How to make a financial plan
Financial plan for business or retirement

8 Steps To Build A Successful Financial Plan | Complete Roadmap

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  • Post last modified:May 2, 2022

Watching your savings dwindle makes you tired, right? You’re not alone. We all experience financial troubles at various points in our lives.

However, this situation cannot last forever. What we need here is the right Successful Financial Plan.

Designing a financial strategy for a business can be challenging. It entails a certain amount of ingenuity, persistence, and reliable information.

An effective financial plan is the only best way to solve your financial problems whether you need a financial plan for your retirement or your business.

“Do you know that 13% of Americans aged 65 and older had no funds set aside for retirement as of January 2020”

In this article, we’ll talk about what a financial plan is, why you should have one, and what is the most effective way to create one for your retirement or business.

We have outlined a full road map for you to follow. Stay with us and keep reading to get the most out of this article.

An overview of a financial plan

In the most simplified way, it helps you reach your goals by determining how to get your money to where it needs to be.

You can use it to track your finances, earnings, and expenditures. An approach sure to relieve financial stress, while giving you the support you need.

Having a financial plan is critical to maximizing your assets and ensuring your future success.

Although, the practice is not limited to the wealthy. It helps anyone clearly see their existing financial situation and develop a plan to improve it.

If you are unsure how to do it, there is always the option of hiring experts.

The core purpose of a financial plan

Financial planning serves a variety of purposes. Listed below are a few.

  1. You can use it to determine a firm’s funding needs and for financial analysis.
  2. It’s an approach designed to make sure the company doesn’t overextend its finances irrationally. Likewise, a surplus of funds will eventually lead to a financial crisis for a company. Therefore, when a company has excessive funds, it is wise to plan its investment strategy so as to prevent holding the company’s capital idle.
  3. Mainly involves the calculation of financial leverage with respect to current and long-term goals.
  4. It covers aspects like strategic financial management, marketing costs, and the costs of capital assets.
  5. Responsible for assuring that the organization has sufficient resources for a variety of purposes, from daily operations to the acquisition of future assets.

Choose the right financial strategy for you

Financial Plan

The first step in determining how to create a financial strategy is deciding the kind of one that is needed.

Making a plan for the future at any time is never a bad idea. Instead – now is the ideal moment to get started.

Financial Plan – Your business needs it

Earlier, I mentioned that a financial plan represents how your business currently stands.

Forecasts outline your immediate and future financial objectives which give you an opportunity to plan a strategy.

Financial Plan – Key elements of a solid plan

In order to build a financial plan for yourself, certain essential elements must be attained first.

  • Income statements
  • Financial statements
  • Cash flow statements
  • Business strategy
  • Earnings projection
  • Cost-benefit analysis

Financial Plan – How to build one for yourself

We’ve compiled a complete roadmap to help you create your financial plan. Listed below are the components of the roadmap and we’ll describe them in further detail below.

  1. Assess your current situation
  2. Make a list of your financial objectives
  3. Plan your budget
  4. Get rid of your debts
  5. Make an investment plan
  6. Funds for emergency situations
  7. Get your assets insured
  8. Review and update plans frequently

Assess your current situation

In order to create a plan that works, you must first know your current situation in order to identify your weaknesses and set attainable goals.

An easy way to calculate your financial position is by deducting your liabilities from your assets.

If you have no idea what assets or liabilities are, don’t worry. Let us explain.

Asset – An asset is anything you own, such as your car, your savings, or even your house.

Liabilities – Liabilities include anything you owe, such as loan repayments, debt payments, and mortgages.   

Let’s see how assets and liabilities can be used to calculate your net worth.

Financial Plan

Maintain a record of your expenses

The other method to measure your financial planning progress is by monitoring your income and expenses.

You can use net worth to assess your financial situation, but monitoring the flow of funds can help you make sure you are on the right track.

Inverse finances indicate overspending, which can lead to issues like bankruptcies and mounting debts.

Make a list of your financial objectives

Following an assessment of your financial status, it is time to start moving towards your objectives in the financial planning phase.

“Take a moment to ask yourself a question – How do you envision your life 5 years from now on?”

Your financial objectives or goals should be based on rational thinking that is attainable, quantifiable, detailed, manageable, and most importantly, schedule-driven. Now make a list of your foremost financial objectives.

  1. Identify your primary goals, such as regular savings or future investments.
  2. Maybe you’d like to pay off a debt.
  3. Perhaps you’ll be buying a new computer this year? It’s a goal in itself.
  4. Invest in a rental estate.
  5. Or do you plan to quit your job before 50?

You can use these goals to divide a comprehensive financial plan into manageable steps. Goals can vary from person to person depending on their priorities.

Being aware of your monetary objectives may assist you in making better short-term selections to contribute to your long-term objectives.

I hope you now have a better understanding of how important these objectives can be in a financial planning phase.

Plan your budget

Financial Plan

Planning your monthly budget or savings will enable you to succeed in the long run. When you design a budget according to your basic needs and follow it, you’ll be able to figure out what your budget supports and what’s not.

