These days, most people I know don’t have a financial plan. We spend a lot of time planning for other aspects of our lives, such as our careers, marriages and having kids, but many of us fail to build a plan to achieve our financial goals.
If you would like to stop wondering about whether you’ll ever realize your financial goals, and build a plan to actually reach them, I can help. Read on and I’ll not only show you how to build a proper financial plan, I’ll take you through each step, complete with worksheets and a blank financial plan template that you can fill in at the end. Follow my simple instructions and in no time at all, you’ll have the peace of mind that comes with a professional-quality personal financial plan—without having to pay a financial planner a dime.
1. Talk to your spouse
Most couples never talk to each other about their financial goals. If you’re in a relationship, before you roll up your sleeves and dig into the numbers, talk to your spouse about what you want to accomplish. “Have a brief conversation about goals, values, and what kind of lifestyle you want,” says Karin Mizgala, chief executive officer of Money Coaches Canada, a national network of fee-only financial experts based in Vancouver. “That’s key to a good start.”
2. Figure out where you’re at
Before you start worrying about where you want to go, you first have to figure out where you are now. In this step you’ll create a net worth statement, which is essentially an honest measure of your current wealth. You do this by tallying up the value of what you own (your assets) and what you owe (your liabilities). When you subtract your liabilities from your assets, you get a number that represents your net worth. Your net worth statement is an important tool that charts your financial progress over the years. For instance, if your net worth is going down, you’re eroding your wealth and making it harder to achieve your goals. If it’s increasing, you’re on your way to getting richer and achieving your financial goals.
3. Track your spending
The key to building a strong financial plan for the future is to understand how much you spend and save right now. This is called tracking your cash flow, and it can give you a sense of control and confidence that makes it easier to make financial changes in your life.