If you're like most people, the thought of financial planning probably conjures up images of wealthy people in suits sitting around a boardroom table discussing stocks and bonds. But financial planning isn't just for the rich and famous—it's something that everyone can (and should) do, regardless of their income level.
Think of financial planning as a road map that shows you where you are financially today and where you want to be in the future. It can help you make smart decisions about how to use your money so that you can reach your financial goals, whether that's saving for a rainy day, retirement, or anything in between.
Financial planning doesn't have to be complicated or expensive. In fact, there are a number of simple things you can do to get started, even if you don't have a lot of money. Here are a few basics of financial planning to get you started:
1. Determine your current financial situation.
The first step in financial planning is getting an idea of where you stand financially today. This means taking stock of your assets (such as your savings, investments, and property) and liabilities (such as your debts and bills). You can use our handy tool to calculate your net worth.
2. Figure out your financial goals.
What do you want to achieve financially? Do you want to save up for a down payment on a house? retire early? travel the world? There's no wrong answer here—it all depends on what's important to you. Financial goals can (and should) change over time, so don't be afraid to reassess them every once in a while.
3. Create a budget.
Once you know where you stand financially and what your goals are, it's time to create a budget. A budget is simply a plan for how you're going to spend your money each month. When creating a budget, be sure to include both your fixed expenses (such as rent and groceries) and your variable expenses (such as entertainment and dining out). Our budgeting tool can help you get started.
4. Start saving!
Saving money may not be the most exciting thing in the world, but it's an important part of reaching your financial goals. Automating your savings by setting up direct deposit into a savings account is one of the easiest ways to make sure you're putting away money each month without even thinking about it. You can also try stashing away smaller amounts of money here and there by taking advantage of cash back apps or rounding up purchases to the nearest dollar with apps like Acorns or Digit .It may not seem like much at first, but those small amounts can add up over time!
These are just a few basics when it comes to financial planning—but they're important ones! By taking stock of your finances, figuring out your goals, creating a budget, and automated savings plan, you'll be well on your way to achieving financial success.