What is Financial Planning?
Chances are you have at least a few financial goals, whether you hope to buy a house, save up for retirement, or travel more often. With a solid financial plan in place, you can keep track of your finances and eventually meet these goals. Let’s dive deeper into what financial planning is and how it works.
What is a financial plan?
A financial plan is a detailed overview of your financial goals and the steps that will allow you to achieve them. It’s essentially a roadmap that outlines the following:
- Your current financial situation.
- Your short-term and long-term goals.
- Various strategies that will allow you to succeed with your finances.
Financial planning and analysis can make it easier for you to manage your money wisely and reach your long-term goals.
How to create a financial plan
Here’s a brief overview of what you can expect from the financial planning process.
Set your financial goals
Write down what you hope to accomplish financially in the future. You may want to build up an emergency fund, save up enough money to buy a house, retire by a certain age, or pay for your child’s college education. Setting your financial goals can motivate you to stick to your financial plan once you build it.
Track your monthly cash flow
Your monthly cash flow is the amount of money that comes in and out of your bank account every month. Keep track of what you earn and what you spend for a few months. Tracking your monthly cash flow can help you figure out whether you need to earn more, make changes to your spending habits, or both in order to reach your financial goals.
Build a budget
A budget is a plan for how you’ll spend your money. If you create a realistic budget and follow it, you’ll have enough cash for your needs and wants. Some common types of budgets you may want to consider include:
- Pay yourself first: Pay yourself first can be a good option if saving money is your top priority. Calculate how much you earn after taxes and subtract your expenses. The figure you come up with can give you an idea of how much you can afford to pay yourself every month.
- 50/30/20: The 50/30/20 budget forces you to use your money on three categories: needs, wants, and savings goals. With this budgeting method, you can allocate 50% of your after-tax income to your needs, 30% to your wants, and 20% to your savings goals.
Set up a plan to meet your goals
Figure out what you have to do to meet your goals. You may need to save a certain amount of money each month, or you might have to cut your expenses and spending so you can allocate more toward your short-term or long-term goals. Your financial plan will depend on your particular goals and current financial situation.
Put your plan in use to build up your savings
Whatever your plan is, savings will likely be a significant part of it. After all, you won’t be able to meet your goals if you overspend and don’t save any money. The more you save, the more financially comfortable you’ll feel and the more likely you’ll achieve your goals.
Revisit the plan as needed
One of the greatest benefits of real-life financial planning is that it’s ever-evolving. Your financial plan is not set in stone, and will likely change as your income, expenses, and goals change. You can periodically revisit your plan and alter it as necessary.
Get an Advance America loan to meet your financial goals
If you can’t wait to meet a financial goal and need cash to cover it now, Advance America can help. We offer payday loans, installment loans, and other loan products that come with fast approvals. You can get approved for a loan from us even if you don’t have great credit, and may receive your funds the same day you apply. Whether you need to buy a car or pay for your child’s education, an Advance America loan can help you meet your financial goal right away.