A financial plan outlines how you should spend your money. It's a financial plan that helps you visualize how you'll achieve your financial objectives. Although your financial advisor may offer you an example of a financial plan, each plan is unique to you. So, how does one make a financial plan? Our personal financial plan example will guide you through the process of creating your own, so you'll know what steps to follow to reach your financial objectives!

What is a financial plan?

A financial plan is a comprehensive overview of your financial situation that is essential to the financial planning process. It contains information about your assets, liabilities, financial goals, and strategies for achieving them. There are no right or wrong answers. Your strategy should be tailored to your specific financial requirements. With that in mind, let's look at a financial plan example.

Example of a financial plan

The following information is often included in a personal financial plan:
  • Age, salary, tax filing status, children, and other personal details
  • Your financial objectives and a broad perspective (assets, debt, etc)
  • A debt-reduction strategy
  • An investment strategy (to build assets)
  • Insurance for individuals
  • An estate strategy
  • Tax planning strategies
You can use this information to make your own financial plan example. Let's take a closer look at each point: Financial goals and big picture overview Without goals, you can't plan. Your financial objectives should include now, the next years, and retirement. What are your present financial assets and liabilities? How would you like to increase the value of your assets? How quickly can you work your way out of debt? You should also consider your work options. How long do you plan to work? Will you reduce your income to one to start a family? Consider retirement next. When do you intend to stop working? Will you retire early or wait till the traditional retirement age? What are your plans for your money? If you're planning to buy a house, a car, or pay for education, you'll need this information in your plan, just like we did in our financial plan example. Your financial plan requires every bit of income and money you'll need to attain your financial objectives.
  • A debt elimination plan

Our example of a financial plan includes a list of all of your debt. Developing a debt reduction strategy is an essential component of your financial planning process. If you have low-interest debt, you can play with the numbers to see where you can save money. Before investing, you should usually pay off high-interest debt. If you have a 0% APR credit card or a card with a rate less than 5%, you may want to keep it and invest your money instead, but that is a personal choice. Ideally, you will be debt-free and free to make other financial decisions in order to meet your financial objectives.
  • An investment plan

Are your current investments sufficient to meet your objectives, or do you need to make adjustments? Is your investment strategy too aggressive or too conservative? A retirement plan should be included in a personal financial plan example. Don't overlook the importance of saving for retirement. Look into your 401K options if you work for someone. You should be able to automate your deposits so that you contribute to your retirement fund on a regular basis. Deferred income reduces your tax liability, so there are advantages to putting money aside for the future. Consider opening an IRA if you do not work for someone else or have more money to save for retirement. There are two choices:

i. Traditional IRA

Traditional IRAs allow you to defer income now and pay taxes only when you withdraw it during retirement.

ii. Roth IRA

You contribute after-tax dollars to a Roth IRA. Contributions and earnings grow tax-free, and you don't pay taxes on withdrawals during retirement. You should also ensure that you have maximized your contributions. If you haven't recently increased your contributions, go over your budget and see how much you can increase them.
  • Personal insurance

Are you over-or under-insured? Do you need to make any changes to ensure your safety? This includes things like life insurance, health insurance, auto insurance, disability insurance, and so on. Examine your current insurance and future requirements. Are you in need of term life insurance? Or would whole life insurance be a better fit for you? Are your auto and home insurance policies adequate? Don't overlook long-term requirements like long-term care insurance and final expenses. Do you have money set aside for final expenses, or do you also require coverage for that? In your personal financial plan example, you should review your insurance to ensure you are properly protected.
  • An Estate Plan

It's also a good idea to decide what you want to leave behind for your beneficiaries too. Are you trying to leave a legacy? Planning for your death isn’t something anyone likes to do, but it’s necessary to ensure your beneficiaries are correct and your assets are protected from probate and taxes. Having an estate plan can help you do this. This plan essentially acts as a directive for what will happen to your assets and who gets what. It can also include medical and legal directives based on your preferences.
  • Income tax strategies

Income tax plays a big role in a personal finance plan. Working out ways to minimize taxes each year by strategizing investments, income, and retirement funds will help keep more money in your pocket. To do this, it's a good idea to work with a reputable tax advisor that can provide the guidance you need since tax laws change often. Important Things to Keep in Mind as you Create your Financial Plan The sooner you create your financial plan, the more likely you are to reach your financial goals. Now that you have an example of a financial plan to follow, here are some key things to keep in mind as you develop your personal financial plan template.

i. Budget your money

It's time to budget your money after you've determined your financial goals. You can't achieve your goals if you don't make plans to work on them. As a result, you'll need to make room in your budget to save for your long-term and short-term goals. This includes setting aside money in a savings account and deferring a portion of your income for retirement. Prioritize your goals so that you save for the most important and immediate goals first and then work on your long-term goals.

ii. Set up a substantial emergency fund

Nothing disrupts a personal finance plan more than an emergency for which you are not financially prepared. Save at least three to six months' worth of expenses in an emergency fund. An emergency fund should only be used if you lose your job, become ill, or are injured and unable to work. It's not a fund to cover you when you overspend or buy something that doesn't fit into your regular budget. Even in the event of an emergency, an emergency fund can help you stay out of debt and on track with your finances. So, set aside money in your budget for unexpected expenses.

iii. Track your progress

Making a budget is one thing, but if you don't stick to it, you won't meet your goals. Tracking your progress is the only way to determine whether you're on track or if you need to make changes. It does not have to be difficult to keep track of your progress. You can use a free app like Mint, your own spreadsheet, or even pen and paper! Use what you're familiar with and will use frequently. Use your personal financial plan template to ensure you stay on track with your goals! If you discover that you are not on track to meet your objectives, look for areas where you can improve.

Leverage this example of a financial plan to achieve your goals

When creating your financial plan, be patient. Looking at a financial plan example may make you feel as if you need all the answers right away, but you don't. Remember that everyone's finances are unique and that it takes time, adjustments, and even some setbacks. That is why it is critical to creating a personal financial plan template that is tailored to your specific financial needs and goals. You'll get on the right track to reaching your financial goals if you track and revisit your financial needs on a regular basis. While it will not happen overnight, with patience and time, you will see the fruits of your labor.

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