6 Tips for Building a Financial Plan That Will Support Your Dreams

Before you can create a financial plan, you need to know where you're headed. What are your dreams? It could be anything; starting a business, buying a car, saving for retirement, or even taking a year off to travel. The key here is to be specific. Saying “I want to save money” isn’t enough. Instead, think in terms like, “I want to save $10,000 for a down payment on a house in the next three years.”

Once you have these goals defined, break them down into manageable chunks. Long-term goals, like retirement, might require steady contributions to an investment account, while short-term goals, like saving for a vacation, could mean cutting back on daily expenses. It’s all about finding that balance between what you want now and what you’ll need later. What’s more important to you—a fancy coffee every day or an unforgettable vacation next summer?

By regularly reassessing these goals, you can make sure you’re staying on track. Life changes, and so do our priorities. Just make sure your financial plan adapts to them.

Now that you have your goals, it’s time to figure out how to fund them. Enter the budget. I know I know; budgeting doesn’t sound fun, but it doesn’t have to be painful either. Think of it as giving yourself permission to spend money on what truly matters to you.

Start by tracking your income and expenses for a month. This will give you a clear picture of where your money is going. You might be surprised—those little expenses can add up! Once you know where your money is going, divide it into categories: housing, utilities, groceries, entertainment, and, of course, savings.

The goal here is to create a budget that feels realistic. You don’t want to feel so restricted that you give up halfway through the month. On the other hand, if you’re too loose with your spending, you might never reach those big dreams. It’s all about finding the sweet spot that allows you to enjoy life now while planning for the future.

Unexpected expenses can hit at any time, and without a safety net, they can throw your whole financial plan off course. That's why having an emergency fund is extremely important because it provides you with a safety net to handle expenses that may arise. 

Financial professionals commonly advise saving an amount that can cover expenses, for 3 to 6 months as a measure of financial security and stability in unforeseen circumstances.  This might sound like a huge task, but starting small is key. Begin by saving a little each month, and over time, you’ll see that fund grow. Consistently contributing to your savings over time will gradually build up your emergency fund which is an aspect of planning and preparedness. 

Need help figuring out the exact amount to aim for? Try using a 6-month emergency fund calculator to estimate how much you should set aside based on your expenses. Having that target number in mind can make it easier to stay motivated and on track. Plus, once you’ve built up that cushion, you’ll sleep a lot better knowing you’re prepared for anything.

Now that you’ve got a budget and emergency fund in place, it’s time to start thinking about saving and investing. What’s the difference, you ask? Saving is money you set aside for short-term goals or emergencies; think savings accounts or certificates of deposit (CDs). Investing, on the other hand, is all about growing your money over the long term, typically for bigger goals like retirement.

A good saving strategy is to set up automatic transfers so that a portion of your income goes directly into savings before you even have a chance to spend it. It’s a simple way to build up your savings without feeling the pinch.

When it comes to investing, there are lots of options: stocks, bonds, mutual funds, and more. It might sound intimidating, but you don’t need to be an expert to get started. A basic rule of thumb is the earlier you start investing, the more time your money has to grow. Consider meeting with a financial advisor to help you figure out which investments align with your risk tolerance and goals. And remember, investing is a marathon, not a sprint. You’re in it for the long haul.

Life is full of big moments, getting married, buying a house, and having kids. Each of these events comes with its own set of financial challenges. The good news? With a solid financial plan, you can prepare for them.

Let’s say you’re planning to buy a house in the next five years. You’ll want to start setting aside money for a down payment now. Or maybe you’re thinking about having kids; have you considered the costs of daycare or college tuition? It’s important to start saving early so you’re not scrambling when the time comes.

The best part? Once you’ve factored these life events into your financial plan, you’ll feel more in control. Instead of stressing about the future, you can focus on enjoying the present, knowing you’ve got a plan in place.

Your financial plan isn’t something you set and forget. Life changes, and your plan should too. Maybe you get a raise at work, or perhaps you decide to switch career paths. When these changes happen, take the time to revisit your financial goals and make adjustments as needed.

Think of it as checking in with yourself; are you still on track to meet your goals? Do you need to save more, invest differently, or cut back on spending? Keeping tabs on your progress ensures that your financial plan evolves with you.

One of the easiest ways to track your finances is by using budgeting and investment apps. Many of these tools allow you to set goals, monitor your spending, and see how your investments are performing; all from your phone.

Building a financial plan that supports your dreams doesn’t have to be complicated. In fact, it’s all about taking small, manageable steps. Define your goals, create a realistic budget, build an emergency fund, and start saving and investing. As life throws changes your way, adjust your plan accordingly.

So, what are you waiting for? Whether you’re just getting started or already have a financial plan in place, now is the perfect time to take action. With a clear plan, you can turn your dreams into reality; one step at a time.