Financial planning may be necessary, but it’s also notorious for being a decidedly unpleasant experience. For many people, dealing with intimidating life events, such as having kids in college or reaching retirement age, can cause a lot of emotional or mental stress. Still others may feel overwhelmed as they explore different possible scenarios, challenges, and solutions.
No doubt there are many smaller, simpler money tasks which you can complete quickly and improve your financial situation to some extent. However, there is no substitute for a full, detailed financial plan.
Follow these 11 tips to prepare for your future and make the financial planning process a little easier. Your end result will be a renewed sense of readiness and confidence to face whatever the future may bring for you and your family.
1. Make a budget and stick to it
A budget is simply a financial plan for the present and the near future. Based on your current and immediately foreseeable circumstances, your expected income and expenses, both fixed and variable, are recorded in a budget. It helps you determine your spending habits to ensure you have money available for bills when they are due.
To start your budgeting process, you first need to learn about different types of personal budget plans. Pick the one that makes the most sense for you and your current situation. Gather your receipts, bank statements, income records, and bills and start counting expenses against income. You can complete this process with pen and paper, or you can use free online budgeting tools and spreadsheets.
Choose the method that works for you and that you feel most comfortable with. As part of your financial plan, remember that your budget should be reviewed periodically if there are changes in your life, such as a new job, a new home, or having children.
2. Automate your finances as much as possible
To keep your financial plan on track, make as many of your money management tasks as automatic as possible. Sign up for direct deposit whenever possible. You may also want to research banks that are more likely to offer access to direct deposit funds. Also look into setting up automatic withdrawals for your recurring bills. This helps you avoid late payment fees and interruptions to critical services.
Plus, take advantage of all the automatic savings plans available to you. Both banks and many employers offer individuals the option of splitting a paycheck between checking, savings, and investment accounts. You may also be able to declare extra change (usually by rounding up to the next whole dollar amount) for your savings account with each purchase.
Finally, use the appropriate financial instruments to keep track of your budget, your bills and your investments. Some tools automatically look for potential refunds available to you for previous purchases, while others can flag subscription services that aren’t used often so you can cancel them and save those costs each month.
3. Invest in yourself by taking finance courses
Investing in yourself and your future financial health means improving your financial literacy. Fortunately, you don’t have to spend a fortune to learn about your money and how to manage it properly to achieve your goals. Start with free digital resources, such as Due’s library of guidebooks and the many available podcasts about money management and investing.
Many digital classes are also available online, some free and some pay what you can, such as the Khan Academy’s course on personal finance. Others may require a larger financial investment up front but can pay even more dividends over time, for example if you are looking for more specialized information on more advanced topics such as investing in real estate or setting up complex trusts.
Finally, don’t ignore the smaller bits of equally valuable information. These can often be found in popular and respected financial literacy and money management newsletters. Look in the archives of publications such as She spends, The Myth of Money substackor one of Money’s many newsletters.
4. Set savings goals and make a plan to achieve them
Many people feel motivated by the thought of buying something they’ve always wanted or by achieving some level of material comfort. If there’s something you’d like to buy, experience, or achieve, and you need to raise enough money to get there, set a savings goal to help you focus on financial health and building your savings. Then make a step-by-step plan on how you will achieve that savings goal. For example, you can set aside a certain percentage of each paycheck each payday in your savings account.
Figuring out exactly how long it would take you to comfortably finance that new purchase or trip will naturally help you stay motivated for that goal. It will also help you feel more comfortable with more in-depth financial planning.
Sometimes purposeful savings planning relieves feelings of anxiety or overwhelm, making the harder work seem a little easier. And when you eventually achieve those goals, you’ll realize how effective financial planning and money management are, which can help you get more into more complex long-term planning.
5. Have an emergency fund to cover unexpected costs
One of the simplest and most effective ways to make financial planning easier is to set aside enough money to cover unexpected bills and expenses. Once you’ve set aside an emergency fund, or have a plan to build one in a few months, you may feel more motivated to take further control over your finances.
