Step By Step Checklist To Create Your Money Strategy
Financial planning can feel complex, especially if you’re new to money management. However, managing your finances is essential to securing your desired lifestyle.
Whether you’re overwhelmed by debt, struggling to save, or want to make the most of your money and investments, these 10 financial planning 101 tips for beginners will set you on the right path.
Let’s start because time is money, and it’s time to create your financial plan!
Financial Planning 101 For Anyone Who Wants To Have More Money
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
1. Make An Honest Assessment Of Your Current Money State
Get your financial facts together.
First, calculate your net worth. Net worth is the value of what you own minus what you owe. Many people, like you and me, start with nothing. However, knowing your net worth is essential to improving it.
Net worth = What you own (assets) minus what you owe (debts)
Next, determine how much money you spend and where you spend it. If you aren’t sure, that’s okay. We will cover that topic next.
To sum up, get familiar with your current financial situation.
Must read – Simple Habits of People Who Always Have Money
2. Make A Budget And Monitor It Monthly
Set a monthly budget and do your best to stick to it to understand how much money you are spending and where.
Break your spending down into categories such as:
- Housing (rent or mortgage)
- Utilities
- Groceries
- Transportation
- Entertainment
- Travel
At the end of each month, compare your spending to your budget for each category. Reflect on your progress and make adjustments as needed.
Don’t beat yourself up if you overspend. Learn from it and strive to do better in the future.
3. Spend Only On What You Value
Think carefully about what you value in life. What you love may include travel, movies, home renovations, dining out, wine, sporting events, or something else.
What you value is unique to you. So, whatever it is, allocate money in your budget to what you love and value. Then, reduce or eliminate expenses everywhere else.
Dig Deeper – Advanced Tips to Further Your Finances
4. Top Off Your Emergency Fund
Emergency expenses are the enemy of your finances. Thus, assign any extra money from your monthly budget to emergency savings.
Most financial experts recommend having 3-6 months of living expenses available. Review your budget’s essential monthly expenses to determine your optimal emergency fund balance. Put the extra money in a high-interest-bearing savings or money market account.
Finally, reserve your emergency fund for unexpected and vital expenses like:
- Medical bills
- Auto repairs
- Home maintenance
5. Monitor Your Credit Score
Look up your credit score and monitor it regularly.
A good credit score can mean a difference in getting a mortgage, being able to use a credit card, or getting a job offer from a prospective employer.
So be sure to protect and improve your credit score.
By applying all of today’s tips to your financial plan, your credit score should improve automatically.
We are halfway done, with plenty more to come. Before you continue, please PIN IT:
6. Make A Plan To Become Debt Free
Identify and itemize your debts if you haven’t already as part of calculating your net worth. Use any excess cash identified from your monthly budgeting process to reduce your non-mortgage debt.
Most people owe money for:
- Credit cards
- Student loans
- Auto loans
- Personal loans
Pay off your credit cards first. Then, target any other loans, starting with the debt with the highest interest rate. Making timely payments will improve your credit score.
7. Invest In Yourself
The best investment you can make is in yourself. So, figure out what you are good at, then put in the time, money, and effort to excel at that skill.
Take advantage of every training opportunity. What options does your employer offer? The best thing about learning on the job and employer-sponsored training is that it is free.
However, more formal courses and continuing education are beneficial, too.
Most importantly, seek to leverage your training to maximize your earnings. Identifying ways to make more money should be essential to your financial plan.
Related – Best Investments for Beginners
8. Invest For Your Future
Suppose you have money left over each month at this point. If so, congratulations, you are flawlessly executing your financial plans.
However, your work is not done. Effective financial planning requires an investment strategy.
Your first three investing goals should be:
1. Maximize contributions to your employer’s 401(k) or 403(b) plan.
2. Fully fund an individual retirement account (IRA).
3. Make additional investments outside of your retirement accounts.
Focus your investments on stocks or low-cost exchange-traded funds (ETFs) invested in the broad stock market for long-term capital appreciation.
Great resource – Investing may seem complicated, but it doesn’t have to be. For example, I learned a ton from the Financial Freedom Dividend Investing Course offered by Simply Investing.
9. Make A Commitment To Financial Literacy
Start building your finance knowledge base. Learning about money, personal finance, and investing is critical for managing your financial plans in the future.
First, pick a book or try this course on a finance topic and set a goal to study it from beginning to end.
Second, find a money mentor. Trusted friends or family members are good choices. Talking to someone about your finances is a great way to learn and expand your horizons. Having a mentor means you won’t need to pay for a financial advisor.
At the same time, think for yourself and make your own choices. After all, it’s your money.
10. Review, Reflect, Adapt, And Improve
Review the results of your financial planning efforts at least annually. Make an honest assessment of your current state and your actions against your financial plans and goals.
Ask yourself hard questions, such as:
Did I stick to my budget? If not, why and what can I do to reduce my spending?
Am I making as much money as I deserve? How can I make more?
Is my emergency fund adequate?
Am I steadily reducing my debt?
With any money left over, am I investing it wisely? What types of investments should I have at this stage in my life? How are my investments performing?
People on a path to financial freedom routinely ask themselves these questions.
Financial Planning 101 – Wrap Up
Financial planning is a journey, not a destination. It’s about continuous learning, adapting, and improving your strategy as your life and goals evolve.
Commit to these principles and stay proactive to build a secure financial future. Remember, every small step you take today will lead to significant gains tomorrow.
Stay focused, stay disciplined, and start writing your financial success story.
Good luck with your money strategy. Thanks for reading, and before you go, PIN IT:
Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.