Financial Plan

Financial Plan

What is financial planning? 

• Financial planning is an ongoing process that will reduce your stress about money, support your current needs and help you build a nest egg for your long-term goals, like retirement. 
• Financial planning is important because it allows you to make the most of your assets, and helps ensure you meet your future goals. 
•  Financial planning isn't just for the wealthy: Creating a roadmap for your financial future is for everyone. 
• You can make a financial plan yourself, or you can get help from a financial planning professional. Due to online services like robo-advisors, getting assistance with financial planning is more affordable and accessible than ever.

Financial Planning Steps : 

1. Start by setting financial goals 

• A good financial plan is guided by your financial goals. 
• If you approach your financial planning from the standpoint of what your money can do for you — whether that's buying a house or helping you retire early — you'll make saving feel more intentional. 
•  Make your financial goals inspirational — what do you want your life to look like in five years? What about in 10 and 20 years? Do you want to own a car, or a house? Are kids in the picture? How do you imagine your life in retirement? 
• You start with goals because they will inspire you to complete the next steps and provide a guiding light as you work to make those aims a reality. 
• Financial goals planner 
• Wondering where to save or invest for your goals? 
• Financial goals planning tool will help guide you toward the right accounts, based on your goal, time horizon and other factors.

2. Track your money, and redirect it toward your goals

• Get a sense of your monthly cash flow — what’s coming in and what’s going out. 
• An accurate picture is key to creating a financial plan, and can reveal ways to direct more to savings or debt pay-down. 
• Seeing where your money goes can help you develop immediate, medium-term and long-term plans. 
• Developing a budget is a typical immediate plan. 
• NerdWallet recommends the 50/30/20 budget principles: 
• Put 50% of your take-home pay toward needs (housing, utilities, transportation and other recurring payments), 
• 30% toward wants (dining out, clothing, entertainment) and 
• 20% toward savings and debt repayment. 
• Reducing credit card or other high-interest debt is a common medium-term plan, and planning for retirement is a typical long-term plan.

3. Make sure emergencies don’t become disasters 

• The bedrock of any financial plan is putting cash away for emergency expenses. 
• You can start small — $500 is enough to cover small emergencies and repairs so that an unexpected bill doesn’t run up credit card debt. Your next goal could be $1,000, then one month’s basic living expenses, and so on. 
• Building credit is another way to shock-proof your budget. Good credit gives you options when you need them, like the ability to get a decent rate on a car loan. It can also boost your budget by getting you cheaper rates on insurance and letting you skip utility deposits.

4. Tackle high-interest debt 

• A crucial step in any financial plan: 
• Pay down “toxic” high-interest debt, such as credit card balances, payday loans, title loans and rent-to-own payments. 
• Interest rates on some of these may be so high that you end up repaying two or three times what you borrowed. 
• If you’re struggling with revolving debt, a debt consolidation loan or debt management plan may help you wrap several expenses into one monthly bill at a lower interest rate.

5. Invest to build your savings 

• Investing sounds like something for rich people or for when you’re established in your career and family life. It’s not. Investing can be as simple as putting money in EPF and as frictionless as opening a brokerage account (many have no minimum to get started).

6. Build a moat to protect and grow your financial well-being 

• With each of these steps, you're building a moat to protect yourself and your family from financial setbacks. 
• As your career progresses, continue to improve your financial moat by: 
•  Increasing contributions to your retirement accounts. 
•  Padding your emergency fund until you have three to six months of essential living expenses. 
•  Using insurance to protect your financial stability, so a car crash or illness doesn’t derail you. 
• Life insurance protects loved ones who depend on your income. Term life insurance, covering 10-year to 30-year periods, is a good fit for most people’s needs.

A financial plan isn’t a static document — it's a tool to track your progress, and one you should adjust as your life evolves. It's helpful to reevaluate your financial plan after major life milestones, like getting married, starting a new job, having a child or losing a loved one.