How to Work on Your Long-Term Financial Planning

Long-term financial planning involves defining your financial goals and creating a strategic plan to achieve them over time. This strategy can help you prepare for different goals, like saving for a child’s education, buying a home, building a comfortable retirement nest egg and planning your estate, among others. Working on your long-term financial plan starts with examining your current financial situation and setting realistic objectives.

If you want to create a financial plan, a financial advisor can work with you to set and reach specific goals.

What Is Long-Term Financial Planning?

Long-term financial planning helps you set and work toward goals that can span years or even decades. Unlike short-term financial plans, which focus on immediate needs and objectives, long-term planning focuses on sustainability and growth over an extended period.

This type of planning emphasizes consistent progress toward major life objectives and typically calls for discipline, patience and adaptability.

Long-term financial planning can generally prepare you for predictable milestones, as well as unforeseen events. So, for example, careful saving and investing over decades can help you retire early, afford your children’s education, and travel extensively.

How to Create a Long-Term Financial Plan

To develop a long-term financial plan, consider these nine general steps:

Assess your current financial situation: Start by evaluating your income, expenses, debts and assets. This will give you a clear picture of your financial standing and help identify areas for improvement.
Set clear financial goals: The next step is defining clear and measurable financial goals. These can range from paying off a high-interest loan to planning for retirement. Establishing both short-term and long-term objectives will guide your financial decisions and help you stay on track.
Develop a budget: Realistic budgeting is important for managing daily expenses and saving for the future. It helps track income and expenditures, identifying areas where you can cut costs and allocate freed-up funds toward your goals.
Build an emergency fund: Building an emergency fund lets you handle unexpected financial setbacks without derailing your plan. Aim to accumulate three to six months’ worth of living expenses in a separate, easily accessible account.
Establish an investment strategy: Investing is an essential part of long-term financial planning. Developing a strategy for investing will involve considering your risk profile and time horizon. This will guide you when diversifying investments across different asset classes so you can grow wealth while managing risk appropriately.
Retirement planning: Preparing for retirement calls for determining how much you need to save and the best ways to achieve that savings goal. This may include employer-sponsored plans like a 401(k) as well as IRAs or other retirement accounts.
Review insurance needs: Insurance coverage protects your assets and income. Most long-term financial plans consider health, life, disability and property insurance. Long-term care insurance may also be part of your plan.
Create an estate plan: Estate planning ensures that your assets are distributed according to your wishes. This includes creating wills, trusts and power of attorney documents to manage your estate and health care decisions.
Monitor and adjust regularly: Schedule regular reviews of your financial plan to track progress and make necessary adjustments. Life changes can impact your financial situation, so staying flexible is key.

Long-Term Financial Planning Tips

A financial advisor reviews a financial plan with a client.

Several strategies can enhance your long-term financial future and better prepare for life’s uncertainties. Here are eight general tips to consider:

Automate savings and investments: Set up automatic transfers from your checking account to savings or investment accounts. Automating savings ensures that you consistently allocate funds toward long-term goals without having to remember or make manual transactions.
Educate yourself continuously: Stay informed about personal finance and investment opportunities. Financial literacy can empower you to make better decisions and adapt your plan as new financial products or strategies become available.
Leverage tax-advantaged accounts: Take full advantage of tax-advantaged retirement accounts such as 401(k)s, IRAs and health savings accounts (HSAs). These accounts can provide significant tax benefits, boosting your savings potential over the long term.
Review credit reports regularly: Maintaining a strong credit score is important for long-term financial health. Review your credit reports regularly for inaccuracies or signs of fraud and address any issues promptly to protect your financial reputation.
Consider professional guidance: Hiring a financial advisor can provide valuable insights and personalized strategies. An advisor can help you navigate complex financial landscapes, offer tailored advice and ensure your financial plan aligns with your goals.
Prioritize health and wellness: Health expenses can significantly impact long-term financial plans. Prioritizing a healthy lifestyle can reduce medical costs over time and ensure you’re physically capable of pursuing your financial goals. Investing in preventive care and health insurance can safeguard your finances against unexpected medical expenses.
Plan for inflation: Inflation can erode the purchasing power of your savings over time. Consider investment options that offer inflation protection, such as Treasury Inflation-Protected Securities (TIPS) or real estate, to ensure your money maintains its value.
Diversify income streams: Relying on a single source of income can be risky in the long run. Consider creating multiple income streams, such as side businesses, rental properties or dividends from investments, to increase financial stability and resilience.

Bottom Line

A woman looking up financial planning strategies.

Long-term financial planning requires a strategic mindset and a willingness to adapt as circumstances change. Combining different strategies for your financial plan can help you balance immediate needs with future goals. As your life changes, so should your financial plan to remain aligned with your needs.

Financial Planning Tips

A financial advisor can help you create a financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
One of your longest-range financial goals is likely to be preparing for a secure and comfortable retirement. SmartAsset’s retirement calculator can tell you how much you should be saving now to be ready when the time comes to leave the workforce.