Financial planning 101: Get started with managing your personal finances

1. Take control of your finances: Regardless of your income, financial planning is about being more mindful and intentional with your money. With a strategy in place, it’s easier to monitor your spending today, set aside cash for a significant life event, be protected against unexpected emergencies, and prepare for a comfortable retirement.
   
   
2. Feel more prepared at every life stage: Having a personal financial plan goes beyond investing and growing your wealth. It covers all types of financial strategies, including budgeting for daily expenses, planning for a family, buying or setting up a home, saving for your children’s education, and saving for retirement. Each part can affect your goals, so having a structured plan helps you stay financially secure at every stage of life.
   
   
3. Alleviate financial stress:  We all know that money pressures, such as rising prices for daily essentials or rent increases, are usually at the forefront of our minds. Reducing the time we spend worrying about our finances gives us the freedom to enjoy life.

1. Assess your financial situation

Let’s start with a blank sheet of paper. Write down a summary of your assets—existing investments, savings, property, and cash on hand. Subtract your liabilities, such as loans, to calculate your net worth.

Understanding your net worth is an important first step. It helps you assess where you currently stand financially, determine where you need to begin, and identify what is required to reach your goals.

2. Budgeting 
Next, write down your income and list all your expenses to see how much is left over.

Different people have different spending patterns depending on lifestyle and family structure. Generally, these may fall into three categories:

• Day-to-day living costs – power, groceries and travel costs

• Lifestyle expenses – gym memberships, vacations and dining out

• Recurring expenses – rent costs, insurance, home maintenance

A budget surplus, which means your income is greater than expenses, can be helpful as it allows you to allocate more resources toward longer term goals. Budgeting is also a good opportunity to clean up your finances. For instance, look at items like unused subscriptions or the interest you are paying on a credit card or loan.

3. Set goals 
By developing a clear understanding of your financial situation, you can define your short, medium, and long-term goals. These goals should be quantifiable and concrete; not vague statements such as “make more money” or “have a good retirement.” Clear goals make it easier to establish a realistic time frame and monitor your progress.

4. Implementation 
Now it is time to put your plan into action. Prioritize your financial needs and goals, and outline the specific steps required to achieve them. For example, setting up a regular savings plan, investing, or purchasing insurance products.

It also helps to understand the risks involved, know your responsibilities, and think carefully before making or adjusting decisions. To manage risk effectively, maintain a well-diversified investment portfolio that aligns with your goals and risk tolerance.

5. Review your plan 
You now have a budget and a clear set of goals, but remember that financial planning is fluid. Your individual circumstances, or even your goals, may change over time. That’s why it’s vital to regularly review and adjust your plan, so you could stay on track and continue moving towards your near and longer-term objectives.

Your financial plans don’t have to be perfect! Building your strategy can start with simple moves that you can sustain over time. Get started by talking to a Manulife Advisor today.