Create a Solid Financial Plan: 10 Steps to Financial Security


share on

5 months ago

Create a Solid Financial Plan: 10 Steps to Financial Security


share on

5 months ago

To support our editorial team’s mission, we may receive compensation from the products or services mentioned. Learn about how we make money.

Feeling uncertain about your financial future? That’s understandable, especially in these crazy times. But no matter what your current situation is, you can give yourself a little peace of mind by creating a solid, long-term financial plan.

We all have financial goals (buying a house, taking that dream vacation, supporting a family, etc.), but most of us don’t have a clear idea of how to get there. A financial plan will help you to create a realistic road map toward your dreams, whatever they are! It just takes a little saving and dedication.

This article will walk you through how to create your own financial plan in 10 easy steps. It won’t take much time out of your day – so stop stressing, and start planning! Here’s everything you need to know.

What’s the point of a financial plan?

Before I get into the details, let’s talk about why you might want to create a financial plan in the first place.

The point of a plan is to give yourself financial security in the future. Instead of living paycheck-to-paycheck, a solid financial plan will help you to build up your savings, pay off your debts, and grow your wealth. It will provide some structure to your personal finances and take out all the guesswork.

Even if you’re out of work right now or struggling to pay the bills, there’s no reason you can’t start planning for your future today. Having a plan will make your dreams more achievable and set you up for success.

Elements of a solid financial plan

So, what are you planning for, exactly?

Well, everyone’s financial plan will be unique to them. But there are a few common elements that you will want to incorporate into your plan, no matter your situation. Here are a few essential items that you’ll want to include in your plan for financial security:

  • Paying off debts: Getting all your debts paid off is a crucial step toward financial independence. You need a plan to get all your student loan, credit card, auto loans, and other debts completely paid off.
  • Retirement savings: Even if you’re just starting out in your career, you should be considering your retirement savings. A 401(k), Roth IRA, or other retirement account is an important part of your financial plan.
  • A monthly budget: Your budget will change as your life changes. Part of your financial plan includes adapting and sticking to a monthly budget that will allow you to save money while still paying all your bills.
  • An investment portfolio: If you really want to grow your wealth, a diverse investment portfolio is key. The sooner you start investing, the more your earnings will grow.
  • An emergency fund: Unfortunately, emergencies can happen. If you have emergency funds set aside as a part of your financial plan, you won’t have to dig into your savings in the case of a serious accident or illness.
  • Insurance: Picking the right plans for your health, home, auto, and life insurance will make a huge difference in your budget. Don’t just choose your insurance on a whim; research ahead and know exactly which plans will save you the most money.

What kind of financial plan do you need?

Remember, it’s never too early to start planning. Your career and relationship status might change over time, but your financial plan should be able to change with you.

If you aren’t married or in a committed relationship right now, start with a financial plan for yourself. You can plan for your insurance, personal budget, and investments now, while still leaving space for potential changes in the future.

A financial plan for a couple will include both of your individual plans, plus a monthly budget for your household, insurance, etc. As a couple, especially if you’re planning to have a family, it’s important to have a sizeable emergency fund set aside and be prepared for whatever might happen.

10 steps to financial security

Have an hour to kill? You can sit down and create your personal financial plan right now.

It doesn’t matter what your current employment or income status is. If you have goals, you can start planning to reach them. A solid financial plan is like a framework for a better future — instead of hoping, dreaming, and stressing over your finances, you can start taking real steps toward the life you want.

Ready to get started? Here are 10 steps toward financial security that you can lay out for yourself right now.

1. Write down your goals

If you’re writing out a road map toward your future, you have to know where you’re going. That’s why the first step in creating your financial plan is writing down your long-term goals.

If you’re anything like me, you probably have a few lofty financial goals that feel impossible to achieve right now. You might want to buy a sports car, for example, or travel to Japan, or live in a penthouse. Even if they seem a little silly, those goals are important, and totally should be included in your financial plan!

That said, if you want to reach those pie-in-the-sky goals, you should start with the more definable steps.

Start by writing down what you can achieve within the next month: establishing a monthly budget, setting aside an emergency fund, paying off some percentage of a debt, etc. Then, write down the goals you can achieve within the next year, the next five years, the next ten years, and so on.

Once you have a clear picture of what you want to accomplish and when, you can start to lay out the more detailed steps of your financial plan.

2. Pay off your debts

Before you start to build your wealth, you have to pay off all your debts. This is the first concrete step toward financial independence.

Of course, you aren’t going to pay all your debts right this instant – but you can make a plan for getting them paid off. This is called your debt payoff strategy, and there are several ways to get it done.

