Financial plans are written, organized strategies for maintaining financial health and accomplishing financial goals. Whether or not you employ a professional financial planner, it is your responsibility to contemplate and develop your own financial plan, centered on your unique circumstances, desires and objectives. Follow these steps for how to write a personal financial plan.
1) Set goals. Personal financial planning revolves around goals. Consider what you want your lifestyle to be like in the present, near future and distant future, then create an outline of your goals that is comprehensive enough to cover every facet of your life:
o Intellectual goals. Furthering your education, participating in leadership retreats, sending your children to college and attending seminars are types of intellectual goals.
o Occupational goals. Personal financial planning requires that you produce a stream of income, and you need to consider the ways in which you plan to produce income, whether it be earning raises at work or switching careers altogether.
o Lifestyle goals. This category encompasses the things you do for fun and entertainment, and the things you feel are necessary to the quality of life you aim for.
o Residence goals. Your financial plans should account for any desire you might have to move to a new location.
o Retirement goals. Consider the lifestyle you want when you retire, and set personal financial planning goals that will provide for a retirement that is comfortable to your standards.
o Career. Traditional employment under an employer, either salaried or hourly, constitutes career income.
o Business. If your financial plans include starting a home business or profiting from a hobby or interest, then that income would be classified under business.
o Investments. Investing is an activity that leverages money to produce a return, and includes things like stocks, bonds, real estate, money market accounts and certificates of deposit.
o Inheritance. In addition to active forms of income production, be sure to include any anticipated inheritance money to your projected income.
o Unexpected income. There may be circumstances in your future where you find yourself with an unexpected lump sum of money (i.e. lottery winnings, gifts, bonuses and/or property value increases). Plan for this possibility by deciding how you will use that money. For example, you may allot 50 percent to your retirement account and the other 50 percent to growing a business, or you may choose to put the entire amount into an interest-bearing savings account.