Financial Planning for Beginners: Where to Start

Curious how to create a financial plan on your own without an expert to help? 

Financial planning isn't just for business owners or investors. Everyone can benefit from following some financial planning basics. And the good news is, you don't need to hire a financial planner to get started.

You can learn to track where your money is going, take better control of it, and make it go further, all by following some simple tips.

1. Learn where your money is going

Our first financial planning for beginners tip is to figure out where your money is going. Take a look at your current spending, and determine exactly where your money is going each month.

Look back at the past six months and write down how much you're spending on living costs, bills, debt repayments, entertainment, savings, and so on.

This exercise reveals where you're overspending, and if your goal is to save more money, you can identify which areas to cut back on to start saving.

2. Find a budget strategy that works for you

Even if you're not much of a big spender, having a budgeting strategy is a crucial part of a solid financial plan. 

There are several budgeting strategies out there, including popular methods like the 50/30/20 rule, which splits your income into 50% needs, 30% wants, and 20% savings. There's also value-based budgeting, the envelope method, and the 80/20 method.

All of these are great tactics, but the best tactic of all is the one that works for you. So, if you don't already have a budgeting strategy, why not try out a couple of the above methods and see how it goes? If it doesn't work, keep experimenting until you find one that is sustainable for you.

3. Make specific financial goals and work backward

Most of us have some sort of financial goal set for the future, but if it's not a specific goal, it's easy to lose sight of it.

Whether your plan is to save for a down payment on a house, a new car, or a gaming PC, the best goals are specific, measurable, and realistic. 

Spend some time writing down your financial goals and then work backward to determine how to get there. What can you do today or each month to work towards that goal? For example, if your goal is to save $1,500 in one year, divide the total into 12-month chunks, which means you need to save $125 each month to reach your goal. 

Breaking your goal down into smaller actions can make your goals seem more attainable and help you to stay focused.

4. Set up an emergency fund

If you don't already have an emergency fund, this is another key component of a good financial plan. You definitely don't want to skip this one! 

The last thing you want is to be caught off guard by a sudden car repair or medical bill that forces you to dip into other savings or even take out a loan to cover it.

A solid emergency fund typically equals three to six months of expenses, but don't worry if this doesn't seem realistic for you. If necessary, start smaller, and set an emergency fund savings goal of $200, then $500, then $1,000, and work your way up over time. 

Setting even a small amount of cash aside each month is better than nothing, and if you can commit to adding a little each month, you'll manage to build up a healthy buffer over time. 

5. Create a retirement plan

A retirement plan is a vital part of any solid financial plan, so don't neglect it, even if retirement seems like it's far off in the future. By paying into your retirement plan (even if it's a small amount), you will pave the way for a much smoother retirement.

Try to commit to saving a set figure or percentage of your take-home pay each month for retirement. This is where a budgeting method like the 50/30/20 rule comes in handy. With this strategy, you'd take 20% of your monthly income and put it toward savings, like retirement.

Get started with your DIY financial planning

Financial planning doesn't need to be complex or intimidating, and while hiring a financial planner can be a very helpful approach, it's also empowering to know that you don't need the help of an expert to get started. 

While there are a lot of steps involved in setting up a great financial plan, the best thing to do is break it down into smaller, manageable steps. Start with one step at a time, and focus on each one until you're able to reach your goal. 

Before you know it, you'll be well on your way toward having a solid financial plan in place that works for you!

Ready to change the way you pay?

Order a Card today, and you’ll receive it in the mail within 7-10 business days.

Subject to card activation and ID verification.*