When to Start a Financial Plan

by Ryan Yates

Be sure to write your financial plan on something other than a napkin.

There are usually three reactions to the words “Financial Planning” – general fear and trembling, cold sweats about budget procrastination, and satisfaction in your successful strategy.

If your reaction is one of satisfaction, then this post probably isn’t for you. If, however, you fall into the “fear” or “perspiration” group, then read on my friend, read on.

The Difference Between a Budget and a Plan

When I look at the big picture, I tend to place my budget inside the umbrella of my financial plan. I look at a budget as a tool to remind me where my money goes, how much has already been spent, and how much I have left before my bank account dries up.

And if I follow my budget, my account should never go dry – theoretically. On the contrary, it should grow.

A financial plan, on the other hand, is the over-arching fiscal system I have put into place that keeps all of my financial cogs working together. I was able to develop my budget based on criteria within my financial plan.

For Example: My wife and I decided we would give our children 3 Christmas presents each. We decided upon this strategy when discussing our plans about raising kids and spending money (the financial planning part), and we implement this strategy by reflecting the estimated cost in our budget (the budget part).

Our financial plan contains our budget, but it also includes our reasons for wanting to save and get out of debt. It includes our short-term and long-term financial goals. It includes strategically placed reminders as to why we’ve decided to spend less, spend wisely, save more, pay down debt, earn more, and live financially responsible.

Our financial plan includes strategies for saving for retirement and saving for college. It also includes our plans for raising our children in an effort to teach them financial responsibility.

Steps in the Plan

In the most concise way I can describe it, a financial plan is a road map of your life – fiscally speaking. And no map is complete without a few key steps.

  • Evaluation of your current financial situation.
  • Evaluation and expectations of your future financial situation if current elements do not change.
  • Development of short-term and long-term financial goals.
  • Evaluation of what needs to change to meet these goals.
  • Create a budget to set you on the course of reaching your goals.
  • Budget Implementation – your budget will do you no good if you never actually use it.
  • Accountability – your spouse, a family member, a close friend, or a financial advisor could be crucial in keeping you focused on your strategy.
  • Detour instructions in case of an emergency.

The Time is Now

Let’s read this together to avoid any confusion, “Start Your Financial Plan Right This Second.”

It’s never too late or too early to create a strategy that will help you earn more, save more, spend less, and spend wisely. Don’t get caught up in the suspended animation of procrastination. Don’t fill yourself with worry to the point where you can make a decision.

If you’re fearful about financial planning, then start small. Seek out a professional or trusted friend to help you initialte the process.

Whatever you do, start now. Don’t let another day go by without working out your financial life. There’s more than regret at the end of the road when you’ve been driving without a map.

Photo By jonny goldstein

Leave a Comment

{ 3 trackbacks }

Previous post:

Next post: