3 Simple Steps To Creating A Financial Plan


creating a financial planBudgeting is planning for the best and the worst. It’s what enables you to start accumulating wealth in a meaningful way. It’s what helps you move from living paycheck to paycheck to a life of relative ease and comfort.

A budget is a plan to take every cent that comes into your life, and channel it into pre-planned directions. It’s an important part of fiscal responsibility and personal financial development.

It’s hard enough to get used to following a budget when things are easy. Imagine how hard it will be when things get hard? That’s why you have to start now. Because, rest assured, rough times will come.

You’ll have a medical emergency, be forced to travel out of the blue, your vehicle will break down, or any of a million other strange and terrible events. These trying times hit fast, leaving you in a challenging mental place. You’ve got to have your financial plan prepared for the worst, long before the worst happens.

Here’s how I would recommend you do so.

3 Steps To Creating A Financial Plan That Works

#1. Know What You Value

The biggest downfall of many people is not knowing what they value. They spend money on things that don’t matter and then wonder why they aren’t happy and have no money.

If you take the time to figure out what you value, you will put yourself in better financial shape overnight.

The reason is simple. Once you know what you value, you stop spending money on things that you don’t value. This will allow you to have more money to spend on the things you do value and to save a lot of money as well.

For example, let’s say you value relaxing on the beach. You now know that it makes sense to spend your money on things that will help you to enjoy this value and reduce your spending on areas that don’t help you enjoy this value.

Maybe you stop buying new clothes every few months. Maybe you stop buying a new car every 4 years. It might sounds crazy but it’s incredible how well this works.

I used to spend money like it was going out of style. In fact, I ended up in tens of thousands of dollars in debt because I thought buying things made me happy. But it didn’t. It just made me depressed.

Once I figured out what I value, I stopped spending money on things that didn’t matter any longer. I suddenly was able to save 50% of my income each month. That has put me on a path towards early retirement, which is one of the things I value.

#2. Have An Emergency Fund In Place

You should have money set aside in an emergency fund that will carry you through 3-6 months of normal living expenses, should you lose your job or be unable to work. This is something that’s going to be challenging to save up.

But I can’t describe to you the peace of mind that comes from having this safety net sitting between you and the cold, cruel world. Saving up for an emergency fund also puts you in fighting shape for saving in general.

Once you’ve got your emergency fund in place, you can start to save for things in the here and now! Things like a house, investing for your future, improvements to your lifestyle, etc.

How do you get started with saving money for your emergency fund? You should be taking some money from each paycheck and putting it into a savings account. Put as much as you can. Even if this means you save $20, it is better than nothing.

In some cases, you might want to save more money, but you just don’t know how. Here are the 2 simplest ways I save money.

  • Qapital. This is a free app that rounds up your purchases. Spend $14.95 and Qapital will round up that purchase to $15. The $0.05 gets automatically transferred from your checking account to your Qapital savings account. It doesn’t sound like much, but it adds up quickly. You can learn more here.
  • Trim. Another free service I love. They will help you to cancel subscriptions you no longer use and will help reduce your bills as well. They even negotiate your cable bill! When you cut out some expenses, you can save more money every month. You can learn more here.

Of course, you should never underestimate the power of making extra money too. Anything extra you can make can be put towards your emergency fund.

The easiest way to start making more money is by taking surveys with Survey Junkie. You should also read this post I wrote about other ways to make money.

#3. Have A Solid Team

When you are trying to build wealth, you cannot go alone. You need a team around you to support your decisions and to help you make the best decisions as well.

A typical team would include the following:

  • Financial planner
  • Accountant
  • Insurance agent
  • Lawyer

Depending on where you are on the journey and your level of expertise, you can substitute out one member of this team.

For instance, I went to school for finance and worked in the financial services industry for close to 15 years. As a result, I handle my investments. I don’t need to have someone else look over how I invest my money.

But, I do need an accountant, insurance agent and a lawyer. They help me to pay the least amount in taxes and protect the wealth that I’ve accumulated.

While they do cost me money, the value I get from them in terms of growing and protecting my wealth is more than the fees I do pay them.

Plus with them on my side, I can sleep at night knowing that if something would happen, I am in great financial shape.

Final Thots

There are many ways to prepare for the worst, but following these steps to creating a financial plan will weather any storm. I know that many times we don’t think about the bad things life can throw at us or how these things can quickly destroy all that we worked so hard to accumulate.

But life happens. The better prepared you are, the less stress money will be during these times. This will allow you to focus more of your energy on the things that really matter. Stop procrastinating and start to work on creating a financial plan. Your future self will thank you.

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