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How to Create a Financial Plan

In today’s video I will give you 7 steps to create a solid financial plan, so grab your favorite notebook or journal, and let’s go! Step 1: Assess your current financial situation. No judgment, just a simple look at your financial reality. Questions to ask: How much do you have saved as an emergency fund? […]

In today’s video I will give you 7 steps to create a solid financial plan, so grab your favorite notebook or journal, and let’s go!

Step 1: Assess your current financial situation.

No judgment, just a simple look at your financial reality.

Questions to ask:

How much do you have saved as an emergency fund?

How much do you have invested for retirement?

Invested outside of retirement?

How much debt besides your home do you have?

List these all out with the balance and interest rate next to each. Write out your monthly income, spending, and surplus. Factor in retirement contributions, so note how much extra money you have each month after everything is paid for (if anything). take note of how much of your paycheck is going into your retirement account if you have this auto-drafted (you’ll use this later)

Step 2: Set your goals.

Ideas for financial goals could be saving an emergency fund, getting out of debt, starting an investment account, retiring by age 60, buying a home in 2 years, going on a vacation next year, getting married, starting a business, helping your kids with college, helping your parents, giving to a cause you love or anything else that is important to you. Write these all out.

Step 3: Prioritize your goals. If you’re in debt and working on your emergency fund, take a look at these videos for help. Financially it’s best to get your first 1k saved, contribute enough to get your employer’s match in your 401k if that’s offered to you, then pay down high-interest debt, then increase your retirement savings, then move to other goals, BUT I know that’s not reality sometimes. 

You may be dealing with a crisis or have something specific that’s deeply important to you, so don’t let others set your priorities. Writing these out will greatly increase the odds that you reach YOUR goals.

Step 4: Review your monthly expenses- we need to see how much extra, we’re working with after everything is paid for. If nothing is left then you will need to work on reducing your spending and increasing your income. Write that out as a goal and watch those two videos for help.

Step 5: Allocate money to goals. Split up what you’re working with based on what’s most important. If you’re not sure where to start, I would first set aside a set percentage of your income to retirement and then allocate the remainder to other goals.  If you already contribute to your retirement and your extra money is after that contribution, then you can just move to the next goal. Maybe that could be investing outside of retirement for future use. I think it’s important to have some investments that aren’t all tied up in retirement. This gives you access to a larger lump sum say 10 years from now if needed, and you aren’t retiring for 20 years so can’t access that money without a penalty. 

Step 6: Get invested and make sure investments align with your risk tolerance for each goal…longer-term goals allow you to be more aggressive with your investments, while short term goals should be more conservative.  Watch this video for a step by step guide on creating an investment portfolio.

Step 7: Schedule time to review your plan and investments to ensure you’re on track. I would start every month in the beginning and you can move to every 3 months, then once every 6-12 months as you get used to how everything is coming together. Schedule a call with me if you need help with any of this!

Wrapping up, these are the exact steps I would take high net worth clients through when working one on one with them at Morgan Stanley and Etrade. If you’d like some more personalized help with creating a plan, check out my Financial Planning Package!

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