Oct 10, 2017

Are you ready to turn your bank account around? Financial planning can help you achieve your monetary goals such as paying down debt, putting together the money to buy a new car, or saving enough to make a down payment on a home.

You may be wondering, what is financial planning? A financial plan goes far beyond a budget. It is sort of like a wish list of all the things you would like to achieve financially, as well as a roadmap of how to achieve them.

Start planning your financial future today with our four-step plan:

1. Know Where Your Finances Stand

Before you can even think of all the things you would like to save up money for, you need to know how much you are really bringing home at the end of the month. Look at your paychecks to calculate how much you bring home each month.

After you know exactly how much you earn, it is time to look at how much you spend. Add up your rent or mortgage payments, car payments, utility bills, loan payments, average grocery costs, and any other necessary expenses. To help you actually reach your goals and stick to your financial plan, also allocate an allowance for yourself that you can spend each month on nonessential items such as entertainment.

Now subtract your expenses from your take-home pay to see how much money you have to work with each month. This is your starting point.

2. Decide on Your Financial Goals

What do you hope to do with your money? You most likely have financial goals beyond saving for retirement. For example, you may decide you want to pay off all of your student loans by a certain age or to buy your first home. You may also have short-term financial goals such as saving for an upcoming trip or a new laptop.

3. Create a Roadmap to Reaching Your Goals

Decide which financial goals are most important to you. Could you put off that goal of buying a new laptop if it helps you reach your goal of saving for your first home faster? Start with just a few goals and break down how much money you will need to save and when you would like to reach the goal by. This will help you understand how much money you will need to put aside each month.

Goal Amounted Needed Target Date Monthly Savings Goal
Down Payment for a New Home $30,000 4 Years $625
New Laptop $800 1 Year $67
Vacation $2,500 1.5 Years $139

Suppose you are focused on achieving the three financial goals above. You would have to save at least $831 each month to achieve your goals on time. For some people, that may not be feasible after all of their expenses. Seeing how much you need to save helps you understand how realistic your financial goals are. If you cannot achieve that level of savings, you may need to adjust the amount you spend on vacation or the target date for you to buy a new laptop.

4. Monitoring Your Expenses

A key to the success of your financial plan is to keep your goals as realistic as possible. However, it is always possible to speed up the pace at which you pursue your financial goals. Use financial tracking software to spot areas where you could cut back on spending to help you reach your goals sooner.

There are plenty of ways in which you can cut back on your spending to help you get the things you want faster. Cancel an expensive cable package and stick to online programming. Skip the gym and find alternative ways to work out to save the membership fee. Cancel subscriptions to services you hardly use.

Freeing up $10 here and there can make that vacation or laptop a reality before you know it.

5. Keep Re-Evaluating Your Financial Plan

Make sure to check in on your financial plan often. Each promotion, bonus, and birthday card containing money can bring you closer to your financial goals. You may often find that a new goal has become more important than a previous one. Evaluating your financial goals regularly can help you stay on track.

Another way to ensure you reach your financial goals, without spending your savings, is to create a separate savings account for each goal. This will also allow you to easily monitor how close you are to reaching your goal simply by logging in to your online banking account.

Are you ready to get started on your financial plan? Download our Financial Planning Worksheet today.