A financial plan is a record that contains a person’s present financial condition, long-term financial goals, and tactics for achieving those goals. Financial planning assists individuals in achieving their particular objectives and improving their financial situation, which is why having an efficient financial plan is critical. However, developing a financial plan that accounts for all of your expenses while still allowing you to save as much as you desire is difficult. As a result, Tori Dunlap, founder of Her First $100K, outlines why and how to construct an effective financial plan in this YouTube video on the Harvard Business Review channel.
Effective financial plan
Tori says that people have a variety of goals, the most important of which is to save for emergencies, but the cost of paying debts, everyday expenses, and desires may be an impediment to doing so. She recommends that you start with an emergency fund. The main objective of an excellent financial plan is saving for an emergency fund. This implies you must save at least three months’ worth of living costs in a high-yield savings account.
Second, she recommends dealing with high-interest debt as your second priority. Higher-interest debt may be costing you more money than you could be making by investing in the stock market. As a result, it is necessary to address it first. She also believes that saving for retirement should be one of the top concerns. She recommends doing this while paying off your lower-interest debt and investing for your long-term goals.
Finally, she recommends prioritizing employment matches through your retirement program if you have one. This is because it is a sure method to double your money. She concludes the video by stating that a financial plan offers you a very clear purpose, which psychologically makes goal-setting and achievement simpler. This also provides you with some clarity on why you are saving money at all periods in your life.
A financial plan helps you to save money while keeping track of your day-to-day expenses and obligations. Even if creating a successful financial strategy may seem daunting, having one is essential. As a result, a sought-after method for developing an effective strategy is presented above.