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A graph depicting progress with a financial plan

Tips for Creating a Personal Financial Plan

How to Create a Financial Plan

If you want to grow your personal wealth and obtain financial stability, you’ll need to create a financial plan to prepare for the future. Without goals and a vision established, you can’t expect to have discipline with how you manage your money. When you’re ready to create a financial plan, there are a few essential tips to follow.

Establish Goals

Creating financial goals is necessary to ensure that you work towards your dreams of where you want to be in 10 or 20 years. It’s important to be specific with your goals to ensure that you can take realistic steps when working towards your dreams. You may want to pay off your mortgage or build an investment portfolio. This makes it necessary to work with a financial advisor who can guide you in the right direction after looking at your income and assets.

Monitor Your Credit

Your credit is necessary to be approved for loans or obtain lower interest rates. You should monitor your credit every year to ensure that you can work towards obtaining a higher score. You can receive a free credit report each year from one of the top credit agencies. This will allow you to review which factors have contributed to your score. It will also allow you to discover if any errors are present on the report, which can be disputed if they’re incorrect.

Begin Saving

Saving is integral for your financial plan. It will ensure that you can avoid outspending your income, and set aside money for your children’s college education or retirement. Review your budget and look for areas where you may be spending too much money. You may be able to cut down on dining out, cable, or car payments to find extra wiggle room in your budget. Shoot for putting aside 10 percent of your income towards your savings plan, which can also be used for emergencies.

Investing is essential for building your savings, which can include putting money into your 401(k) or opening a robo-advisor account, which doesn’t require having to put in a minimum amount of money. The key is to begin early to ensure that you get a head start and can acquire a significant amount of money over time. Consider consulting a financial advisor to determine how much you should invest each month as your income continues to grow.

Create Exit Strategies

You’ll need to create an exit strategy for every financial goal in your financial plan. You’ll likely need an exit plan for the larger house that you plan to buy, along with your retirement and estate plan.

Tackle High-Interest Debt

One of the most important parts of financial planning is tackling high-interest debt that you’ve accumulated, which can delay your ability to save. Toxic debt includes credit card balances, title loans, and payday loans. These are known for having high interest rates and can cause you to pay twice as much as what you originally borrowed. If you have an issue with revolving debt, consider obtaining a debt consolidation loan or creating a debt management plan when consulting a financial advisor.

Creating a financial plan with the help of a financial advisor can allow you to have more control over your money in both the present and future. You’re more likely to meet your goals and attain financial success by planning ahead and establishing discipline with how you budget and set aside money.