A Step-by-Step Guide to Build Your Own Financial Plan

7 steps for a comprehensive financial plan

Photo by Micheile Henderson on Unsplash

Set financial goals

It’s always good to have a clear idea of why you’re saving your hard-earned money. Think it through and list down several things that come to mind. Your goals can be long-term as well as short-term.

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Create a budget

Now list down all the income sources you have and count how much income you get every month. All types of income (no matter how small they are) count.

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Build an emergency fund

Life can be unpredictable, and you should be ready for an emergency. Having financial means to sustain yourself financially in difficult times is essential. Ideally, you should save at least three times your monthly salary and keep that money untouched in your emergency fund.

Manage debt

If you have a lot of debt (credit cards, student loans, car loans), pay off these first and allocate your budget based on the remaining balance. The last thing you want is to keep the debt growing. You know that the interest charges on your debt might be very painful and will cause you to lose much more money.

Protect yourself with insurance

Get insured to avoid unexpected costs in case something happens. Health and personal insurance are the most important ones that you should get sorted out first. If you can afford it, get insurance on your house in case burglary or fire happens.

Plan for retirement

Even if it’s a long way off, think about what you want your money to do for you when you retire and create a plan to make it happen. Keep in mind that you won’t be able to work and earn a salary forever; thus, having a clear plan when you are over 60–70 years old is very beneficial.

Photo by Max Harlynking on Unsplash

Create an estate plan

Protect yourself and your loved ones with a will. You don’t have to be wealthy, old, married, or a parent to need an estate plan. An estate plan is a critical component of your financial plan, and it also lays out who makes financial and healthcare decisions for you if you can’t make them yourself.

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