Five-step guide to financial planning

Planning for the future is important to all aspects of our lives, particularly when it comes to finances. Financial planning can help you meet your financial goals by effectively managing your income. 

Now is a great time to examine your financial priorities and start saving for them. Financial security isn’t just about finances. A solid personal financial plan can help you work toward your life goals, whether that’s buying a house, saving for your child’s education or starting a business. 

But, it can also reduce financial anxiety and boost your confidence. Here are five steps you can take when financially planning for your future.

1. Review your financial situation and typical expenses frequently — Be honest about your income, savings and spending habits, even if they’re not where you want them to be. Calculate your typical monthly expenses, like rent, groceries and subscriptions. Reviewing paychecks, bills and bank statements can help you get a clear picture. Use a budgeting tool to give you a good idea of your financial outlook for the next few months without the hassle of retracing years of history.
    
2. Set personal financial goals — Document what you want from life as you set your financial goals. Some examples may include homeownership, travel or retirement. Adding a "why" to each goal may keep you motivated. Consider creating "buckets" for each goal to allocate what is needed to reach that goal in your preferred timeframe for each category. Start by focusing more on short-term goals, like an emergency fund, since you can build toward long-term goals over time.
    
3. Create a plan that reflects the present and future — When budgeting, be honest about your lifestyle, values and savings potential. Whether you’re financially comfortable or just getting by, stay realistic about what you can save. Your snapshot of monthly income and expenses should show where your money goes, highlighting fixed costs like rent, and lifestyle expenses like groceries. Adjustments may need to be made to discretionary spending to meet your long-term goals. Also, remember to budget for fun. Depriving yourself entirely can be frustrating, resulting in unplanned spending to boost your mood. 
    
4. Fund your personal goals through saving and investing — A savings account is ideal for short-term goals like travel or an emergency fund, while investing is best for long-term goals like retirement. It’s never too early to invest, even if you’re just starting out. There’s a strategy for every financial situation, and compound growth can help savings growth over time. The sooner you start, even if just $10 per week, the more your investments can compound. An easy way to begin is by using an employer-sponsored retirement plan, like a 401(k), especially if your employer offers a match. Contributions are taken directly from your paycheck before taxes, lowering your taxable income.
    
5. Monitor your progress — It’s important to regularly review your personal financial plan, as your goals and circumstances will change over time. Set an annual reminder and take some time each year, or when your circumstances change, to review your expenses, budget, financial accounts, estate planning documents and short- and long-term goals to make sure they’re up to date and working for you.