How to Create a Plan to Pursue Your Financial Goals

Many people struggle with developing concrete plans to pursue their financial goals. Whether it’s paying off debt, building an emergency fund, or saving for retirement, having a clear roadmap is crucial to help ensure that you stay on track towards your objectives. Creating a plan to help achieve your financial goals can seem daunting, but with the right approach and mindset, and with a little help, it can be a straightforward process.

What is financial planning?

Financial planning, generally speaking, is the process of setting long and short-term financial goals through the effective management of one’s financial resources. This includes developing a comprehensive understanding of one’s current financial situation, setting financial goals, and creating a plan to help achieve those goals.

Financial planning typically involves analyzing assets, liabilities, income, and expenses to determine how to allocate financial resources appropriately for your situation. This may include creating a budget, investing in stocks or other financial instruments, and planning for retirement or other long-term financial goals.

Financial planning can help individuals and families achieve financial independence, manage debt, save for the future, and make informed decisions about their financial well-being. It can also help businesses and organizations manage their finances more effectively and make strategic investments for growth and success. And, of course, this process can be made much easier with the help of a financial advisor.

Step 1: assess where you are now

The first step in the financial planning process is to clearly assess your current financial picture. As we said before, the four main areas of focus for this assessment are assets, liabilities, income, and expenses.

Assets

In financial terms, assets are anything that can generate future economic benefit or provide value to its owner. Some examples of assets might include physical property such as real estate, vehicles, or recreational vehicles, as well as financial assets such as stocks, bonds, and other securities. Depending on the circumstances, assets may also include intellectual property, patents, trademarks, or copyrights.

Liabilities

Liabilities are things that an individual owes to someone else or to an entity. This often includes various forms of debt, like mortgages, credit card debt, or student loan debt, but the term can be applied more broadly as well.

As Investopedia puts it, “Generally, liability refers to the state of being responsible for something, and this term can refer to any money or service owed to another party. Tax liability, for example, can refer to the property taxes that a homeowner owes to the municipal government or the income tax he owes to the federal government.”

Income

Income, Rutgers University explains, is “A source of money with which to save and pay household expenses. Common sources of income include salary from a job, self-employment earnings, alimony and child support payments, gifts, tax refunds, and public assistance.”

Expenses

Expenses are the places where household income is spent. This would include money spent providing for basic needs like food and housing, and also discretionary spending like travel or entertainment.

Step 2: Identify and define your financial goals

Once you have a clear picture of where you are, the next step is to determine where you are going, financially speaking. Here are a few examples of financial goals that people may consider as a part of their financial plan.

Short-term financial goals

In a financial plan, you may have some short-term financial goals. For example, you may set a goal to pay off credit card debt in order to free up funds for investments or savings. You may decide to save money for a purchase or for travel. And it’s always wise to have an emergency savings account to cover unexpected financial needs.

Long-term financial goals

Long-term goals are also part of a well-formulated financial plan. You will want to determine, for example, if you wish to save money to fund your children’s college education. You may wish to invest in real estate or develop a broad and diverse investment portfolio that includes stocks, bonds, and more. And you will want to determine if retirement is a goal for you, and if so, at what age you wish to retire.

Step 3: Analyze and create a plan

With these elements in place, it’s time to begin financial planning. As we intimated earlier, this process can be rather complex. How can you take your current assets and income, balanced against your expenses and liabilities, and achieve your financial goals? We recommend the help of a professional fiduciary financial advisor.
There are many aspects of financial planning that an advisor can help with, from retirement planning to investment management.

What are the important considerations to keep in mind when developing a financial plan?

There are a number of things that you (and your financial advisor) will want to keep in mind as you undertake financial planning. These include:

• Age and the milestones that come with it
• Income needs
• Assets
• Liabilities
• Taxes
• Risk tolerance
• Health

With all of these variables, it’s vital to have a personalized financial plan that you thoroughly understand. It’s important to consider that adjustments to your financial plan could be necessary as life goes on. You may experience a change in income in one or both spouses. You might lose work, change homes, move states, or have a child in the time between the creation of your financial plan and the time you get to your financial goals. 

Financial planning is often a process of constant adjustment and constant monitoring, of changing factors in your own life, and in the market as a whole. A financial advisor can help you to cut through the noise.
Schedule a complimentary assessment to see how Dechtman Wealth Management can help you with your financial planning.