An emergency fund also allows you to make money decisions from a position of relative strength, rather than being driven by fear and anxiety. It’s always easier to analyze a complex situation clearly when you’re calm and confident that whatever happens, you’ve got the basics down.
6. Create a retirement plan
Setting up a means to fund your retirement years is probably the most complex aspect of your financial plan. You need to cover some unseen potential circumstances. These may include illness, disability, or an unknown length of time during which you must meet your expenses.
If you don’t currently have a 401(k) or other retirement savings fund, look into one the Roth IRA and other forms of savings and investments to help you build a nest egg for the golden years. As you get closer to retirement age, you’ll want to choose safer (i.e. less risky) investments and savings vehicles to protect yourself from market fluctuations. However, if you are younger, you can probably take a little more risk and potentially earn a bigger reward.
7. Invest money wisely
Creating Real Wealth—generations of wealth-requires you to think more long-term about your finances and take the necessary actions to grow your savings. While paying off big debt should be a priority most of the time, at some point you’ll want to look for smart ways to grow your money.
Start by learning more about the stock market and how protect your investments in a falling market. Consider consulting with a FINRA registered investment professional to get you started. However, don’t fall into the trap of letting an investment advisor make all of your decisions for you. It’s important to stay informed and engaged with your investments every step of the way. Be guided by a trusted professional, but maintain your discretion.
8. Stay disciplined with your spending habits
Perhaps you promise to radically change you financial habits in the new year. Perhaps you decide to gradually get your money in order. Either way, there’s no doubt that improving your financial habits and sticking to a disciplined spending and savings plan will go a long way toward maximizing your wealth.
“Mystery expenses” can really sink your financial plan if you’re not careful. Americans are even losing track, according to a Visa survey $1,000 per year average. Decide to eat more and put an end to eating out and delivery costs. Invest in clothing that will last for years, as opposed to fast fashion that lasts a season or two and goes out of style even faster. (To be Bad for the Environment, too.) Also, consider logging all of your purchases for a month to get a more complete picture of your spending habits. You may be surprised at the results.
9. Consider using a financial planner
At some point, you may wonder if you should hire a professional financial planner to help you solve your money management, savings, and investment needs. You may be hesitant for fear of cost, reliability or the reliability of the advice you receive. Those are not irrational concerns, and you should make sure you thoroughly vet anyone you hire protect your money from unethical or shady advisers.
However, the benefits of working with an experienced, qualified financial planner usually outweigh these concerns and can provide a healthy return on that investment. Work to maximize their usefulness to you and your financial plan communicate well with your financial plannerand don’t hesitate to change something if they don’t align well with your values and goals.
10. Pay off debts as soon as possible
It’s tempting to focus on growing your wealth by investing in high-risk companies and high-reward stocks. However, what might be in your best interest is that you pay off your debt faster. It’s arguably more boring than the exciting world of investing, but it’s potentially more lucrative because it will save you more than you could probably earn in interest.
11. Periodically review your financial plan and make changes
Unfortunately, your financial plan is not a one-time task. Think of it more as a living document that needs to be reviewed and updated from time to time. Keep your financial plan flexible. As your circumstances change, so should your financial plan. Include your life insurance policies and other insurance policies in this periodic check.
Planning helps maintain your financial health for the future
It may seem like an overwhelming prospect before you get started, but creating your first financial plan doesn’t have to be an all-consuming task. Set a target date in the near future to help you stay motivated. Then commit to taking small steps each week to meet that target date. Schedule half an hour or an hour of work every week to get the job done.
By participating in the process, learning more about your financial health and challenges, and implementing solutions to help you overcome those challenges, you can focus on more important aspects of your life and work. And isn’t that the ultimate goal? A good financial plan helps ensure that your finances support your lifestyle and goals, both now and in the future.