How to Do Financial Planning
The first step toward financial planning is to set goals. Most people create narrow and broad goals. For example, your goal may be to stop living paycheck to paycheck. This may be a narrow goal, and part of your broader desire to save money to own a house. Your desire to own a house may also be part of an even broader goal: to achieve financial security in retirement, in part, by having a paid off house.
Once narrow and broad goals have been identified, then it is time to create a concrete plan to achieve them. Start by looking at your current income to determine how much money you have to spend. Make a list of set expenses and allocate your money toward those. See if you have any money left over after your monthly fixed expenses are taken are of. If you do, set up a budget for how to allocate that money. Include saving for short term and long term goals in a budget. If all of your money is going toward fixed expenses and you have nothing left to save for goals, then the first step to your financial planning picture is to figure out how to reduce your fixed expenses or increase your income so you have money left over to achieve your dreams and build wealth after your day-to-day living expenses are taken care of.
Once you have a budget in place that determines where your money is going to go, take specific steps to accomplish your goals. Begin by setting a date that you want to accomplish each of your goals. For example, you may decide you want to save $20,000 for a home down payment. Set a date to accomplish it in one year, or two years, depending on how much of your money you can set aside each month toward buying the home.
When it comes to saving for your future and financial security, you will also need to identify the ways you will save- stocks, mutual funds, savings accounts or other investment mechanisms. Determine how much to save for retirement, or for your other goals, and figure out a plan to do so.
If you have a problem coming up with your own plan, certified financial planners can help. However, financial planning should be doable for everyone if you simply break down your goals to get a handle on your finances.