Financial planning is an important part of being an adult. You spend money almost every day, and you work hard to earn the money you spend. You have bills to pay and dreams to live, and you can’t do either of those if you don’t have a solid financial strategy in place.

If you’re reading this article then you’re at least thinking about planning for your future, and that’s a great first step! No matter what you’ve heard about financial planning, It’s never too late (or too early) to sit down and figure out how to make your money work for you. 

There are three basic steps to financial planning: Evaluate, Set Goals, and Create a Strategy.

Evaluate

Before you can make plans with your money, you need to know how much you have to work with and where it’s already going.

First, look at all of your sources of income and figure out exactly how much money you have coming in each month, and when you receive it.

Next, create a detailed list of every monthly bill you are currently paying. Don’t worry about cutting costs yet, at this point you’re just giving yourself a solid understanding of your monthly cash-flow

Last of all, estimate your remaining monthly expenses. Things that you spend money on every month that aren’t bills. For example: groceries, gas, and eating out. Looking at your spending for the last 3-4 months can help you get an idea for how much you usually spend in each category.

Set Goals

Now that you know how much money you’re earning and where it’s all going, you need to set some goals. Your financial goals can be big or small, short or long term. If you’re new to handling your own budget, it might be helpful to start with something small and short-term so you can get a handle on setting the strategy to achieve your goal.

Some ideas for major financial goals could include buying a home, paying off debt, or investing for retirement. Short-term financial goals could include saving for a vacation, paying for a wedding ring, or buying a new car.

Whatever goal you choose, make sure it’s something you are dedicated to working hard to achieve.

Create A Strategy

Finally it’s time to figure out how to turn your current cash-flow into something that will allow you to achieve your goal. There are plenty of detailed guides out there for how to create a financial plan, but here are the basics. Your strategy will probably include a combination of reducing your current spending, and increasing your current income.

Reducing spending might mean cancelling some of your subscriptions, eating at home more often, or even carpooling to work. If you’re currently living without a budget, you will probably be surprised at how much you spend on things you don’t really need. Remember that reducing is good, but you should still leave yourself a bit of “fun money” every month to help you avoid going over budget in other areas.

Increasing your earnings could mean finding a side-hustle, working gigs, or just putting in a little overtime. If you work a 9-5 job, the easiest way to increase your income is to simply ask for a raise. If you’ve never done that before it can definitely be nerve wracking, but it’s worth it when you get the pay off. Remember that the worst they can say is “no” – and most employers are willing to give at least a small bump simply because you asked for it.

Handling Unexpected Expenses

Plan as you might, life can still throw a curveball your way. Remember that if something happens that throws off your strategy, it doesn’t mean your goals are unattainable.  When you’re hit with a big expense, the first thing you should do is try to find a way to cover it without using savings. Set up a yard sale, look into your hidden skills and talents and offer your services as a professional side hustle, or even consider looking into a personal loan or apply for a title loan to give you a quick boost.

Planning for the future is important, but having a financial plan is more than just planning for the future. It’s the first step towards financial freedom. Don’t wait, take that step today.