Creating a financial plan for yourself or your family is important for a multitude of reasons. We all think about lavish cars and fancy vacations from time to time, but having a stable financial situation is really the goal.
If you’re searching around trying to create a financial plan, here is a strategy broken down into four weeks. The trick is to stick with it long after the month is over.
Week 1: Track your Spending
Tracking your own spending will tie directly into your goal-setting. You cannot set realistic goals if you don’t know your current financial situation. Record everything you spend money on this week and then go back in time and measure how much you typically spend monthly. Where can you afford to cut back? Savings, bills, and loans will all likely stay as they are. Pay particular attention to where you are spending most of your monthly income and whether or not it falls into a category that is unchangeable.
Week 2: Set SMART goals
SMART stands for: Specific, Measurable, Attainable, Realistic, Timely. Start by writing your short-term and long-term goals down and put them each through the SMART test. A good example of a short-term financial goal is to build an emergency fund within six months. Ask yourself how much can you save within that time frame, and how you will measure your savings to reach that goal. Take a full week to set these goals and create a financial schedule that will measure your balance and how much you can contribute each month.
Week 3: Review and Update your Monthly Budgets
This is the fun part. Take this week to go through your income and expenses for at least the last couple months. What does your budget currently look like and did you know where your money was going?
Many times this process can be surprising because it takes an effort to pay close attention to your monthly spending, but we can’t stress the importance enough. After you have a full snapshot of your monthly spending habits, tweak it. If this is the first time you’ve made SMART financial goals, this step will allow you to actually reach them because you’ll know where you can spend and where you need to stop spending.
Week 4: Create a Plan and Stick to it
You’ve made it to week four! Now it’s time to put all that planning into action. Create a financial plan for the foreseeable future, five years is a good amount of time but we know that things change. To make this less daunting, focus on one five-year goal. An example goal could be: save for a downpayment on a house.
Remember that all goals need to be specific, measurable, attainable, realistic and timely. This should repeat throughout your financial plan. Beyond your goals, you should be consistently reviewing your spending to keep yourself accountable.
Here at Camino, we care about your personal finances and want to help you reach your goals. Follow us on social media for more tips!