How To Create A Personal Financial Plan For Your Life

Published initially on Relish Growth.

This post will share how to create a personal financial plan for your life.

I recently started taking my personal finance seriously again after it took a hit when I moved abroad and started a semblance of a new life.

I had to adjust to this new cost of living and ensure my bills were paid.

Thankfully, I’m no longer in ‘survival’ mode.

I can now afford to set aside an emergency fund and start thinking about savings and investments again.

So, I researched and created a personal financial plan with a checklist.

While I’ve not yet reached any of my financial goals.

I’m happy to be making significant progress.

I have no doubt that in no time, with consistency, I’ll achieve my goals.

How Do You Create A Personal Financial Plan That Is Realistic For Your Situation?

When it comes to doing research on Personal Finance, I’ve learnt the principles are most often the same across the board.

The main work is just to tailor them to your present financial situation.

Don’t feel you need to go over and beyond what you can afford because of some ‘money guru‘ or self-help book‘.

If you can only afford to save $50 a month, start with that and grow at your own pace.

I hope you’ll find the following steps as helpful as I did;

Make A Budget

It goes without saying that budgeting is the very first step in taking control of your Personal Finance.

You want to stay on top of incomings and outgoings.

You also need to be able to settle your bills and avoid overspending, thinking you have more than enough.

Budgeting can be as simple as a Post-it note or as extensive as a Spreadsheet or a Notes app.

Just make sure it is somewhere that is easily accessible.

Build 1-3 Months Emergency Fund

I never used to take emergency funds seriously.

I always thought I had a safety net with my family and friends.

But then what happens when you move to a new country alone and a global pandemic happens?

The reality of your aloneness hits you right in the face.

To be honest, if nothing else, the pandemic has taught me the importance of setting aside an emergency fund.

Nothing beats the peace of mind that comes with knowing your bills are covered for a few months if you lose your job or a sudden expense creeps up.

Building that buffer takes time, though, and life doesn’t always wait — if you’re based in Australia and an unexpected cost lands before your fund is ready, looking into EBP Money fast loan options is one short-term route to bridge the gap. 

A simple method I’ve used to build my emergency fund is to use my budget.

I choose a figure that covers my bills and essentials for a month, multiply it by three and save it in an accessible bank account.

Maximise Your Employer’s Pension Contribution

There’s nothing like passive saving, like a pension.

Not only are you saving ahead for your retirement, but you also don’t have to consider it as your employer automatically deducts it from your income.

It works by contributing a percentage to your pension, and your employer matches that contribution.

The higher you contribute, the higher they match it, although they usually have a cap depending on the company.

So, learn from your HR department how to maximise and take full advantage.

Don’t sleep on it.

Those contributions add up quickly.

Pay Off Your Debts

Now that you’re settled, it’s time to make plans to pay off your debts, particularly those expensive debts like student loans and whatnot.

Choose a plan that conveniently allows you to pay them off quickly.

You really don’t want debts lagging behind and dragging you back.

Also, research the various options available before committing.

Build 3 – 12 Months Emergency Fund

Before you start saving and investing, which would require you to put your money away for an extended period, ensure you have enough money to sustain yourself in your emergency fund.

After paying off your debts, now is the time to create an extensive emergency fund that can support you for up to a year.

Again, this money must be easily accessible, called an ’emergency fund’.

Don’t get tempted to hide it because you feel it sitting in your bank account without generating interest.

Build enough to cover your bills and essentials, and start thinking of ways to save and invest the rest.

Educate Yourself Further On Personal Finance

Everything I know about Personal Finance has been through self-education.

I make it a priority to research and read up as much as possible.

Granted, most of us weren’t taught in school how to manage money, but we owe it to ourselves to be self-taught.

I mean, how else would you achieve your financial goals.

Yes, having a great job is nice, but how do you manage all that income?

My current favourite book on Personal Finance is Clever Girl Finance.

I’m also looking to read further on investing, so I have to Grow Your Money by the same author on my wishlist.

Save Towards Short-Term Goals (< 5 years)

You know your finances are on lockdown when you’re ready to save towards your short-term goals.

So, if you want to buy a c, save for your first ho, me or even a Master’s degree in the next five years, now is the time to start saving.

Ensure you look for different tax-free options like a Cash ISA or LISA.

If you’re saving to deposit your first home, choose an LISA, as the government tops it up with 25% of your contribution.

Whatever savings account you use, ensure they have the best interest rate and are tax-efficient.

Save Towards Long-Term Goals (> 5 years)

Once you have gotten that new car or paid the deposit for your new home, you can save towards retirement.

Here, you can decide to have private and workplace pensions.

You should also consider investing in Stocks and Shares, which accumulate in compound growth over time.

It is important to note that you shouldn’t invest any money you will need in the next five years, including your emergency fund.

So, don’t be in a hurry to invest, as you won’t be able to access the money quickly.

Whether you’re using a Stock & Shares ISA, a LISA or a pension, ensure you’re saving towards retirement.

In Conclusion,

Nothing makes you feel better as an adult than having a personal financial plan.

Once your finances are in place, everything, including your life, will take shape.

That alone can give you a sense of accomplishment and fulfilment.