Financial Planning in 2021: Are you ready to take the First Step?

Financial planning is building a roadmap of your financial future. Most people have an idea of what a financial plan is, however they might need help with the planning. If you want to save, for example, education and retirement, financial planning is where I would start. You might not feel confident about your finances but that’s where I come in.

I’m going to tell you how to create your personal financial plan step by step. The first step is creating your financial goals. Then you go through your cash flow next analyze your savings and work out your retirement. The most important thing to remember about financial planning is that it’s an ongoing process. 

You will always need to review and update. This process might be similar to you such as creating a budget. The benefit of financial planning is that it will reduce your stress and also worry about money. Planning to cut down debt? Savings and debt payoff are part of the financial plan as well.

Even though it sounds hard, you can do all this financial planning yourself. You don’t need any money to plan the financial future. In fact, you can do it yourself. Do you want to know how? Great, let’s continue. In this article, you are going to create a financial plan that will support your current needs and ensure that you will meet your goals. These could be goals that you have today and also years down the line for retirement. 

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Financial Planning the Step by Step Guide

a stack of five dollar bills

Start setting Financial Goals

The start of a good financial plan and for any plan begins with goals. Making financial goals helps plan for your security. Financial goals should be planned annually and also reviewed as if you are your own business. Always update them and review what progress you made from the year before.

What are some financial goals?

There are short-term and long-term goals. Short-term goals could be creating an emergency fund. A long-term goal can be saving for retirement. Make a list of short-term goals and long-term goals. Let this be the first page of your plan.

Some examples of short-term financial goals

  • Establishing a budget
  • Create an Emergency fund
  • Pay off credit cards
  • Getting life insurance

Examples of Long-term financial goals

  • Paying off Student loans
  • Become debt-free
  • Buying your first home
  • Save enough money to retire

Do you need help goal planning?

I’ve written a lot of articles about goal planning. It all begins with an idea and then you have to break it down into manageable steps. One of the best ways to plan any goal is by using the Smart Method. Use each letter to strategically make any goal actionable.

Articles related to Goal Planning

woman sitting on a couch looking through bank statements

Find out what you are Worth

Create a net worth statement to find out what you are worth. When you see your actual net worth it helps clarify your finances. Start by adding up all your assets then subtract the value of your liabilities. Sound easy enough? Well, this can be the scary part. You might just be worried about the actual end result but this will propel you to make better decisions.

Make a list and go through all of your assets. Your assets would be any cash, accounts balance, personal assets, or investments. Investments can include any retirement accounts, stocks, and bonds. Personal assets would include the value of the current properties you own. For example your jewelry, clothing, and vehicles.

Now let’s collect your liabilities. Liabilities would be anything that is due currently or within a year. Some examples of liabilities are credit card debt, taxes owed, mortgage, student and vehicle loans. Find out your net worth calculations by taking your assets and minus the liabilities.

Assets – Liabilities = Net Worth

a notepad with budget written on it and cash money on top

Create a Budget

Once you’ve done the scary part now it’s time to combine your plan with your budget. A budget is allocating the income you receive after taxes to fulfill your monthly expenses. In order to succeed in your financial planning, you need to have a budget. Your budget should align with the goals you have mapped out. If your goal is to save for an emergency fund, this should be added to your budget.

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Track your Spending

Tracking your spending is something you should do periodically along with your budget. Reviewing your cash flow is also important for financial planning. Seeing the comings and goings of your money while sticking with your plan. You can easily do this with no loss of time by downloading a budgeting app. Most budgeting apps track your spending for you. Goodbudget is a great budgeting app for beginners. You can separate your income into sections or what they would call envelopes. After you set your budget, you can also track your spending throughout the month. In this instance, you can see with categories of your budget you are spending the most.

Save for Retirement

Retirement might be one of your long goals. However, it’s always good to start early. First, you have to calculate how much money you’ll need. The money you save will be a major part of your income. Some employers offer a matching policy. Find out what options you have at your current employment. If you asking yourself how much money you need to save, there’s also a tool you can use. Nerdwallet has a retirement calculator you can use to determine how much money you will need. You can also review my chart below which is a retirement guide by age.

Manage your Debt

Repaying your debt will significantly lower your liabilities. Secondly, it will make you feel more relieved to rid yourself of debt. After completing your net worth review you should have an idea of the liabilities. The first thing you want to do is always pay on time. Your pay frequency makes up 30% of your actual credit score. Know your limits and pay more than the minimum.

When you are first starting out all you can possibly afford is the minimum. After you’ve increased you’ve saved you can also add more to this goal. Avoid increasing your debt by building up your emergency fund. Most people run towards credit to pay for something they can’t afford. Manage your expenses within your budget. And only use the emergency fund for emergencies. When an emergency arises, use the money you had already put aside.

Start Investing

Investing is one of the ways to create wealth over time. Before you put money into any investments is recommended to have 3 to 6 months of expenses saved in an emergency fund. If you are just getting your feet wet into investing there are some things you should know. First figure how much time you want to spend investing. Then of course how much money do you want to invest. Make sure you have a basic understanding of stocks, bonds, index funds, and ETFs. Spend time doing research on different styles of investing and how to analyze stocks before you invest.

Pick out a Life Insurance Policy

When you start the search for an insurance company begins with finding out the requirements. Make sure when discussing your plan to ask about all the features and benefits. Since picking insurance is part of your financial plan make sure you can afford it. You can choose either a Term life or Whole life insurance. Term life lasts typically 10, 20, or 30 years, and Whole life adds value over the duration of your lifetime. One thing to consider, in term life coverage if you outlive your policy the money you have put in stays with the insurance company.

Protect and Grow your Income

After you’ve earned a steady income for a while, it’s in your best interest to protect it. Make sure your taxes are always prepared by an accredited professional. Always keep records of all your financial statements. Once you focus on starting to grow your income you can of course start earning more money. After investments, allocate any large sums of money in a high-interest account. Continue to look for more ways to increase your income. Earning more money like in side-hustles can be another investment you are making in yourself.


It’s never too late to create your own financial plan. Remember financial planning is not only if you have a lot of money. After you’ve done the first couple of steps you can continue the rest. Always revisit your plan every year. Revise your goals and stick to the plan.

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