best things you can do. Don’t worry if you’ve never created one before. You don’t need to hire an expensive financial planner. By following a few simple steps, you can take better control of your finances — your way.


5 steps to create a financial plan

1. Review your current situation

Step one in making a financial plan is to take a good look at your current situation. This means giving yourself an overview of all your income and expenses, debts, investments, and so on.

Spend some time reviewing how much you spend on things like groceries, days out, debt repayments, and other variable expenses.

By the end of this review, you should have a clearer picture of how much you’re spending versus how much you’re earning. This can surface some surprises and help you better evaluate where you can tweak your spending (if you need to).


2. Get clear on your financial goals

financial planning

Creating a financial plan without solid goals leaves you unfocused, and it makes it all much harder to stick to. Financial planning isn’t most people’s idea of fun. So you need to make it worth your while or you just won’t stick to the plan.

Spend some time listing your top financial goals, big or small. Do you want to buy a house or a new car? Are you saving for a vacation? Want to get out of debt? Write them all down.

Goals alone aren’t enough, though. You also need direction. Split your goals into short- and long-term goals, and come up with an actionable plan to reach them.

Try to be as concrete as you can. For example, if you need $1,000 for your dream vacation next year, split $1,000 by however many months are between now and then. That’s your monthly savings goal. Breaking goals down into little chunks and having a deadline gives you a clearer target to work towards.


3. Find a budgeting system that works for you

No one likes budgeting, and in most cases, budgets can feel impossible to stick to. That’s not because budgeting itself is too hard, however. It just means the budgeting system you’re using isn’t right for you.

Many people think budgeting is about cutting back on everything you love. But for it to be truly sustainable, you need to factor in spending for fun. That’s why methods like the 50/30/20 rule are so popular because they account for spending on things you love.

If that method doesn’t work for you, you can try out one of the many different systems people recommend. A few popular ones to try out include the envelope method, the “pay yourself first” strategy, and zero-based budgeting. Try a few out and see how they work. Not all of them will be perfect, so keep searching until you find one that sticks.


4. Create a debt repayment strategy

If you’re in debt, a key part of your financial plan should center around this. Take a few moments to list out all of your different debts, such as credit cards, personal loans, student debt, medical debt, or car financing.

Pull out the interest rates, monthly repayment figures, and final payment dates, so you have a clear overview. If you’re happy with your debt repayment strategy now, you don’t have to change it. But if you’re looking for a way to clear debts faster, try out the snowball or avalanche methods.

These methods work by paying more on the smallest or highest interest debt first and then moving on to the next one. You gain momentum after each debt is repaid in full.


5. Plan for retirement

Retirement may be a while away, but the best time to plan is right now. If you’re not already taking advantage of employer retirement benefits, make sure you’re signed up and not missing out.

Try to work out how much extra you can afford to put into your retirement pot. The more you can, and the sooner you can, could mean a more comfortable retirement.

If you’re not very familiar with retirement planning, take some time to research 401(k)s, Roth IRAs, and other types of retirement accounts.


Take control of your financial future

Financial planning isn’t just for the experts and millionaires. Putting some simple plans into place is a good move for everyone to help them take more control over their financial future.

If you’re unsure how to get started, just pick one step for now and concentrate on that. You don’t have to do everything all at once!

One way to take better control of your money is to equip yourself with the right tools. Get the Western Union® Netspend® Prepaid Mastercard for a simple way to manage your money wherever you go.

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