Income Artist

What Is the First Step in Financial Planning?

Author: Adam
Published:September 14, 2022
4 mins 18 secs
What Is the First Step in Financial Planning?

It is a natural thing to worry about your personal finances, especially if you are not very organized about it. If you don’t manage your finances properly, it can affect you mentally and physically.

Financial planning is extremely important, whether it is for your personal or business finances or both.

If you do not keep track of your finances, you will be like a rudderless boat left to the mercy of the sea.

Planning your finances is easier than you may imagine but you need to exercise a bit of self-discipline to achieve it.

The First Step in Financial Planning – Where Do You Start?

Most people don’t have an inkling where to start with financial planning, which is the main reason that so many people’s finances are in a mess.

But before you resort to seeking assistance from a professional financial advisor, here are a few things that you could do to start putting things in order:

List Out Your Monthly Incomings and Outgoings


Having an idea of how much you earn and spend each month is the starting point in financial planning.

Once you track your cash, you can predict how much you need in months when you are likely to fall a bit short.

By “saving for a rainy day,” you can create a more or less uniform cash flow. It also gives you an idea of where your shortfall is and you can plan for boosting your income in such areas.

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Make a List of Investments

If you don’t have any investments, now is the time to start investing some of your money. If you have investments, make a list of all of them, including those that you share jointly with your spouse.

Investing 30% to 40% of your monthly income reflects good financial planning.

Reduce Expenses

Instead of bemoaning the fact that you never have enough money, try reducing your spending. Don’t be under the illusion that there is nowhere that you can cut down.

For this exercise, you need to take a look at the list of monthly outgoings that we mentioned above.

For example, make a note of the total money that you spend on eating out or ordering in.

You will be amazed at what you see! We don’t say that you shouldn’t indulge yourself occasionally, but why not limit such spending to once or twice a month?

Take the case of Warren Buffet’s five-bedroom home that he bought in 1958 for $31,000 and in which he still lives. Today Buffet’s net worth is put at $90.3 billion.

The mansion that American rapper Kayne West lives in is worth $20 million, and he is deep in debt.

From the above examples we see that no matter how rich and famous you are, you need to choose between being a cautious spender or spending more than you earn.

Write Down Your Goals


There is an uncanny relationship between writing down your goals and achieving them.

If you aim at a monthly income of $100,000 and you write it down, you stand a better chance of achieving your target.

Your sheer determination can push you to accomplish what you put down in writing.

You don’t need to reach that status in a week, a month, or even a year. Perhaps you can aim at earning an extra $5,000 a month.

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With a few wise investments here or a second job there, if you have the will, you’ll find a way.

The Value of a Safety Net

There will be times when your cash gets blocked unexpectedly. You need to spread your jam evenly.

It means that when you are earning well, don’t blow up all your money but put some aside for the difficult times.

A great way of saving a bit for hard times is to create a contingency fund. The best way of building up such an account is to open a separate bank account.

Make it difficult to withdraw money from this account like not opting for a checkbook or no internet banking.

From every payment, you receive every month such as your salary, or income from other sources like rent, interest, or dividends, divert a fixed percentage.

You will be surprised how your contingency fund grows, providing for times when money is scarce.

Divert regular amounts of money into a “contingency” account. A good idea is to put a fixed percentage of every payment you receive into your contingency account.

That way, without hardly realizing it, you will create a safety net for hard times.

Consult Financial Planning Services


If you feel too overwhelmed by the task of doing financial planning by yourself, you can seek help from financial planning services.

A professional from such an agency will take you through the steps we have mentioned here and also advise you on investment management, estate planning, education planning, and retirement.


Whether you go through a financial advisor or do financial planning yourself, try to go through the basic steps outlined here.

With a bit of self-discipline and careful monitoring of your finances, you will take the first step in financial planning to become a financially responsible individual.