Today, we’re lucky to have so many resources available to help us strategize and plan. A quick internet search will lead you to some of the best debt payoff strategies that you can personally tailor to your own situation. You can also get help by talking to a financial advisor for a minimal cost.

It’s generally recommended that you start with your high-interest loans, like credit cards, then work your way through the debts that aren’t collecting as much interest, like student loans. I would also recommend setting up automatic payments on all of your accounts, so that you don’t ever miss a payment.

The other major benefit to getting all your debts paid off is a better credit score – that means a better chance of getting your dream home or car in the future without a high interest payment.

3. Set up an emergency fund

Next, you need an emergency fund to be prepared for whatever life throws at you.

This is a crucial element of a financial plan that a lot of people ignore. It might seem like you don’t need an emergency fund – but you never know what will occur until it happens! A medical or housing emergency can set you back in your financial goals by years.

But if you have funds set aside already, you won’t have to worry about going into debt or missing out on a financial milestone because an emergency occurs.

Where to keep your emergency fund

While you could have a chunk of money set aside in your personal checking or savings account, it can become pretty tempting to spend that money for non-emergency purchases. Your best bet is to store those funds where they’ll be out of sight and out of mind until you need them.

Better yet, invest that money somewhere it can grow over time! Here are a few options to consider:

  • A high-yield savings account: Most online banks these days offer high-yield savings accounts where your emergency funds can grow, untouched, until you need them. You won’t be tempted to spend the money, but you’ll still be able to access it quickly if you need it.
  • Certificates of deposit (CDs): CDs allow you to deposit a certain amount of money into an investment account that you won’t be able to withdraw for a given time period. This is a great way to grow your emergency fund – however, there will be some fees if you need to withdraw the money before the CD has fully matured.
  • Your retirement account: A Roth IRA is another great place to store your emergency fund. These accounts will appreciate in value over time, and you can withdraw the funds whenever you need them. If you never have to use your emergency money, you can enjoy it in retirement!

4. Start your investment portfolio

If you want to grow your wealth, a diverse investment portfolio is a must.

Developing an investment portfolio might seem like a big, confusing ordeal, especially if you’re just starting out on your own. But it’s actually a lot easier than most people realize! There are tons of tools and resources available today to help you start investing, no matter what kind of income you currently have.

So, as a part of your long-term financial plan, you should decide what you want to invest in and how. You can even get started right now – investing doesn’t always take a huge sum of money, despite what a lot of us think.

Easy ways to start investing

If you want to start investing today, you have a few easy options. Here are some of the best ways to get started, without investing a huge amount of money.

  • Use a robo-advisor: It might sound like science fiction, but robo-advisors help tons of people start investing with little to no experience. All you have to do is download the app or software, input your preferences, and let your robo-advisor invest your money for you.
  • Start investing in stocks: You can start investing in the stock market with small amounts of money, if you use the right program. Check out apps like Robinhood or Public for affordable, guided trading options for beginners.
  • Invest in real estate: Real estate investment used to take some serious cash. Today, you can use a program like Fundrise to dip your toes into the real estate market for pennies at a time.
  • Mutual funds: Low initial investment mutual funds are the perfect way to diversify your portfolio as a beginner. They allow you to invest in a fund that contains multiple stocks and bonds, so your funds stay stable.

5. Find the right insurance

The right insurance plans will make or break your personal finances.

 First of all, the most important factor is to have insurance. The last thing you want is to lose all of your savings paying for an emergency procedure or accident. Health, auto, and home insurance aren’t options, but necessities.

If you rent your home, you should also consider buying a renter’s insurance plan. These plans are generally pretty affordable, and will protect your personal property (expensive tech, furniture, etc.) in case of an emergency or disaster in your home.

The best way to save money on all of your insurance is to work with a provider that will bundle your plans. There are plenty of mainstream insurance companies that will bundle your auto and home or renter’s insurance together, so you can pay less for each plan.

Ask around and do some research – if you find an insurance provider that works for you, stick with them! You can set up automatic payments and never have to stress about your insurance again.

6. Account for taxes

When you’re creating your financial plan, it’s so important to account for taxes.

This is particularly true for someone who is not traditionally employed. That is, freelancers, business owners, and anyone who works for themselves instead of a company. When taxes aren’t coming out of your paycheck automatically, you need to stay on top of them and be prepared.

If you have a complicated tax situation (like a small business), you might want to invest in a bookkeeper or personal accountant who will help you prepare for tax season. Hiring someone to help you is a minor investment, but it will pay itself off as you learn what you can write off on your taxes and make sure you never overpay.

If you are traditionally employed, you should still prepare for your annual taxes ahead of time each year. When you’re planning to buy a home, make sure you account for property taxes in your budget!

7. Start saving for retirement

It’s never too early to start saving for retirement! Even a dollar a month saved right now will add up in the long-term, especially if you’re investing that money into an account where it can grow.

