Financial Planning For Starters: Top 10 Tips

Are you new to financial planning? Then NOW is the time to start learning about it, so pat your back for actually taking the first step in beginning your journey. We understand that this is a huge step, so it is a bit daunting, with many newbies not knowing where to begin.

Financial planning is a definitive, strategic, and step-by-step process that has you set your financial goals and achieve them to gain more wealth and better financial security. Based on expert advice from Financial Mappers, we’ll be showing you the ropes when it comes to financial planning.

1) Getting Paid and Spending Less

This is pretty simple, though a lot of people would struggle with just this tip alone! Be sure that you know how much your job is worth in your industry. You can do this by evaluating your skills, productivity, job responsibilities, your contribution to companies, along with the going rate in and out of the said company. Being underpaid for a seemingly small amount would create a significant effect over your career.

Furthermore, even if you are paid smaller than others, never spend more than what you make. It’s better to spend less than earn more actually, and with just a bit of effort in cutting costs, you can save a lot more. It doesn’t need to be huge sacrifices, even just switching off more unused lights at home can contribute.

2) Set a Budget and Personal Goals

Setting your budget is a crucial step to creating a good financial plan, as this will allow you to understand your income and expenses. As a result, you’ll be able to create smarter spending decisions and control your costs. Consider your income and how much you can spend on expenses (with extra leftover for any wants and emergency funds), and stay consistent with it.

Furthermore, you should also set a personal goal so you know where you want to be (financially) in given periods. This will encourage you to do better with what you have, particularly the resources and finances available for you.

Personal goals can mean anything, may it be investing in a car, traveling, or getting your first home! Segment them from short, medium, and long-term goals so you can plan your income and budget accordingly.

3) Pay Off Debt

Credit card debt is one of the major obstacles when getting financially ahead. While so convenient, we tend to forget that we’re dealing with ‘real’ money, whipping it out whenever we want to.

If you have a credit card, focus more on sticking to a budget and spending wisely, opting to pay in cash most times.

4) Contribute to Your Retirement Plan

If ever your employer would offer a 4041(k) plan or other kinds of retirement savings program, contribute an amount you can afford. Employers will contribute the same amounts their employees put (to a certain percentage).

If there are no retirement plans offered, consider getting an IRA.

5) Have Savings Plans

Always pay yourself first! Don’t wait until you met all financial obligations and use your leftovers for savings. Make your savings one of the major priorities as well.

If you do wait, then chances are you won’t have a healthy savings or investments plan. Set aside at least 5% of your salary for your savings before paying bills, then whatever is leftover will also be placed in your savings account.

6) Learn About Investment

If you are already contributing to your savings account and retirement plan and see that you can put money in investments after paying expenses, then better! There are various investments you can make, just be sure that you choose one with a good return of investment.

7) Maximize Employee Benefits

Look into your employment benefits to take advantage of! As mentioned, you have your 401(k) plan, along with flexible spending accounts, insurance, and others. These are worth a lot, so maximize yours and take advantage of other benefits that can have you save money by reducing your expenses and taxes.

8) Look into Insurance Coverages

A lot of people are talked into paying a lot for life and disability insurance, whether adding coverage to car loans, purchasing whole-life insurance when term-life is more sensible, or even buying life insurance without dependents.

While enough insurance is important to protect you and your dependents in case of disability or death, review which ones may be giving you more expenses than savings and protection.

9) Update Your Will

Did you know that only 32% of Americans had a will in 2020?

For those who have dependents, regardless of how small or big of assets you own, you have to create a will. If you don’t have complicated situations, you can create your own will with different software. This is a good step toward financial planning and preparedness to further protect your loved ones.

10) Estate and Tax Planning

Lastly, if you aren’t wary when keeping thorough records, you might not be claiming all of the allowable income tax deductions and credits. This is why it’s high time to learn about how to do your taxes early and correctly.

Once you get the gist of doing taxes, set up a good system now, using it all year. This is easier compared to scrambling to find all of the requirements come tax season, only to miss out on a lot of things that could have saved you money.

Wrapping It Up

Financial planning can be overwhelming, especially with the many tips and advice out there. But once you get started with expert advice (like the ones you find here), you can get started by taking that first simple step.

Hopefully, this article helped you learn a lot about financial planning and where to begin. Don’t wait any longer and get started with your long-term plans today.

Do you have questions or want to share your tips and experiences when it comes to creating a viable financial plan? Share them in the comments section below, all of your thoughts are much appreciated!