One of the best things you can do for your finances is to create a financial plan. The right financial plan can provide you with a roadmap to financial freedom. Many view creating a financial plan as a daunting task. However, it doesn’t have to be a big deal. Use the following steps to create your financial plan:
Step 1: Look at Where You Are
Honestly evaluate your current financial situation. Take a look at where you’re at right now. Consider your income, and your expenses. Acknowledge your debt, especially your credit card debt. You can’t move forward unless you know where you are starting from. Be honest, so that you have an accurate view of where you stand.
Step 2: Decide Where You Want to Be
Next, you need to figure out where you want your finances to be. Realize that there are milestones along the way, including getting out of debt, buying a home, building a business or improving your career, and retirement. Know what you want to have happen, and compare your desired outcome to where you are right now.
Step 3: Figure Out How to Reach Where You Want to Go
This is probably one of the hardest steps involved in creating a financial plan. This is where the meat of it takes place. You need to identify specific actions that will help you achieve your long-term financial goals. At this step, you need to decide what is most important to you. You need to determine your priorities, and also recognize the time frames that you are working with. Some of the actions that you might need to take in order to reach your financial goals include:
- Pay down debt: If you have a lot of debt, you will need to create a debt reduction plan as quickly as possible.
- Save for retirement: You will also need to decide how much money you need each month to save for retirement. Once you know this, you can set aside the required amount.
- Create your preferred lifestyle: Get the education or apprenticeship that you need to accomplish what you want, whether it’s a better job, or a business that you start yourself.
Any of the smaller goals you set for yourself will require their own plans. However, it doesn’t need to be complicated. Make a list of the general things that need to happen if you expect to reach your goals. Then break those things down into mini-plans, based on time frame, and how important they are to you.
Step 4: Stick to Your Plan
You do need to stick to your plan, though. While it makes sense to tweak it a little bit as you progress, you want to keep with your financial plan. Do your best to stay on track, and remember that the reward for keeping with it is to end up with a more stable financial situation. Consider how you can creatively incorporate different aspects of your financial life, including credit cards, into your plan.
With a little planning, you can reach financial freedom. But you have to be honest and realistic.
Image source: Rick via Flickr