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Steps of Financial Planning

A goal requires a plan. A plan requires a to-do list. A to-do list requires check marks when items are completed. When you complete one item on your to-do list and check it off, you feel a sense of accomplishment and success. This is where you begin your financial planning. You make a goal, break […]

A goal requires a plan. A plan requires a to-do list. A to-do list requires check marks when items are completed. When you complete one item on your to-do list and check it off, you feel a sense of accomplishment and success. This is where you begin your financial planning. You make a goal, break it down into steps, and cross them off as you go. Each time you meet a smaller goal, you become more inclined to work harder to achieve the next goal on your list.

Get A Planner 

good budget planner is one of the easiest things to use when creating a financial goal. Writing things down helps your mind take note of what you want, and you remember your plan better than when you put it into an electronic or you keep it in mind. Budget planners guide you on your way to success by providing you with the necessary tools to succeed financially. Some planners are undated, so you can start using them anytime. Check this list of undated planners if you need one. 

Create A Goal

Financial planning requires a goal, but the goal is rarely the same for two people. What’s your plan? Do you want to retire with $2 million in the bank by the time you’re 50? Do you want to own your house outright before you retire? Do you want to pay off all your debts before you turn 40? Write down your goal. When you see your goal in a tangible location, a piece of paper in this instance, you’re more likely to work harder to meet your goal. 

There is no such thing as a right or a wrong way to create a goal. Whatever your financial planning entails is perfect. All you need to do is have a goal in mind and write it down in a paper planner so it is evident and tangible. 

Set A Timeline

When you do you want to accomplish your goal? How much time do you have to meet your goal? You need to know how much time you have to work with before you begin the next steps of this process. Even if you don’t seem to have much time to meet this goal, don’t change it to meet the timeline. Adjust your methods of meeting the goal rather than the time you have to meet it. 

Break Down Your Goal

Let’s say your goal is to pay off your mortgage by the time you’re 40 so you can meet your retirement goals. Once your goal is written down and your timeline is set, write down smaller goals that help you meet that goal. For example, if you’re 30 now, you have 10 years. If you purchased your home for $500,000, and you put down 20 percent, you owe $400,000 on your mortgage with a 4.5 percent interest rate. 

You need 30 years and $729,000 to pay off your loan, but you’re doing it in a third of the time. Your mortgage payment of $2,027 per month needs to be $4,145 per month for 10 years. 

– $956.54 per week to pay off the mortgage in 10 years 
– $136.65 per day to pay off the mortgage in 10 years 
– $13.66 per hour for 10 hours a day to pay off the mortgage in 10 years 

When you see your goal broken down into a smaller goal such as this one, it’s more attainable. You’re more likely to meet your goal when you see it broken down. 

Gather Pertinent Data

Now it’s time to find the data that supports your goal. Common financial planning data includes knowing your income, your taxes, your outgoing expenses, and where every penny goes. This is where it’s helpful to download a financial app that takes every penny and records where it goes. When you see where your money goes in a precise manner such as this, it’s easier for you to make appropriate changes to your spending habits. 

Get the Help You Need

Financial planning is easier when you have help from someone who knows how it is done. A financial planner, an investment banker, or someone who works in the industry can help you take your goals and make them a reality. They can advise you where to invest your money if investing is where you want to make your financial planning changes. They can help you take what you have and turn it into more using methods that work with your income. 

A financial planner is someone who knows investments, and they know how to plan for the future. You probably have questions, and this is the person to take those questions to for the best possible answers. It’s helpful to think of your financial planner as an accountability partner who is there to monitor your progress and keep you on track. 

Monitor Every Step 

Creating a financial planning goal only works if you monitor your goals. This means taking stock of what you’ve saved, how you’ve paid things off, and where you are every month or every quarter. This also allows you to make the necessary changes. For example, if you’re still working to pay off your mortgage, you might find that refinancing for a lower rate can help you pay it off faster so long as you don’t take equity out on the home. 

Apply These Steps To All Your Financial Situations

The great aspect of financial planning is that you’re free to take these steps and apply them to every aspect of your financial plan. From your household budget to your savings account to your retirement savings, the goal is the same. These steps merely help you create a goal and implement a plan to meet your goal. 

You can use these steps to plan for your taxes, your children’s college educations, and more. Every step of this plan is also customizable, which means you can adjust it accordingly when life changes occur. A big raise can help you save more in a shorter timeline. Job loss might take you off track for a few months, but your plan can be adjusted to account for that situation. 

Financial planning is easier when you understand how it works. What works for one person might not work for another, which is another important aspect to remember. Your financial plan is personal to you, but it’s beneficial to work with a financial planner who can help you stay on track and meet your goals. 

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