Financial planning - the 5 best tips to create an effective plan.

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Financial planning - the 5 best tips to create an effective plan.

Some people always have enough money to fulfill their desires, while others are constantly broke. Do you ever wonder why? Creating a financial plan helps keep track of income and expenses. In both business and personal life, financial planning is an ongoing process that is changed or adjusted as needed.

What does a financial plan look like? Financial planning includes strategies that are used in the Achieving short- and long-term goals are helpful. With a balanced financial plan you avoid financial bottlenecks. The creation of a financial plan is the basis for wealth creation and enables you to invest and manage your money properly. A clear, structured plan is necessary to build financial reserves, fulfill your wishes and provide for emergencies.

What is financial planning?

What is a financial plan? In every company, financial planning is an essential business management tool. Even in private households, the preparation of a financial plan or business plan is necessary to get an overview of regular income and expenses and to calculate the cost of living.

The term financial planning describes the creation of a plan in which all financial aspects are recorded, planned and analyzed. In principle, a financial plan can be prepared for different periods of time (years or months). Financial planning is like a strategy that serves to, Realize life goals. This may involve building a home, accumulating assets, financing studies, training, a trip around the world or other personal goals.

Overview of your financial situation

A financial plan helps you manage your finances, better control financial transactions and investments. Decisions about spending, cost reduction and savings are easier when you have an accurate overview of your financial situation.

Money is a financial asset with high economic importance. Wise management of financial resources can bring you closer to your goals. Uncontrolled spending, on the other hand, restricts your liquidity and, in the worst case, leads to financial bottlenecks.

Financial planning is an important cornerstone that focuses on the future.

A financial plan should:

  • take into account your individual situation
  • include accurate information about your income, living expenses, assets and debts
  • Capture long-term and short-term goals
  • Be the basis for financial decisions
  • Provide for unexpected events
Create financial plan

Financial planning examples

A financial plan reflects the current financial situation and the goals to be achieved within a certain period of time. The first financial plan is usually prepared during school years, when it comes to financing an education or studies. Before important events, such as a wedding, starting a family or building a home, careful financial planning is of particular importance.

The private financial plan differs in some details from a business plan common in the company. In both cases, the purpose of planning is to get an overview of one's finances in order to be able to plan better. In financial planning, the actual financial situation is first determined. The personal financial situation serves as a starting point for further planning. At the end are the financial goals and the development of a strategy to achieve them.

Budget book: practical everyday helper

One example of private financial planning is the budget book. Although often considered old-fashioned, the budget book is a practical helper in everyday life that can protect against unnecessary spending and wrong financial decisions. All income and expenses are entered in the columns provided so that the fixed expenses can be determined. Save money is easier if you know your costs and where there is potential for savings.

Other financial planning examples include:

  • Investment plan
  • Cost plan
  • Liquidity planning
  • Financing plan
  • Capital Requirements Plan
  • Liquidity planning

A distinction is made between short-term (maximum one year), medium-term (one to five years) or long-term financial planning (more than five years).

How to create a personal financial plan? 5 steps

How do I create a financial plan? To ensure that your financial planning is based on a solid foundation and that nothing is forgotten, it is important to invest some time and research. The best way to create your personal financial plan is step by step. These are the 5 steps to developing a balanced financial plan that will secure you and allow you to fulfill your desires:

  1. Determination of the actual situation
  2. Define goals
  3. Set time frame
  4. Develop strategy
  5. Decide on measures

Before you start thinking about investment options or cutting costs, it's about understanding your Identify current financial situation. This includes your monthly income, savings, existing assets (real estate, cars, stocks, etc.), but also financial obligations such as rent, living expenses and loans.

Where is there potential for savings?

Write down income and expenses and analyze the list. Are your costs too high? Where is there potential for savings? Will your income increase in the near future, for example through a salary increase?

At second step you define your financial goals. What do you want to achieve? What lifestyle are you planning? Do you want to build a house or live in a rented apartment? Do you want to enjoy your retirement in the sunny south, finance a trip around the world or start your own company?

