Your 4-step guide to financial planning (2024)

No matter what life stage you’re in, it’s always a good idea to assess and work toward your goals. Here’s a step-by-step guide to creating a personalized financial plan.

There’s a good chance one of your goals right now is to feel more financially secure.According to aU.S. Bank Women and Wealth Insights Study, 72% of women and 50% of men say financial security is a “main motivator” to create wealth.

But here’s the good news: having a financial plan can help you feel more confident about your financial future and better prepare you to handle evolving and uncertain circumstances as they arise.

Use this step-by-step financial planning guide to become more engaged with your finances now and into the future.

1. Assess your financial situation and typical expenses

An important first step is to take stock of your current financial situation. Even if you’re not where you’d like to be, be honest with yourself about the income you’re currently generating, savings you’ve accumulated and your general spending habits.

You may feel proud of your progress or notice room for improvement – and both reactions are perfectly acceptable. Your initial focus should be on creating a non-biased assessment of what your financial life looks like now, so that you can make good decisions about how to take the next steps.

To get a realistic idea of your spending habits, add up your typical monthly expenses. These might include rent or mortgage, transportation costs or car payments, groceries, gym memberships, cable or streaming subscriptions, loan payments and discretionary costs – like ordering takeout or shopping.

Reviewing your paychecks, monthly bills, bank statements and even recent receipts in your wallet can be helpful resources as you reflect on your income and expenses. Once you start tracking your expenses, you’ll have a good idea of what the next few months will look like as well.Taking this approach offers a snapshot of your overall financial habits without the stress of retracing and calculating years of your financial history.

2. Set your financial goals

Next, take time to picture what you want out of life as youidentify your financial goals.These will be different for everyone, but examples include home ownership, travel, philanthropy, and retirement. You may find it beneficial to add a “why” to each of your goals. Doing so can make it easier to stay motivated as you work toward achieving them.

Consider setting up “buckets” or categories for each of your goals, whether you have two or ten. If you currently have savings, distribute the amount you feel comfortable with toward each category. You might want to start by putting more money toward immediate or short-term goals, as you’ll have time to contribute money to your long-term goals more gradually.

3. Create a plan that reflects the present and future

Your snapshot of monthly income and expenses will help you know precisely where your money is going. This will give you an objective idea of your fixed expenses, like rent or loan repayment, and your lifestyle expenses, like groceries and entertainment. It will also illuminate where you can make changes and ultimately, how much you can put toward your short- and long-term goals.

When making your budget,the key is to be honest with yourself about your lifestyle, values and goals. Whether you’re comfortable now or still trying to make ends meet, it’s important to be realistic about how much you can really save.

Finally, don’t forget toadd some fun in to the mix.Trying to deprive yourself of anything but the essentials can be frustrating and potentially unattainable. However you decide to budget, keep in mind that what’s right for you won’t necessarily be right for someone else.

4. Fund your goals throughsaving and investing

In general, a savings account is a good approach for your short-term goals, like a vacation. Investing is the way to go for your long-term goals, like retirement.

Even if you’re just starting out in your career or don’t have large pool of money set aside yet, it’s never too early to invest. There’s aninvestment strategy for every financial situation, and investing can allow your money to grow over timethrough compound interest.The earlier you start, the longer your investments have to compound and the greater the impact.

The easiest way to start investing is to take advantage of aworkplace savings plan, if you have access to one. Some employers offer a 401(k) match up to a certain amount. Plus, contributions are directly withdrawn from your paycheck with pre-tax dollars.

If you’re afirst-time investor, remember that the process will be a valuable learning experience. Holding onto your investments through market highs and lows can be a good strategy, so remember to practice patience and stay informed.

Creating a financial plan now can help set you up for future success. As you earn more money, you’ll know exactly where it should go. With a little planning, budgeting and consistency, you’ll be well on your way to a financial life that aligns with your dreams and goals.

When it comes to financial planning and guidance for key moments in your life, you don’t have to go it alone. Read abouttimes you may need a financial advisor.

Your 4-step guide to financial planning (2024)

FAQs

Your 4-step guide to financial planning? ›

The main elements of a financial plan include a retirement strategy, a risk management plan, a long-term investment plan, a tax reduction strategy, and an estate plan.

