How To Stop Impulse Buying

Shopping can, understandably, provide a thrill. There's something exciting about seeing something you enjoy and being able to purchase it. However, these "surprise" purchases have a tendency to derail budgets and become an unhealthy financial habit. 

7 Steps To Creating A Financial Plan

Creating a financial plan can seem like a daunting task, especially if you’ve never done one before. 

Creating a financial plan can seem like a daunting task, especially if you’ve never done one before. 

You may be wondering, can you do it if you don’t have a financial background? The good news is that you don’t need to hire a financial planner or a CPA to do one for you. You can create your own financial plan which will go a long way towards achieving your goals. Here are seven steps you can take to create a solid financial plan.

1. Take stock of current income and expenses

The first step when designing any type of financial plan is to look at what’s coming in and going out. That means taking full stock of your current income and assessing all your expenses. The easiest way to do that is with a tool like Thinkflow that pulls your expenses in automatically and helps you categorize them.

Most people will have a clear idea of their income if they receive a salary, but expenses can be a mystery to even the most organized people. A good way to take control of your money is to track your spending. Look back at your expenses from the past few months and note down all the areas you spend on. 

This exercise can be an eye-opener for those who wonder where their money goes each month. 

2. Create reachable goals

The chances are, if you’re creating a financial plan, you have some goals you want to achieve. No matter what your goals are, it’s important to be realistic and create reachable goals. 

Creating realistic goals means you’re more likely to stay on track. Having a big goal at the end is great, but there need to be smaller, reachable goals that act as stepping stones before you get there. 

For example, saving $10,000 in one year might be your goal for this year. However, it can feel unachievable and overwhelming until it’s broken down into smaller goals you can achieve along the way. 

3. Don’t forget seasonable expenses

When creating a plan or a budget for the year ahead, one thing that is easy to overlook is seasonable expenses. By this, we mean those birthdays, anniversaries, weddings, or holidays that we don’t always plan for months in advance. Other things that are easy to overlook include back to school expenses, annual memberships, car insurance or annual subscriptions. 

When planning out your year, make sure you take these seasonable expenses into account. Put them into your calendar so they don’t come as a big shock.

4. Build an emergency fund

No matter your financial circumstances, everyone can benefit from an emergency fund. It’s hard to prepare for unexpected events such as illness, injury, job loss, or expensive repair bills. However, an emergency fund is your best defense against expensive emergencies like these. 

How much you need to save will depend on your usual income and expenses. Some people say three to six months of expenses is the ideal emergency fund. Others prefer 12 months. Whatever emergency fund goal you decide, starting small is better than nothing. Try to factor some saving in your financial plan each month to build up your emergency fund. 

5. Plan for retirement

While it may be far off, the best time to plan for your retirement is right now. It always pays to think about what your retirement plans are as early as possible. That way, you have more time to save and prepare. 

Your first step is to determine how much you will need to retire. You’ll need to take things like inflation, investment returns, and whether you have any assets into account. Your calculation will be a rough estimate, but it’s better than nothing. 

Once you have an idea of how much you need to save, stick to a set figure or percentage of your earnings each month and tuck it away in your investment accounts. 

6. Create a debt strategy

If you have debt, do you have a strategy to clear it as soon as possible? 

Take an inventory of all your outstanding debt amounts and interest rates. Ask yourself, what can you do to reduce interest rates or clear your debts sooner? This could include using a balance transfer credit card for credit card debt. You might even consider refinancing your mortgage to reduce interest payments. 

If you have several debts weighing you down, you might want to try the snowball or avalanche methods for clearing debt. These methods focus on paying off one debt at a time as fast as possible.

7. Protect your money with insurance

Another important step in any financial plan is to protect your hard-earned money. The last thing anyone needs is an unexpected emergency to wipe out your savings. Insurance is therefore a great backup plan to protect your assets. 

If you haven’t already, consider insurance that covers you in the following areas: health, disability, home, flood, auto, life, and business. Look for gaps in any insurance plans you already have and see if you can adjust or switch your plan to fully cover you. 

Financial planning can be complicated sometimes but don’t be put off. You don’t need a finance degree to put some financial-savvy plans in place. Once you have strong plans and goals in place, you will feel more in control of your money.

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