An easy five-step guide to building a financial plan
By WP BrandStudio
Planning for the future can be daunting. Get the ball rolling by mapping out your personal goals for tomorrow, next year and decades from now.
Setting financial goals can be one of the keys to a happy and successful life over the long term. It’s always helpful to have a clear idea of what you’re saving your hard-earned money for—and how to make it work for you.
We’ve outlined a five-step plan to help you set and make progress toward your financial goals. Use this financial goals worksheet provided by Principal® as you work through each step.
Step 1. Think about what you want your money to do for you.
Goals help guide your plan. They don’t have to be set in stone. In fact, you’ll revise them throughout your life. But you need to start somewhere.
Everybody wants to grow their assets, of course—but how much, how fast and for what reasons? That varies from person to person.
The key questions to answer are: What kind of life do you want now and what kind of life do you want later? Here are some examples.
Basic life and money goals:
- Buy a home. Or buy a different home if you already have one.
- Remodel or repair your house. Examples: A new roof, finishing your basement, updating your kitchen.
- Pay down debt, such as loans and credit cards.
- Buy a car.
- Build an emergency fund.
- Pay off student loans faster.
- Pursue hobbies and interests. Take a trip overseas every three years or become a season-ticketholder for your favorite team.
- Donate annually to a favorite charity.
- Start a new business or expand a current one.
Family-related financial goals:
- Get married. (Rings, honeymoon, flowers—it all adds up.)
- Plan to have children. Think daycare, activities/sports, braces and summer camp.
- Help kids with college expenses.
- Leave the workforce to raise a family, care for aging parents or go back to school.
- Help adult children with expenses, like paying for a wedding or a down payment on a house.
- Leave an inheritance for your loved ones.
Retirement-related goals:
- Retire from working full-time. (Or work part-time or retire early.)
- Move somewhere that has a lower cost of living, or where it’s warmer or to be closer to family.
- Pay off your mortgage before you retire.
Step 2. Categorize each goal as short-, mid- or long-term.
Use this as your guide to help you complete your financial goals worksheet:
- Short-term goals: Six months to five years.
- Mid-term goals: Five to 10 years.
- Long-term goals: More than 10 years
Step 3. Set a target date for each one.
Being specific helps, even if you adjust the date over time. Let’s say you have a child headed to college in 2030—that gives you a target date for your college savings goal. Want to take a cruise for your 10th wedding anniversary? You know what timeframe you’re working toward. Add target dates to your worksheet.
Step 4. Prioritize each financial goal: Critical, need or want.
It helps to prioritize, so if push comes to shove, you know what to fund first. Label each goal on your worksheet: Critical, need or want. Let’s say you have a short-term goal to build up your emergency fund, and it’s “critical.” But another short-term goal is to trade your car, which is running just fine; it’s a “want.” If funds become tight one month, you know where to put your money.
Step 5. Know how much you have versus what you still need to save.
Do you have money in a 401(k), 403(b) or IRA? If so, log those numbers on your worksheet toward a retirement-related goal. Note: Some goals may not have current savings. That’s okay. You have to start somewhere.
If you plan to buy a home in two years, and you need $15,000 more for a down payment, divide that by 24 months. Then you know to save $625 more per month toward that goal.
Organizing your finances for the long-term future may seem like a lot to tackle, but remember you don’t have to do it all at once. Just take it step by step, and before you know it, you’ll have a clear path to help guide you through the years ahead.
This content is paid for by Principal Financial Group® and published by WP BrandStudio. The Washington Post newsroom was not involved in the creation of this content. Learn more about WP BrandStudio.
