How a Financial Plan Helps You Plan for the Future

What is a Financial Plan?

Planning for the future is hard since so much can change; however, putting down the foundation of a financial plan now can help you prepare for whatever the future brings. Think of it as a personal money roadmap so that your future self can do all the things you think you’ll want to do. A plan can also help reduce the concerns that we all feel about our future.

According to the latest Marketplace Edison-Research Poll, “among the more than 1,000 people surveyed, more than 60 percent reported feeling at least some anxiousness about their financial situations, while 30 percent said concern over their financial situation is causing them to lose sleep.”

Putting together a financial plan can help anyone prepare for the future

Financial plans are not just for rich people with private wealth accounts at Merrill Lynch. Everyone can benefit from taking just a few steps to list out their goals and what they can do to meet them.

Here are some steps you can take to create a STEADY plan for the future…  

Specify future goals

Identify things that you absolutely need to do. These can be related to your daily routine and may entail eating, commuting, and living. Second, list out desires or wants. These may include anything from purchasing a computer to planning a vacation.

Timeline to achievement

Divide time into three categories: the short-term, the medium-term, and the long-term. Now, arrange the listed goals into one of those three areas. Remember that some of your short-term and medium-term goals can help you achieve the longer-term goals.

Evaluate current situation

Begin by listing out items of value. These can be cash or cash equivalents such as checking accounts or savings bonds, property such as real estate or automobiles, and investments such as stocks and bonds. Next, list out anything that you owe. These can include credit card balances, loans, taxes, other bills, rent, or mortgage payments. The difference between the items of value and that which you owe gives you an idea for where your finances currently stand.

Alternative paths or actions

What could you do today to make a goal such as taking a trip possible? You may find new sources of income such as working overtime, taking on a part-time role such as tutoring, or investing more aggressively. Alternatively, you may be able to change your spending patterns and save more. Before taking action, be sure to weigh the pros and cons of each option and make sure that it is doable.  

Develop the plan

Now you can come up with the strategies. You may be able to prioritize certain goals by comparing the necessary costs to achieving them. Also, remember to choose steps that are practical so that you can be successful in accomplishing your goals.

Yardstick to measure progress

Set small milestones to measure your progress over time. You can follow two approaches: measurement points at certain intervals of time such as every 2 months or at specific monetary amounts such as $500 increments. By increasing your accountability, you can make sure you are staying on track.

Once you have created the above, you are better positioned to think about the future. It is likely that you may find new goals or encounter unforeseen circumstances. The truth is that life will change and some of those changes may bring new priorities. The important thing to remember is that as you evolve, so will your financial plan. Be diligent in checking on your goals and revising the steps you need to take to achieve them. By doing so, you can make sure you are always moving in the right direction.

 

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