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5 Steps to Developing a Financial Plan that Works For Your Life

Many people that I meet know that a savings and spending plan that intentionally, authentically, and proactively manages their money is in their best interest.

Yet, somehow it doesn’t get created and they’re left living a life where they’re still not quite sure where the money is going.

There are several reasons for why people don’t design a plan: 1) they’re not ready yet to change how they’re using their money; 2) they feel as if designing a plan will restrict them (when the opposite is generally true and it frees them to know they’re using their money to support their dreams); and 3) they’re not sure exactly how to design a new plan.

Well, if you happen to fall into the category of “I’m ready to do this and I just need to know how to do it,” today is your lucky day!

Here are 5 steps to developing a new savings and spending plan that works for your life:

  1. Set goals – While most of designing a new spending and savings plan has to do with looking at numbers, this step is a critical first step to take to ensure that any new plan allocates how money is used in a way that aligns with whatever matters to you. The Jones’ next door will have different dreams than you do, so understanding what you’re up to in your life and where you want to go will be an important step to support you in aligning how you use money as a tool in your life. Determine what your short-term (1-3 years), medium-term (3-10 years) and long-term goals (10+ years) are and use these goals as a guideline to mapping your money outflow.
  2. Use financial history – Understanding how you’re using money right now in your life is the next step, and looking at how you’ve used your money for the last 3 months is what I typically recommend. It’s a decent enough timeframe to give you a solid idea of where most of your money is going, and whether there are areas that you’re spending money in that you’d like to focus on reducing your spending in the future.
  3. Develop a new plan – Once you’ve seen where you’ve been spending your money in the past, you can decide whether to continue spending in the same way or if you’d like to redistribute how you’re using your resources. You can review your current bills to see if there’s any way to reduce your expenses, you can look at your debt to determine a strategy to pay it down, and you can intentionally begin to save as well.
  4. Plan weekly cash flow – A new plan is great, and often comes in the format of “Income – Expenses.” And while this is helpful, I often find when working with clients that it’s even more helpful to map out each month how money will be spent on a week-by-week basis. This allows you to be intentional and strategic with how you’re using your income to pay your bills and live your life (i.e. groceries, entertainment, gas, etc.)
  5. Measure, monitor and adjust – Developing a new plan is only the beginning, however, since measuring against your plan and adjusting as necessary is a critical financial routine to have in place. Tracking actual spending against the plan that you designed is important, so that you can either adjust your spending to more closely approximate your original plan or you can adjust your plan to reflect the new spending. Life happens, and things are always changing – having a plan in place that reflects your current reality will result in you building financial health more quickly!

These steps are generally best done in the order noted, and can take some time to complete depending on how dedicated you are to working through them. In the end, however, you’ll have the peace of mind to know where your money is going and that you’re using it to support what you want in your life, and suddenly financial stress goes away and you begin to enjoy life.

So, is it time for you to take the first step to financially fuel the life of your dreams? There’s no better time than the present to get started!!!

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