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Build a financial plan in 3 easy steps

Key takeaways

  • Want to feel calm and confident about your financial future? A financial plan may be able to help. The best part is that you can create your own plan without hiring a professional.
  • The first step is to decide what to prioritize based on what matters most to you. Then evaluate the resources you have to put toward your goal and consider how long it may take to reach.
  • Do some math (or use a financial calculator) to see if the amount you have now and the amount you can save over time will allow you to hit that deadline.
  • Are you on track? Then it's on to the next goal. If you aren't quite there, the next steps will be figuring out what it will take, whether it's moving the deadline, saving more—or a little bit of both.
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Financial planning can have a profound impact on your peace of mind and improve your confidence about reaching your goals.1 But do you need to hire a financial advisor to get all the benefits a financial plan can provide? Not necessarily. If you’re up for the challenge, you can do it yourself—and you may even enjoy it.

What is a financial plan?

A financial plan is a blueprint for managing your money. It's often constructed on some key financial pillars: spending, saving for the future, managing debt, protecting what you already have, and estate planning. But your starting point and the priorities you set are unique to you.

Flexibility is the name of the game when planning because your priorities may change as your life evolves. For instance, you may be focused on paying down debt now and saving money to travel or buy a home. But what if things change unexpectedly? Having a plan in place can help you change course since you'll already know what you need to maintain your current lifestyle, where you stand in regard to your goals, and the safeguards you have in place in the form of insurance and savings.

How to create a financial plan

Technology has enabled some very cool planning tools for the do-it-yourselfer. There are budgeting apps, robo advisors, and slews of financial calculators that can help you reach your goals.

With the right tools and a process for evaluating your situation and identifying what to do next, you can build your own financial plan

To get started, consider the short- and long-term goals you'd like to focus on. For example, you may know you want to retire one day in 20 years or so. But before that you want to build your emergency savings, pay down debt, and send the kids to college. That's a lot to tackle at once, so it can make sense to break it all down into manageable chunks and take it one goal at a time.

Here’s a 3-step process for doing just that.

1. Pick a goal and identify your financial resources

Whether it's a short- or a long-term pursuit, your goal is the destination and your current income, debtLog In Required, and spendingLog In Required and savings are the starting points. Identifying how much money you have coming in and going out will show you how much is left over—that’s the money you can save. Taking a close look at your spending can also help identify areas where you could spend less if you want to put more cash toward your goals.

Tip: With Fidelity's planning tools, you can add outside accounts to your planning dashboard so you can see everything in one place and get clear insights into your assets and liabilities.

You should know: Your insurance coverage and estate plan are critical pieces of protection and part of your financial resources. Though you can't spend them, insurance and planning documents like a will can help protect what you have in a worst-case scenario.

Get tactical: Define what you want to work toward. Research has found that having a specific goal in mind can help improve your odds of success versus a vague commitment to save more or spend less.2 You can even create a goal and name it in Fidelity’s plan summary. You’ll also be able to add as many goals as you like, see where you stand, and track your progress.

But let's just start with one. Saving for retirement is a goal for many of us but who has time to figure it all out?

To start a retirement savings plan, go to the Fidelity website and navigate to the planning summary tabLog In Required (login required). (You can do this on the Fidelity app as well.) Add a retirement goal and answer a few quick questions to get started. The questions will help you progress through the planning steps. At the end, you'll see where you stand with your goal, plus suggestions on next steps to help reach your goal.

planning summary page graphic
Tell us a bit about yourself graphic
Screenshots for illustrative purposes.

2. Evaluate where you stand

Now that you have all of your financial details in one place, evaluate your entire financial picture with your goals.

This should help you see how achievable your goals are and gauge the progress you’re making toward them. Just seeing everything in one place can help you set your priorities and move on to the next phase of planning.

Back to our retirement example, once Fidelity’s planning tool has your goal and your resources in place, it can estimate what you could have, and what you likely need, in retirement. We'll start with your full Social Security retirement age but you can set a target retirement age. Then you'll get an estimate of how much money you may have in retirement and how much you may spend. If the numbers don't look right, you can adjust them.

Finally, you'll get an estimate of your potential monthly income in retirement and any surplus or shortfall you may have.

Retirement outlook graphic
Screenshots for illustrative purposes.

Of course, most people have more than one savings goal. Some of them may be short term—taking a vacation or making some home improvements—while others are long term, like retirement or sending the kids to college. Fidelity’s tool allows you to set multiple goals, and align your resources to them to give you a fuller picture. For now, the retirement goal is the only goal that will show a shortfall or surplus chart.

3. Taking the next steps

A clear snapshot of your full financial picture can help you understand how much money you have versus what you may need. If you're on track toward one or more goals, celebrate and start conquering another one if you're ready. If you feel behind or unclear about what to focus on next, we can help you stay focused on what matters to you.

Not on track? It may be counterintuitive, but finding out that your savings are lacking can be a good thing. It gives you the chance to improve your situation and puts you in the driver's seat. You may have several options to catch up: You could save more money, save for a longer period of time, and evaluate investment options that could help.

See Fidelity’s suggestions for prioritizing debt, savings, and goals, read Viewpoints on Fidelity.com: How to balance debt, saving, and investing

And remember, if it was easy, no one would need a plan. But life and finances can be complicated. A flexible plan can simplify the way forward, show you what you need to do, and help you shift gears when your priorities change.

Ready to start saving or investing?

Choose from a variety of different accounts to help you meet your goals.

More to explore

1. Fidelity Investments' Retirement Mindset Study presents the findings of an online survey, consisting of 1,429 adults, 23 to 74 years of age and older. Fielding for this survey was completed between February 25, 2019, and March 2, 2019, by Brookmark Research Services, which is not affiliated with Fidelity Investments. The results of this survey may not be representative of all adults meeting the same criteria as those surveyed for this study. The margin of error is +/- 2.6% at the 95% confidence level. 2. Locke, Edwin; Latham, Gary; A Theory of Goal Setting & Task Performance; The Academy of Management Review; 04/01/1991; www.researchgate.net/publication/232501090_A_Theory_of_Goal_Setting_Task_Performance.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Past performance is no guarantee of future results.

Diversification and asset allocation do not ensure a profit or guarantee against loss.

IMPORTANT: The projections or other information presented regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary each time your analysis is run and over time.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

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