6 Steps to Financial Planning for Beginners

6 Steps to Financial Planning for Beginners

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A financial plan can help give you an overall view of your financial situation. A good financial plan should include specifics about your income, expenses, debt, and goals.

Financial planning can be overwhelming for beginners, but it doesn’t have to be. You can create a financial plan or your own or with the help of a financial planning professional. If you choose to create one yourself, the steps in this article will help to get you on the right path.

1. Set Financial Goals

Any good financial plan should include your financial goals. If you plan your goals, saving will feel more intentional and purposeful. What do you want your life to look like 5, 10, and 15 years from now and so on? Make a list of short-term and long-term financial goals that you would like to achieve. Short-term goals could include things like reducing credit card debt, buying a new car, planning a vacation, or buying a new computer. Long-term goals, like saving for retirement or your child’s education, could take years to achieve.

Identifying goals now will help you identify your priorities and things that are important to you. If you set intentional and achievable goals, it will inspire you to stay on track with your financial plan.

2. Track Your Money

Your financial plan should also include keeping track on your money and finances. A great way to do this is to create a budget. Creating a personal budget will help you get a better handle on your income and expenses. It will help you see how much you’re really spending. You’ll be able to work on reducing expenses and increasing your savings, helping you to achieve your financial goals.

Making a budget is actually not that difficult, and pretty much anyone can do it. Check out my 7 Steps to Create a Personal Budget blog post where I outline the following steps for creating a budget:

  1. Collect Your Financial Paperwork
  2. Determine Your Monthly Income
  3. Calculate Your Monthly Expenses
  4. Set Your Financial Goals
  5. Make Your Budget Plan
  6. Adjust Your Spending Habits
  7. Review Your Budget

A popular budget guideline that you could follow is the 50-30-20 budget rule. This line of thought suggests that essential expenses and needs should make up half of your budget, wants should make up about 30%, and savings and loan repayments should make up the other 20%.

One of the most customizable digital budgeting tools available is PocketSmith. They have an app that can help you with planning and tracking your budget. Use my link if you’d like to save 50% off your first two months of their premium plan.

Dave Ramsey also has a popular budgeting app called EveryDollar that may help you track your budget. He also has a best-selling book called The Total Money Makeover: A Proven Plan for Financial Fitness that you might add to your reading list.

If you prefer a tried-and-true, non-digital method of tracking your budget, here’s a best-selling budget planner that comes in so many different colors to choose from: Clever Fox Budget Planner.

3. Start an Emergency Fund

Everyone should have an emergency fund. That way, the next time an unexpected expense comes up, like a car or appliance repair, you’ll be ready and it won’t sink you further into debt.

I recommend saving at least $1,000 in your starter emergency fund. The best way to get started saving for your emergency fund is to automate the process. Many banks and credit unions will let you set-up recurring, automatic transfers from one account to another. If you get paid from your employer every two weeks, set up a recurring, automatic transfer for every two weeks to your emergency fund account.

Check out my related blog post for tips on how to save for an emergency fund: How to Save $1,000 for an Emergency Fund in 90 Days.

4. Paydown Credit Card Debt

Mounting credit card balances can make you feel like you are drowning in debt. Purchases you made months ago can haunt your financial situation today. Getting these balances under control will help you put a solid financial plan in place.

If you aren’t sure how to tackle your mounting credit card debt, my 8 Tips to Pay Off Credit Cards Fast blog post, which outlines the following steps, should help:

  1. Stop Using Your Credit Cards For Now
  2. Determine Which debt to Pay Off First
  3. Evaluate Your Spending
  4. Create a Budget
  5. Negotiate Your Credit Card Interest Rate
  6. Seek Help if You Need it
  7. Make More Money
  8. Continue to Improve Your Financial Habits

5. Start Investing

If your financial goals include retiring, then you’ll want to start investing. Starting to invest can sound more intimidating than it actually is. If you’re not sure where to begin, you may want to reach out to a financial advisor for guidance. They can help customize an investment plan for you, based on your financial situation and goals.

If your employer offers a 401(k) retirement plan with an employer match, I definitely recommend taking advantage of that. It’s basically free money. There is a limit to the amount you can invest in a 401(k). Aside from that, the amount of money you should contribute will depend upon how much money you want to have in retirement and how many more years it will be before you retire.

Other options for investing include Individual Retirement Accounts (IRAs), taxable brokerage accounts, and education investment accounts. If you would like to learn more about IRAs, read one of my related blog posts: Why Should I Invest in an IRA? and Which IRA is Right for Me – Traditional or Roth?

You will also need to choose investments within your investment account that match your risk tolerance. These could include investments like stocks, bonds, mutual funds, and real estate. Some types of investments are riskier, so you will want to carefully match this up with your long-term financial goals.

The sooner you start investing, the better, thanks to the effect of compounding over time. Compounding is the process in which an asset’s earnings (either gains or interest) are reinvested to generate additional earnings over time.

The magic of compounding allows interest to be earned on interest, which magnifies returns to interest over time. Compounding is a motivating factor behind many investing strategies.

Read my related bog post to learn more about compounding: How Does Compounding Affects my Investments?

6. Protect Your Financial Well-Being

Now that you’re building a financial plan, you will want to protect yourself and family from financial setbacks. An unexpected illness or death can wreak havoc on your finances. You can help to keep this from happening with insurance. If you have loved ones that rely on your income, getting long-term disability and/or life insurance can help protect them financially in the event of your illness or early death.


Putting a solid financial plan into place doesn’t have to be intimidating. If you need guidance, I recommend reaching out to a financial planner or advisor to help you put a solid plan together. Do you have a financial plan in place yet? Do you have anything included as part of your financial plan that wasn’t mentioned here? Add a comment and let me know!

Check out some of my other posts on saving, making, and investing money:

Disclaimer: This information is intended for educational purposes and is not tailored for the needs of any specific investor. It is important to conduct your own analysis and research before making any investment.  It is recommended to independently research and verify or seek financial advice from a professional in connection with any information on this website before using it to make an investment decision or otherwise.

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