Email FacebookTwitterMenu burgerClose thin

10 Personal Financial Planning Tips to Live By


Financial planning planning is a proactive approach to managing your finances and achieving long-term financial goals. By establishing a comprehensive plan, you can effectively allocate resources, prepare for significant life events and make informed decisions that support your overall financial well-being. Whether you’re saving for retirement, funding education expenses, or building an emergency fund, a well-crafted financial plan serves as a roadmap, guiding you toward financial stability and security.

If you need help with your financial plan, connect with a financial advisor and see how they can potentially help. 

What Is Financial Planning?

Imagine you’re planning a cross-country road trip. Financial planning will help you map out your budget for expenses so that you can save enough to reach your destination safely and comfortably.

The planning process typically involves a comprehensive evaluation of an individual’s current financial situation, future expectations and objectives. It then calls for the development and implementation of a personalized plan to meet those goals and mitigate potential risks.

A financial plan may address budgeting, debt management, savings and investments and retirement planning, among financial needs. A well-structured financial plan not only focuses on accumulating wealth but also safeguards against unforeseen expenses and economic downturns.

Taking the time to create a financial plan can offer numerous benefits, such as achieving financial stability, reducing stress and securing a comfortable future. But, overlooking a financial plan could have financial consequences that result in your inability to meet your goals. 

10 Personal Financial Planning Tips to Live By

A woman looks over the financial plan that her advisor built for her.

Here are 10 tips to help you create a financial plan, and hopefully, improve your financial outlook:  

1. Set Financial Goals

Setting clear and specific financial goals is the foundation of effective personal financial planning. It provides direction and purpose to an individual’s financial decisions and actions. Financial goals can be diverse and tailored to an individual’s unique circumstances and aspirations. Short-term goals may include saving for a down payment on a car, paying off credit card debt or saving for a home. Long-term goals may encompass objectives such as saving for a child’s college education, buying a home, starting a business, or accumulating a substantial retirement nest egg. 

2. Make a Budget That You Can Follow

When creating a budget, it’s important to be realistic. An overly restrictive budget that doesn’t allow for any flexibility or enjoyment can be challenging to stick to and may lead to frustration and abandonment of the budget altogether. Instead, aim for a balanced approach that allows for some discretionary spending while still prioritizing your financial goals and obligations.

To create a budget, start by tracking your income from all sources, such as your salary, investments or rental income. Next, list all your expenses, including fixed costs like rent or mortgage payments, as well as variable expenses like groceries, entertainment and discretionary spending. Categorize your expenses to gain a clear picture of where your money is going. 

Compare your income and expenses to ensure that your spending aligns with your income. Then, adjust as necessary to avoid overspending and achieve your financial goals. Remember to regularly review and adjust your budget as your circumstances change. Life events like getting a raise, starting a family, or moving to a new city can impact your income and expenses significantly. By keeping your budget up to date, you can ensure it remains a relevant and effective tool for managing your finances.

3. Build an Emergency Fund

An emergency fund is a crucial safety net designed to cover unexpected expenses, such as medical bills, car repairs or job loss. Financial experts generally recommend having an emergency fund that can cover three to six months’ worth of living expenses. Building an emergency fund can be achieved by automating savings through direct deposits or transfers from each paycheck into a dedicated savings account, or by allocating a portion of any windfalls or bonuses toward the fund.

Additionally, setting up a separate savings account specifically for the emergency fund can help prevent dipping into it for non-emergency expenses. Having an emergency fund not only provides peace of mind but also helps you avoid relying on high-interest debt during times of financial stress, which can further exacerbate financial challenges.

4. Save Early – and Often – for Retirement

Retirement planning should be a top priority at all stages of your career. By starting to save early and contributing consistently to retirement accounts, you can take advantage of compound interest and potentially accumulate a substantial nest egg for your golden years. 

For example, a 21-year-old with no savings would only have to save just $360 per month in a 401(k) or IRA throughout their career in order to retire with more than $1 million by age 67. That’s also assuming a very conservative 5% annual rate of return (the S&P 500 averages around 10% per year). Meanwhile, someone who starts saving at age 30 would have to sock away $666 per month to retire with approximately the same amount. 

It’s recommended to contribute at least 10-15% of one’s annual income toward retirement savings, adjusting this amount as necessary based on individual circumstances.

5. Avoid High-Interest Debt

High-interest debt, such as credit card balances, payday loans and high-interest rate personal loans can significantly hinder financial progress. Monthly debts payments can quickly eat away at your cashflow and keep you from saving and investing your money. Therefore, you should prioritize paying off high-interest debt as soon as possible, as the interest charges can accumulate rapidly and consume a substantial portion of one’s income.

6. Understand Opportunity Cost

Opportunity cost refers to the potential benefits or opportunities that are foregone when choosing one alternative over another. For example, choosing an overly conservative investing strategy may mean forgoing the higher returns that riskier investments, like growth stocks may offer. Similarly, using disposable income for a luxury purchase may mean sacrificing the opportunity to contribute to a retirement account or pay down debt. 

7. Focus on Tax Savings

Effective tax planning is an integral part of personal financial planning. By taking advantage of available tax deductions, credits and strategies, you can potentially reduce your overall tax burden and retain a larger portion of their income. Resources like tax preparation software, online tax calculators, or consulting with a tax professional could help you identify opportunities for tax savings and ensure compliance with relevant tax laws and regulations.

Common tax-saving strategies include maximizing contributions to tax-advantaged retirement accounts, claiming eligible deductions and credits like the mortgage interest deduction or child tax credit, and timing income and expenses strategically.

8. Protect Your Assets

Protecting your assets and wealth by purchasing appropriate insurance policies (e.g., life, health, disability, and property insurance), implementing risk management strategies and diversifying your investments. Life insurance, for example, can provide financial protection for dependents, while health and disability insurance can safeguard against unexpected medical expenses or loss of income. 

9. Make an Estate Plan

Estate planning is the process of determining how an individual’s assets and possessions will be distributed after their passing. A comprehensive estate plan typically includes a will, trusts, beneficiary designations and other legal documents that outline the person’s wishes regarding the distribution of their assets, as well as provisions for guardianship of minor children and end-of-life care. 

Working with an estate planning attorney or financial advisor can help ensure that an estate plan is properly structured and compliant with relevant laws. Estate planning not only can ensure that your assets are distributed according to your wishes, but also helps minimize potential legal complications and tax implications for your beneficiaries.

10. Work With an Expert

Estate planning isn’t the only area of your financial plan that an expert can provide guidance on. A financial advisor, especially one who offers financial planning, can be a valuable resource as you set financial goals, build up your savings, invest for retirement and take other important financial steps.

Just keep in mind that not all advisors specialize in financial planning. Finding an advisor with either the CERTIFIED FINANCIAL PLANNER™ (CFP®) or chartered financial consultant (ChFC) designations ensures they are fiduciaries well-versed in the field of financial planning.

Bottom Line

A woman reviews her finances on her laptop.

By implementing these 10 personal financial planning tips, you can take more control of your finances, achieve your financial goals and potentially secure a stable and prosperous future. Remember, personal financial planning is an ongoing process that requires discipline, commitment and regular review to adapt to changing circumstances and evolving needs.

Other Financial Planning Tips

  • If you want a comprehensive roadmap to help guide your financial decisions, consider working with a financial planner. These advisors focus on helping you set and achieve financial goals by building you a unique 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.
  • Retirement planning is a critical consideration of the financial planning process. SmartAsset’s retirement calculator can help you estimate how much money you’ll need to support your projected expenses in retirement and whether you’re on track to hit your target.

Photo credit: ©, ©, ©