How to create a plan that will jumpstart your financial journey
A recent poll found that Zoomers ages 18-25, at 83%, are more inclined to value financial independence compared to their parents or adults ages 41-60 at 76%, and that they are more willing to swap flexibility for longer work hours if it means financial stability. This suggests that today’s young adults are also more inclined to plan their financial roadmap earlier in life. And if you’re here, you’re most likely looking to do just that.
What is financial planning? It sounds so serious, so daunting — but trust that once you get started, thinking about your personal finance objectives and how you can achieve them will soon become natural to you. Here’s how you can start creating your financial planning roadmap.
Step 1: Get to know your starting point
Assess your current financial situation. Start with your monthly income, expenses, debts, and savings. This will give you a baseline for the next steps. When you do your assessment, make sure that you get the whole picture, e.g. put all income including your side hustles, and all your expenses including that semi-regular trip to your favorite cafe.
Step 2: Define your goals
What does financial success look like to you? Is it owning a home, building an emergency fund, or perhaps funding further education? Your goals can be short-term (achieving something within a year), medium-term (1-5 years), or long-term (more than 5 years). These goals should be SMART or Specific, Measurable, Achievable, Relevant, and Time-bound.
Check out this article to learn more about setting your goals.
Step 3: Create a budget
Budgeting is the cornerstone of financial planning — and it shouldn’t be new to you because you’ve been doing it for as long as you’ve been getting baon from your parents. A budget allows you to control your spending, save more, and avoid debt. More importantly, it teaches you to allocate your income to necessities, savings, debts, and leisure in a balanced manner.
Go into budgeting in-depth and learn about the 70-20-10 rule of budgeting here.
Step 4: Build an emergency fund
Before you venture into investments, create a safety net. An emergency fund is crucial for financial stability. As a rule, it’s equivalent to at least three to six months' worth of living expenses. This fund will protect you from unforeseen circumstances without derailing your financial goals.
Read this article to learn how to start building your emergency fund.
Step 5: Invest in your future
Once your emergency fund is in place, start exploring investment options. Investing can help grow your wealth and achieve your financial goals faster. Investing may sound complex and difficult but remember that it’s best to take advantage of the power of compounding while you’re young.
There’s also a wealth of information available to you. You can start with why investing in your 20s can be one of the best gifts you give yourself.
Step 6: Review and adjust
As the cliche goes, the only thing that’s certain in life is change. Plans change, life changes, and you change, so make sure that you regularly review your financial roadmap so you can make the necessary adjustments. Being able to adapt to these changes will help keep you on track.
So, how do you feel about the phrase “financial planning” now? Remember that the sooner you start, the faster you can achieve your goals. Remember, too, that at LifeBanking, we’ll be there to help you make sense of the journey, at every milestone.
Learn more about planning your financial journey:
