How to create a financial plan for your life
The missing link between your dreams and where you are now is a solid financial plan. Love it or hate it, money is a very important part of all of our lives.
If you are looking to improve your life and/or become a classy lady, you must learn to manage your money like one.
What is a financial plan?
A financial plan is the process of zooming out and looking at all of your finances at once, then using that information to create a plan to achieve your financial goals. These goals can include paying off debt, saving money, buying a house, etc.
Having a financial plan helps you get motivated to achieve your dreams. It will also reduce your stress because you have created a step-by step-system to turn your financial dreams into a reality.
You can create a financial plan with a professional if you would like. I have friends that use professional services for financial planning, but if you’re like me and you want to do it yourself it is easier than you think.
There is so much information available online via books and youtube that I found it quite simple to do it myself.
Today I’m sharing my tips on creating a financial plan. This is a basic financial plan for beginners. If you plan on making large investments or are dealing with very large sums of money you might want to speak with a professional.
I am not a financial advisor and this is not professional financial advice. This is advice from my experience with money and what has worked for me over the years.
1.Print out your entire financial information.
This is where you are going to put everything in one place. If you don’t know where all of your money is at any given time, it’s a problem.
You are going to pull all of your financial records, print them out and put them all in a binder together. This binder will help you organize your finances so that you can create a plan that works best for you.
Here are some things to put into your binder.
Your full credit report.
Once a year everyone in the U.S. is eligible to access their full credit reports from all 3 credit bureaus free of charge. Your credit reports will tell you all of your open accounts, debt, and your credit score.
This report is great to have especially if you plan on paying down debt. The report should list all of the people you owe money to and the total amount of money owed.
Your monthly bills and regular monthly expenses.
Put the next copy of each of your bills into your binder so you will have an idea of how much money you are spending each month on recurring expenses.
Information of all of your bank accounts and investment accounts so that you can have it all in one place. This is the best way to be organized and to keep track of all of your money.
2.Create money goals
Type out your money goals and put them in the binder. There are countless studies that say there is a much higher chance of achieving your goals if you write them down.
You can also create a vision board and use that in the front of your binder to motivate you to take the steps you need to achieve your dreams.
- Pay off credit card debt
- Pay off student loans
- Save money for a house
- Save money for retirement
- Pay off car early
- Build your emergency fund
- Saving for a holiday
- Saving money for your children
Creating money goals is a lot of fun and isn’t as intimidating as you might think. I used to be stressed about money and I was always too scared to face my financial information because it made me feel like a failure.
Laying it all out and creating goals and a plan for those goals really helped me achieve my money goals.
3.Create a plan for reaching your goals
You’ve got your entire financial life in one place and you’ve created money goals. Now it is time to achieve you goals. There are a lot of ways that you can make this happen, but the best way is to create the right system for achieving you goals.
If your goal is to pay off debt, choose a method you would like to follow. Here are 3 methods to try
The Snowball method:
The snowball method is when you pay off your debts starting with the smallest balances first. If you have 3 accounts you must pay off, you would start with the account that has the lowest balance and pay that first. Then you would pay the next smallest balance, then the last balance.
This method is satisfying because you get some gratification when you pay your accounts off and depending on the size of your accounts you can pay them off rather quickly if you work hard.
The Avalanche method:
The avalanche method is when you pay off your debts with the highest interest rate first. This method is helpful because interest is expensive, and the longer your account is accruing interest, the longer it will take to pay it off.
Debt consolidation:
Debt consolidation isn’t for everyone, but if you have debt it a lot of different places, you might want to consider speaking with your bank or financial institution about consolidating the debt so it is easier to manage.
If your goal is to save money for a home, car or something else there are a couple of ways you can do that.
Taking on a side job
I know that there are many people who are already working a lot ever since the major changes in the economy over the past couple of years. But if you aren’t already working an extra job, you might want to consider it.
The extra income will help supercharge your savings progress and it’s very rewarding to see.
Reducing your spending and putting that money into your savings
If you don’t want to get another job (or if you simply cannot) I suggest getting on a serious budget and doing everything in your power to reduce your spending so that you can put that money towards your goals.
Printing out savings trackers or using apps to track your money.
When I wanted to save my first $10,000 I used a printable savings jar. Now I use an app to track my savings. Both are awesome but sometimes having a physical savings jar printed and posted somewhere in your house is a great motivator.
4.Execute the plan
I’m sure you probably already know this, but nothing works if you don’t work. You must take aligned action and do exactly what you planned in order to reach your money goals.
It takes discipline and hard work, but you can do it!
Final thoughts
Don’t be intimidated by your money. Face it head on and create a plan to make your money dreams come true. Getting a hold of your financial life will help you begin to live a more elegant life each and every day.