Once you have decided on your goals, the third step is to lay out the Time frame of your financial planning fixed. A financial plan that is solely a short-term Setting Goals should be reviewed again within a few months and adjusted if necessary. Long-term financial Targets can:

  • Real estate acquisition
  • Retirement security
  • Capital formation

be, while short-term financial planning focuses more on near-term events, such as:

  • Household repairs
  • Purchase of a new car
  • Budget for the children's class trip

focused. Both short-term and long-term financial planning include an emergency fund to cover unforeseen costs. Expect that a financial situation may change spontaneously, for example, due to illness, accident, or unemployment. A lower income also has consequences for your standard of living, so you should take these factors into account when planning your finances. Existential risks can be covered by appropriate insurance.

Develop strategy

The fourth step of the planning phase is to create a Develop strategyto achieve your financial goals. Which means could be suitable for this? Do you know financial products that convince you and fit your financial possibilities?

If you feel overwhelmed with the multitude of investment options and savings plans, a consultation with a competent financial or business coach a sensible option. Find out more about financial strategies and investment yourself. You can find numerous research sources on the Internet.

When you decide on actions in the fifth step and create your private financial plan, it matters that the Investment options that fit your desires and financial needs. The calculation of your financial plan takes into account all the facts collected beforehand.

what is a financial plan

The most difficult stages of financial planning

Creating a financial plan does not sound complicated. However, financial planning privately is different from a business plan in a company. Ask yourself, how do I make a financial plan and what challenges should I expect? One of the most difficult stages of financial planning is setting financial goals when you don't yet know what the future holds.

If you are in training or in the middle of your studies, it is not easy to set a budget. In this case, it is advisable to calculate a basic amount that is needed each month to cover living expenses and allow for the standard of living.

Financial goals depend on personal situation

As your personal situation changes, so do your financial goals. Are you professional successful, your financial plan will look different than during an unfavorable period of prolonged unemployment. If you start a family, your financial plan will change with each child that strengthens your family life. Due to additional expenses, but also income (child benefit), the financial plan must be adjusted.

To avoid mistakes in financial planning and the resulting financial bottlenecks, you should ask questions, like: Do I really need this item? Do I have to have the item (the car, the vacation) immediately? Is it advantageous for my financial planning if I do without it at first and buy it later? A cautious approach to money usually protects you from making the wrong financial decisions.

Money and love: financial planning in the relationship

Financial planning in a relationship is a touchy subject. Especially if one of the two earns significantly more than the other, it can lead to disagreements and Misunderstandings come. Talk openly with your partner about finances. Money is a common point of contention in many Relationships.

The best way to avoid relationship problems is to address this issue directly. Do you have a joint account or do you value separate finances? This should be clarified before you move into your first apartment together.

What is your relationship with money?

What does money mean to you and how do you deal with the fact that your life partner has a much higher or lower income? Your own approach to financial resources is usually shaped by your parents' home. The way you grew up and experienced money management is how you will manage your finances in adulthood. To create a common basis for financial planning, you should know what makes the other person tick.

How do you deal with differences in income or assets? It may be that one partner will inherit a lot later on or will receive regular financial allowances from parents, while you will have to earn every penny yourself. Finances are an uncomfortable topic in a relationship that can be discussed with a lot of emotions is connected.

When choosing a partner, it is important to consider this person as a whole, with his or her strengths and weaknessesbut also to accept his (or her) origin and financial background. For each other Assume responsibility, means to support each other and this includes financial aspects. Discussing money should not endanger the partnership.

Sets financial goals in the partnership

If you are unable to contribute equally to the monthly household expenses due to lower earnings, you can take on some additional responsibilities in the household. It is important that both of you agree on the financial planning concerning the household. There is no universal financial plan for couples. It mainly depends on the individual situation and the financial possibilities of both partners, how the financial planning looks like.

Trust, reliability and honesty are important building blocks for a relationship that lasts despite financial constraints. Financial planning in the relationship is about finding a solution that both feel comfortable with in the long run. Making compromises that are fair and don't disadvantage anyone is necessary if the financial plan is to last.

Set your financial goals and create a budget together. Adapt your financial planning to your circumstances. Decide together what you want to spend your money on.


Structured financial planning provides an overview of finances and enables the realization of financial goals. When developing a financial strategy, the current financial situation as well as plans that are to be realized are taken into account.

In five steps, you can create a financial plan that reflects your personal financial situation and contains investment options that meet your needs. Financial planning serves as a basis for wealth creation and enables money to be invested and managed properly.


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Reviewed by Dr. med. Stefan Frädrich

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