What are the four steps of financial planning? ›

Financial Planning Process
  • 1) Identify your Financial Situation. ...
  • 2) Determine Financial Goals. ...
  • 3) Identify Alternatives for Investment. ...
  • 4) Evaluate Alternatives. ...
  • 5) Put Together a Financial Plan and Implement. ...
  • 6) Review, Re-evaluate and Monitor The Plan.

What were the 4 components of financial planning? ›

The main elements of a financial plan include a retirement strategy, a risk management plan, a long-term investment plan, a tax reduction strategy, and an estate plan.

What is financial planning answers? ›

The financial planning process includes multiple tasks, including: Confirming the vision and objectives of the business. Assessing the business environment and company priorities. Identifying which resources the business needs to achieve its objectives. Assigning costs business costs centers included in the plan.

What is the process of financial management 4 steps? ›

For individuals and families, we focus on asset/liability matching, tax-efficiency, and cost-effective planning throughout the four key phases of financial management: accumulation, distribution, preservation, and legacy.

What is step 4 in the planning process? ›

Step 4: Identify Opportunities and Threats.

What are the four 4 objectives of financial planning? ›

Financial planning is the process of creating a roadmap for managing your finances to meet life goals. It involves setting objectives, assessing assets and liabilities, planning for future financial needs, and managing risks.

What are the 4 factors that influence financial planning? ›

While everyone is different, there are common circumstances of life that affect personal financial concerns and thus affect everyone's financial planning. Factors that affect personal financial concerns are family structure, health, career choices, and age.

What are the 4 parts of finance? ›

There are four main areas of finance: banks, institutions, public accounting and corporate. Courses within the finance major provide a solid background in many subjects including: Financial markets and intermediaries. Measuring the risk and return of investments.

What are the 4 C's of financial management? ›

As owners of FP&A processes, today's accounting teams must be well-versed in the four C's of financial planning: context, collaboration, continuity, and communication. Today, financial planning and budgeting are more important than ever.

What is financial planning basics? ›

Financial planning is an ongoing process that looks at your entire financial situation in order to create strategies for achieving your short- and long-term goals. It can reduce your stress about money, support your current needs and help you build a nest egg for goals such as retirement.

What are the main points of financial planning? ›

8 Keys to Good Financial Plans
  • Setting financial goals. ...
  • Net worth statement. ...
  • Budget and cash flow planning. ...
  • Debt management plan. ...
  • Retirement plan. ...
  • Emergency funds. ...
  • Insurance coverage. ...
  • Estate plan.

What is the step 4 of financial planning? ›

Fund your goals through saving and investing. In general, a savings account is a good approach for your short-term goals, like a vacation. Investing is the way to go for your long-term goals, like retirement.

What are the 4 stages of finance? ›

The 4 Stages of Your Financial Life
  • The budgeting years. Roughly between the ages of 21 and 41, we typically spend more than we make, as shown in the first part of the curve. ...
  • The accumulating years. Roughly between the ages of 41 and 57, we reach the accumulating years. ...
  • The managing years. ...
  • The distributing years.
Jun 15, 2023

What are the first 4 steps to financial success? ›

4 Steps to Financial Success
  1. Step 1: Know Your Numbers. Comparing your income to monthly payments will help you budget for savings. ...
  2. Step 2: Protect What's Yours. Insurance is the best defense against the unexpected. ...
  3. Step 3: Fund Your Future. How do you see your retirement? ...
  4. Step 4: Build Your Wealth.

What are the 4 quadrants of financial planning? ›

Everyone can be categorized according to how they get their money: Employee, Self-employed, Business owner, or Investor. Each of these four categories, or quadrants, has its strengths, weaknesses, and characteristics.

What are the 4 routine functions in financial management? ›

9 Functions of Financial Management
  • Financial Planning and Forecasting. ...
  • Cash Management. ...
  • Cash flow forecasting. ...
  • Estimating Capital Expenses. ...
  • Determining Capital Structure. ...
  • Choosing Sources of Funds. ...
  • Procurement of Funds. ...
  • Investment of Funds.
Dec 31, 2023

What are the stages of the financial plan? ›

9 steps in financial planning
  • Set financial goals. A good financial plan is guided by your financial goals. ...
  • Track your money. ...
  • Budget for emergencies. ...
  • Tackle high-interest debt. ...
  • Plan for retirement. ...
  • Optimize your finances with tax planning. ...
  • Invest to build your future goals. ...
  • Grow your financial well-being.
Jan 5, 2024

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