Are you looking for ways to get started with financial planning? If yes, then read on. This article provides 8 simple steps to get started with financial plans.

Financial planning is important because it helps us plan our finances ahead of time. By having a good understanding of where we stand financially, we can take better decisions regarding our future.

I am not a financial advisor so for any investment advice, please contact registered financial advisers. The content in my blog comes from my own experience and is not to be taken as financial advice. Here are some key points to consider before starting your financial planning journey.

What is Financial Planning?

Financial planning is an ongoing process. You don't just start one day and say "I'm done." Instead, it's something you do over time. And there are many different ways to go about creating a financial plan.

A good financial planner will give advice based on your unique circumstances. He or she will help you understand how much money you'll need to retire, how much debt you're comfortable carrying, and what investments make sense for you.

That's why it's important to find someone who understands your needs and wants to help you achieve your goals.

Financial planning in 7 steps

A financial plan is one of the most important things you can do to achieve your financial goals. But what are those goals? And how does a financial plan work? In this article we’ll discuss seven steps to creating a solid financial plan.

1. Constantly Study

You should be studying your personal finances every single month. It doesn't matter if you have $100 or $10 million in assets; you should always be monitoring your spending habits and making sure that you're not taking on more than you can afford.

2. Create a Budget

A budget is a written statement that outlines how much money you make and spend every month. You might think it sounds boring, but it’s actually one of the most important things you can do for yourself financially. A good budget helps you understand where your money goes each month, so you know exactly how much you’re spending. This way, you can decide whether you want to save more or spend less next month.

There are many different types of budgets, including monthly, weekly, quarterly, yearly and even lifetime budgets. If you’ve got no idea where to start, here are six easy steps to help you create a solid financial plan.

3. Get your employer match

In most cases your employer will offer you a contribution match to your pension. This means they’ll contribute a certain percentage of your salary towards your retirement fund. For example, if you earn £25,000 per year, you may decide to contribute 2% and your employer might match your 2% or even double the 2% to 4%.

The terms really depend on your employer so make sure to read your contract and understand what your employer can give you.

4. Have an Emergency Fund

The average household in UK citizen has less than £1,000 saved up for emergencies. This isn't enough money to cover unexpected costs like car repairs, or job loss. If something happens to you or someone close to you, it could put your family into financial trouble. An emergency fund gives you some extra cash to pay for things that come up unexpectedly. You might use it to make sure your kids are safe while you're away, pay off overdue bills, or replace broken items.

Creating an emergency fund and keeping it for ONLY emergencies... so no takeaway night... is crucial for your own financial stability. If you don't have an emergency fund then one surprise payment can make or break your financial circumstances.

5. Tackle High-Interest Debt First

Debt consolidation loans allow you to repay several different types of debts at once. You might use a debt consolidation loan to pay off credit card balances, student loans, medical bills, auto loans and even mortgages. This option allows you to reduce the amount owed on each account while still paying it off over time.

A debt management plan lets you combine multiple monthly payments into one large payment. With a debt management plan, you make one single payment per month rather than making separate payments for each bill. If you have a lot of interest charges, this could save you money.

6. Invest to build your net worth

Investing doesn't mean you need to be rich to start saving. In fact, it doesn't even require you to have much money. You just need to set up some goals and make sure you're investing towards those goals.

There are many different types of investments and each one has its pros and cons. Some people prefer stocks while others love bonds. If you want to diversify your portfolio, consider putting money into mutual funds or ETFs. And if you're looking for an easy way to invest, you can pay for financial advisors to give you proper advice.

7. Protect and grow your financial well-being

The most important thing you can do to ensure a secure future is to save money. 

Contributing to your retirement accounts is one of the best things you can do for yourself financially. Your employer might match some portion of your contribution up to a certain amount each year. If you don't know whether you are eligible for matching funds, ask your human resources department.

If your wanting to take it a step further then investing yourself to potentially make that retirement date much closer is crucial.

8. Make Decisions Based on Logic

Financial decisions should be based on logic and not emotion. For example, if you're trying to decide between buying a new TV or getting a raise, think about what will help you achieve your long term goals. Will the increase in income help you reach your goal? Or will the new TV help you relax more often?

It's important to weigh out all of your options before making any big purchases .

Summary

An emergency fund is essential for your personal finances. It provides you with a cushion when times get tough. Having an emergency fund also helps you avoid taking on too much debt.

You should always try to tackle high-interest debt first. Once you've paid off your highest interest rate debt, you'll have more money available to work on other areas of your budget. Investing is another great way to build wealth.

I am not a financial advisor and anything I say in my blog is not to be taken as financial advice. For any financial advice please contact a financial professional. My blog is based on my own opinions, research and understanding of the financial markets.

I hope you have found this blog post helpful. If you did enjoy the blog then consider leaving feedback below or sharing the post on social media. I regularly post content on the stock market, personal finance, and side hustles/entrepreneurship so if you would like to read more then consider subscribing to my blog through my website (www.portfolio-hub.co.uk) for free or follow me on Medium.com.

Thanks for reading

FAQ

What is Financial Planning?

Financial planning is a professional service for individuals, their families, and businesses, who need objective assistance in organising their financial affairs to achieve their financial and lifestyle objectives more readily.

Source: cisi.org

Why is financial planning important?

Financial planning can help you feel more confident about navigating bumps in the road — like, say, a recession or historic inflation. According to Charles Schwab's 2021 Modern Wealth Survey, Americans who have a written financial plan maintain healthier saving and investing habits, with a higher percentage of those with a plan having a three-month emergency fund compared with those without a plan.

Source: nerdwallet.com

Why choose a chartered financial planner?

Quite simply, it's about dealing with a professional. Chartered financial planners have made a joint public commitment with the CII to deliver the highest standards of professionalism, then placed a public badge on that commitment.

Source: cii.co.uk