A financial planning checklist is similar to your regular to-do list for staying on top of things. Checklists are valuable for adding efficiency to everyday life, mainly accomplishing tasks and goals. In the same way, when trying to plan your finances, a financial planning checklist holds you accountable to yourself. You can draw your financial plans and check them off your list as you achieve them.
A financial planning checklist is beneficial for helping you create and achieve financial milestones. It also enables you to get your finances back on track. This blog post will discuss all you need to know about building your financial planning checklist, why you need it, and how to profit from it long-term.
What is a financial planning checklist?
A financial planning checklist is the plan or layout of your monetary goals and how you intend to attain them. It includes relevant financial information like your cash flow (in and out), investment, insurance, retirement funds, debt, etc. It is the overall picture of your financial journey through the past, present, and future.
Why do you need a financial planning checklist?
A financial planning checklist is an integral part of personal finance and valuable for attaining your money goals. It is similar to going grocery shopping with a list and assists you in effectively managing your funds and getting all you want. Whether you are an investor, entrepreneur, or employee, a financial planning checklist helps you get your money issues under control.
How to build a financial planning checklist
Building a financial planning checklist is not rocket science and only requires a little bit of introspection. SWOT analysis may also assist you in making the ultimate financial planning checklist, whether for business or your family finances.
Wondering how to build a financial planning checklist? Here is how!
Take stock of your present financial state.
It would be best, to be honest with yourself about your current financial state before you can plan for the future. As a result, the first step to successfully building a workable financial planning checklist is to take stock or inventory of your current economic status.
Here are simple questions to ask yourself during your moments of introspection:
- How have you handled money previously?
- What are your sources of cash inflow?
- How did you run your expenses?
- Have you engaged in any investment or savings?
- How much debt do you owe?
- How do you plan on increasing your cash inflow?
- Will a side hustle work? Etc.
Set realistic goals
After quizzing yourself or the members of your financial planning team (if you run an enterprise), the next step is to begin setting realistic goals. If you are unsure how to set your goals, some books on personal finance can give you a headstart. Your goals need to be as realistic as possible to be attainable. You could focus on setting short-term, midterm, and long-term goals. In addition, your goals should be backed up by a realistic time frame. For example, if you run a brick-and-mortar store, you could plan to introduce online generated invoices and online paystubs for your employees within the next three months. It would help if you made your goals well defined, explicit and attainable.
Create and work with a budget
Budgets are excellent tools for dealing with money issues. They help you execute your plans with minimal effort and drive the motivation to create more sources of cash inflow. Additionally, a budget enables you to allocate funds appropriately. For instance, you could decide to work on a budget that allows you to spend 50% of your earnings on necessities, 30% on savings or investment, and 20% on emergencies.
Organize your taxes
A financial planning checklist without tax planning is incomplete. Being behind on your taxes can ruin your plans with uncleared tax liabilities. As a result, you need some financial education on taxation and how it works. You also need to understand how tax deductions and tax refunds work. Such knowledge can help you maximize your taxes to gain more governmental advantage by reducing your taxes and decreasing your tax liability. You can learn about taxes from the IRS website and other online sources.
Save and invest for the future.
Savings and investment should be the bottom line of any financial planning checklist. The future is always uncertain. As a result, you need some monetary backup to forestall unforeseen events. For example, you could invest in a retirement plan, buy insurance or create an emergency fund. Alternatively, you could create additional income streams to help you stay financially afloat.
How to not create a financial planning checklist— Pitfalls to avoid
Now that you know the steps for creating your list, here are crucial mistakes to avoid with your planning:
- Starting your plans late
- Thinking only in the short-term
- Creating Unrealistic budgets by lacing them with excessive optimism
- Using insurance as an investment
- Not diversifying your income streams and investment
- Tax avoidance or evasion
A financial planning checklist is a financial to-do list and a blueprint for organizing your funds. Even though it sounds like a piece of work, taking the time to plan is well worth the effort. Hopefully, this article gives you a head start on what to do about creating an excellent checklist and what not to do to avoid ruining your financial planning checklist.
FAQS: What is a financial plan template?
What is a financial plan template?
A financial plan template is a sample or format that describes the layout for the financial project you want to execute. It is usually a document where you define every cost or need for the project’s success. Examples include project materials, cost, labor, etc., usually as a rough estimate budget.
What is financial planning analysis for an organization?
Financial planning analysis for an organization is a quadruple arrangement of activities toward supporting the financial strength of the establishment. They include planning and budgeting, integrated financial planning, management and performance reports, forecasting, and modeling.
Why do you need forecasting in financial planning?
Business leaders need forecasting as a critical tool for financial planning because of its efficacy in facilitating critical thinking and decision-making prowess. Financial forecasts estimate future economic or monetary outcomes for any establishment and yearly budget processes.
What is the most critical step in the financial planning process?
While the first step in financial planning is creating the plan, other measures synergize to make the most critical step for every establishment. Essentially, companies cannot function economically without a financial planning checklist.