Create a unique-to-you, start-to-finish plan for all your money goals with tools and resources to help you succeed.
3 min read |
When it comes to life's biggest moments, you probably had a plan. Your wedding, for example, followed a timeline, a budget—even if you busted it with that last-minute table for extended family—and involved compromise and conversation. Smart financial planning follows the same logic.
Our how-to articles (linked below) can help. They take you step-by-step through what you need to know to create a personal financial plan and help get your money in order. From the groceries you need, to the retirement you want, and the car repair bill that’s looming, these ideas help you balance long-term dreams with short-term wants, plus those unexpected events that happen along the way.
In nine steps, you have a nice framework you can build on and adjust throughout your life.
It’s OK if you’ve started on some of these tasks. It’s also OK if you haven’t. Just start with one and keep going. (Or tackle the whole thing on a long, rainy weekend with a big pot of coffee and the dog at your feet.)
It’s good to have a clear idea of why you’re saving your hard-earned money. Think it through with a five-step guide to setting yearly financial goals (worksheet included).
2. Make a budget.
Instead of thinking of a budget as way to restrict your spending, use it as a tool to organize your monthly cash flow to help you pay yourself first (savings/investing)—and still have room for the fun stuff. Learn how to create a budget that works for you—not against you. (Downloadable budgeting sheet included.)
3. Plan for taxes.
It can go a long way toward helping you keep more of your money. Explore ways to save on your taxes next year, using our tax planning worksheet to think through potential income tax credits and deductions.
4. Build an emergency fund.
All the planning in the world won’t help if life throws you a curveball and you’re not prepared financially. That’s where emergency savings comes in handy. Our guide to building an emergency fund includes to a calculator to help you figure out how much you need to save and teaches you how to maintain it over time.
5. Manage debt.
Understanding and managing debt is a key part of creating a financial plan. Learn how to pay off the debt you owe now and build a long-term debt-management strategy (worksheet and calculator included).
Life can change in an instant. People with a good financial plan hope for the best, but plan for the unexpected. Insurance helps with that. Learn the basics of life and disability insurance (and use our disability income calculator to assess your needs).
7. Plan for retirement.
Even if it’s a long way off, think about what you want your money to do for you when you retire, and create a retirement plan to help make it happen.
8. Invest beyond your 401(k).
To reach your mid- and long-term goals, take your savings strategy and put an engine behind it. That’s what investing can do. Get started in three steps.
9. Create an estate plan.
You don’t have to be wealthy, old, married, or a parent to need an estate plan, which also lays out who makes financial and health care decisions for you if you can’t make them yourself. Learn the basics of estate planning and options for creating one.
Finished? Here’s when to review your financial plan.
Take a fresh look at least once a year or after a big life change, such as:
Significant change in income
Job change
Change in family dynamics like having a baby or adopting, getting married, divorced, or losing a spouse/partner
Selling or buying a home
Inheritance
Unexpected debt
Change in financial goals
Tip: Around age 50, you may want to consider long-term care insurance and expand your financial plan to include income in retirement.
What’s next?
Log in to your Principal account to see how you’re doing. Don’t have an employer-sponsored retirement account or want to save even more in addition to a 401(k)? We can help you set up your own IRA or Roth IRA. Ready to continue building your financial foundation?
The Bottom Line. Anyone can manage their own assets, but that doesn't mean you should. Most people will benefit from the knowledge and experience of a professional financial advisor, especially if they have a substantial amount of assets.
The financial plan is used to project your revenues and expenses for the coming months. It allows you to plan for lower cash flows, identify your financing needs and determine the best time to get your projects off the ground.
To take control of your money and become wealthy, follow personal finance rules like the Rule of 72 for estimating investment doubling time, age-based asset allocation, and the 50-30-20 budgeting rule. Personal finance has to do with the way you handle your money.
A financial plan documents an individual's short- and long-term financial goals and includes a strategy to achieve them. The plan should be comprehensive and highly customized. It should reflect an individual's personal and family financial needs, investment risk tolerance, and plan for saving and investing.
The 10% rule is a savings tip that suggests you set aside 10% of your gross monthly income for retirement or emergencies. If you still need to start a savings account, this is a great way to build up your savings. You should create a monthly budget before starting your savings journey.
Some common goals include paying off credit card debt or student loan debt, saving for an emergency fund, saving for a downpayment for housing, and building a stock investment portfolio. In this step, one may consider future changes to their personal situations that will affect their financial outlook.
Introduction: My name is Kelle Weber, I am a magnificent, enchanting, fair, joyous, light, determined, joyous person who loves writing and wants to share my knowledge and understanding with you.
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