At the very least, you should have a plan in place for how you want to build up your retirement savings. Your investment portfolio can (and actually should) be a part of that plan. It might seem out of reach right now, but the sooner you start saving up for retirement, the less you’ll have to worry about it as you get older.

Not sure where to start? Below are two of the most popular retirement savings accounts that you can open right now. You can also check out this comparison article.


An employer-sponsored 401(k) is one of the best ways to save for retirement. It allows you to double your investments and grow them over time – and you won’t be tempted to use those savings until you reach retirement age.

If your employer offers a 401(k) account, you can sign up and start investing a portion of your paycheck for retirement. For every dollar you save, your employer will match it. The investments will be distributed into mutual funds where they can safely grow over the years, until you reach retirement age.

The exact guidelines of each 401(k) plan will vary depending on your employer. However, all of them allow you to keep your investments even if you quit or change careers.

Roth IRA

A Roth IRA investment account is a great way to start saving if you aren’t traditionally employed, or if your employer doesn’t offer a 401(k) plan.

The cool thing about these retirement accounts is that the money you invest is after taxes – that means that once you reach retirement age and withdraw your savings, you won’t have to pay taxes on them.

Roth IRAs allow for steady growth, and let you invest a certain amount, proportionate to your income. If you are married and not currently employed, your spouse can open a Roth IRA in your name, so you don’t lose out on retirement savings while you’re raising a family or looking for work.

8. Make an estate plan

This isn’t the most exciting part of creating your financial plan, but it’s important. You have to know what is going to happen to your estate (your personal property and wealth) when you’re gone.

An estate plan generally involves writing a will, listing all of your assets, and making sure that family members and loved ones will have access to them. This is the only way to guarantee that the wealth you’ve worked so hard to grow will be passed on to the people who rely on your support!

9. Review your financial plan every year

Creating a financial plan isn’t a one-and-done process. Your plan should grow and evolve as your life changes.

That’s why it’s important to go back over each of these steps at least once every year. Your income, career, family, bills, and so much more might have changed – so don’t fall behind in your goals because you aren’t prepared!

As long as your financial plan is tailored to fit your life, you’ll be able to stick with it. Here are a few pointers to help you re-evaluate your financial plan each year:

  • Review your finances on a monthly basis: Your monthly budget, investments, loans, and all other accounts will change faster than the other elements of your financial plan. Take some time at least every month to look over all of your finances, make sure you’re on track, and adjust your budget as needed.
  • Rethink your financial goals: As our lives change, our aspirations change. What do you need to add or remove from your list of financial goals? The key to staying on track is always knowing what you’re working toward.
  • Review your insurance: Insurance providers, unfortunately, aren’t perfect. Take a look at your insurance plans at least once a year – or more frequently. Changes to your policies could occur that make them less convenient or more expensive. You may want to switch to another plan if it means better savings!

10. Stick with it!

So, you’ve written out a solid financial plan and reviewed it every year as your life changes. Now for the hard part: you have to actually follow through and stick with those goals. Avoid overspending, get all your debts paid off, and invest in your wealth whenever you have the money to spare.

When it comes to tackling bills and loans, it will help you a lot to set up automatic payments from your bank account. That way, you won’t have to worry about late fees or missed payments affecting your credit score.

Beyond that, just remember your goals and use all the tools available to help you. Of course, things happen and plans can change – what matters most is that you get back on track and stick to your goals in the long term.

The bottom line: Financial independence is possible

No matter what your personal finances look like right now, you can gain real security and independence. All it takes is a little hard work, dedication, and a solid financial plan.

Don’t be afraid to use all the resources at your disposal – whether they’re apps or real-life financial advisors – to create your plan and stick with it. Remember, it’s never too early to start growing your wealth, even if that just means investing a few bucks here and there while you pay off your debts.

The bottom line is that you can reach your financial goals. All you need is a road map to get there!

Let's stop worrying about money, together.

Get free access to the best tips, exclusive content and more


    August 14, 2020

    How To Invest In Bitcoin

    by Dollar Flow

    August 30, 2020

    The 18 Best Cable TV Alternatives

    by Dollar Flow

    May 10, 2021

    Best Cash Back Credit Cards of 2022

    by Dollar Flow

    September 25, 2020

    Work from Home: 12 Sites to Find Legit Jobs

    by Dollar Flow

    You may also like

    October 16, 2022

    The 10 Best Free Gaming VPNs in 2022

    by Dollar Flow

    September 28, 2022

    8 Ways to Lower Your Internet Bill

    by Dollar Flow

    September 23, 2022

    12 Ways to Pay for College Without Student Loans

    by Dollar Flow