And if you want to learn how to manage money more efficiently, simply learn the 50/30/20 rule. It’s an impressive budgeting technique designed by “Elizabeth Warren”.

How to apply the 50/30/20 rule

Financial Plan

50/30/20 is an easy-to-follow budgeting system for determining what proportion of your income should be allocated toward savings and living expenses per month.

As a general principle, you should separate your net income after taxes based on 3 categories.

  1. 50% for basic needs (essential expenses, such as monthly rent or bills).
  2. 30% for extras (expenses other than necessities, such as groceries or restaurant meals).
  3. 20% for savings.

Regardless of the financial objectives, you are aiming to achieve, it is crucial to hold an up-to-date schedule and prepare accordingly.

By maintaining your budget evenly among these three categories, it is possible to budget effectively.

Learn to earn passive income from home with cryptocurrency.

Get rid of your debts

Yes, getting rid of your debts should also be included in your financial strategy. Unfortunately, it is impossible to take control of your financial future when you are burdened with debt.

Your debt balance sheet enables you to keep track of your debts and maintain a healthy balance.

You may find it difficult to set aside money for retirement and settle your outstanding debts, but believe me, it will help you prepare for a successful retirement.

Make an investment plan

An investor’s success depends on his or her ability to plan.

Having a proper plan will enable you to identify investment opportunities based on your investment horizon and level of risk which will assist you to achieve your investment objectives more quickly.

The world of investing can be intimidating at first, but it is possible to start investing and build assets with the right knowledge.

Before you invest, determine how much money you intend to invest. It doesn’t matter whether you invest $100 or $1000, saving and investing today will set you up for a better future down the road.  

It is recommended that you allocate monthly funds for investing. These funds will eventually grow into substantial amounts with the passage of time.  

Funds for emergency situations

The cornerstone of an effective financial strategy is having emergency funds on hand. No amount of planning will be of any use if something unexpected happens and you don’t have the cash to handle it.

This is the time when an emergency fund can be of great assistance.

“Do you know that according to a report by (Economic Well-Being Of US in 2020) 4 out of 10 adults cannot afford a $400 surprise expense”

In today’s financial climate, where most people live month to month for most of their lives with zero savings, sudden emergencies can put a serious dent in a person’s financial situation without proper planning.

Get Your Assets Insured

Instantaneous changes can occur in life. Financially savvy people expect the best, but brace themselves for the worst.

As you build your wealth over the passage of time, it is important to consider different strategies for protecting it.

Asset insurance serves more as a safety mechanism than an aggressive one.

Insurance types – What they cover

Unexpected costs scare you. Fear not. Your insurance will cover it. The type of insurance you need depends on the situation.

Let’s explore the different types of insurance and what they cover.

  1. Medical insurance
  2. Life insurance
  3. Vehicle insurance
  4. House insurance

The purpose of medical insurance is to protect your life. Primarily covers your healthcare costs.

It isn’t cheap to die. Many people rely on you. So life insurance covers your beneficiaries after your death.

Uninsured driving is illegal as well as risky since the person and his car are unprotected from mishaps and theft.

In order to protect your home against catastrophes, it is crucial to have your home insured against major losses such as fires.

Review and Update Plans Frequently

This is possibly the most important step in developing your financial plan.

Hopefully, you have already put together a solid plan. However, one thing remains the same: life has its own way of happening. You should therefore review your plan frequently.

After a certain point in your professional life, you might want to consider committing more to your financial future.

The same goes for a new job holder in his 20s who has fewer funds to contribute to a nest egg and retirement plan compared to someone in their 30s.

Regularly reviewing your financial plan also motivates you to stay on track. On a long-term basis, skipping a payment here and there might not seem so bad, but establishing concrete targets can provide you with the motivation to work towards better financial understanding.

Positive aspects of financial planning

Having a financial plan provides several benefits right away. Benefits range from mental and physical well-being to a more secure financial future.

It positively influences your life in every way. That’s why the most important thing you can do in order to be financially successful is to be well-informed about your finances.

Take a look at some benefits of having a financial plan for both your retirement and business.

  1. Transparent business objectives
  2. Administration of cash flow
  3. A judicious distribution of resources
  4. Effective cost-cutting
  5. Risk management
  6. Effortless campaigning
  7. Growth plan
  8. Investor and employee transparency


Can you give me an example of a financial plan? 

An example of a financial plan includes retirement savings and a range of short or long-term goals. Such as settling debts or enhancing credit scores.

How to improve a personal finance plan?

Use these five tips to enhance your existing financial plan. The first step is to identify your assets and financial goals. The second is to evaluate potential lifestyle adjustments. The third is to evaluate your priorities (what you need versus what you want). Saving early is the fourth step. Last but not least is budgeting for emergencies.  

What are the 3 primary factors to save money?

The 3 primary factors for saving money are as follows:
Wealth creation
Planning for emergencies
Extensive acquisitions

What is Dave Ramsey’s four-wall approach?

Dave Ramsey’s four-wall approach includes rental utilities, food, apparel, and transportation.

Essential tool for financial planning?

2 essential tools for financial planning are financial budgets and cash flow projections.