How To Do Beginners Financial Planning

Just because you're not a trained financial planner doesn't mean you shouldn't know about finances. Everyone needs a financial plan so that they can reach their goals. Take responsibility for your debts, your retirement, your dependents and your financial goals by making a financial plan.  Follow these steps to beginners financial planning.

Step 1

Get insured. Even though you may be young and death may be the furthest thing from your mind, it's always a possibility that you may pass away at a young age. Ensure that your family will be taken care of by buying the necessary insurance as part of your financial plan. Consider medical insurance and life insurance. Both of these ensure that your family will not be left with financial burdens after your death. (You can also ensure your mortgage through your bank. If you accidentally die, your mortgage will be paid off. Who wouldn't want to include this as part of their financial plan?)

Step 2

Get rid of your loans. The next step in beginners financial planning is to stop paying interest! Get rid of your loans, especially the high interest loans. Student loans and credit cards incur exorbitant interest rates, and will have you paying unnecessary fees for years if you don't take control of the debts. Make paying off your loans part of your financial plan so that you can begin to save for your future and not pay for your past.

Step 3

Contribute to your retirement. This is a no-brainer. Make sure that you are setting aside money for your retirement. The sooner you invest, the longer the money can work for you. And also be sure to take advantage of any employer programs that offer to match your contributions. It's like free money for your retirement, and a definite part of any solid financial plan.

Step 4

Set up an emergency fund. If you're like most people who are living paycheck to paycheck, then setting aside money in an emergency fund might seem like an impossible task. But this has to be part of your beginners financial planning. Even if you only set aside a few dollars a week, you'll have the security of extra cash if in emergency were to arise. Ideally, you should have 3-4 months of living expenses set aside. It will take some time to do this, but it will get you out of a crunch and you'll be glad you did it. (Just make sure you commit to not spending the money on frivolous things. Leave it as an emergency fund only.)

Step 5

Prepare a will. The final part of your beginners financial plan is to make a will. Unless you want the court to allocate your possessions for you, it's important to have a will so that you will have a say in how your finances are dealt with after you're gone. Name beneficiaries for all of your assets (investments, life insurance, house, possessions, etc.) so that you can ensure that the things you worked so hard for are passed on to the right people. There is a minimal cost associated with having your lawyer do this for you, and an even lower cost associated with do-it-yourself will kits. Whatever method you choose, make sure that you give a copy to a loved one that you trust. And take the time to update your will as your life changes.


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