Imagine saving diligently for your dream vacation, only to face an unexpected medical bill that wipes out your travel fund. Or maybe you've been working hard for years, only to realize you can’t afford a comfortable retirement. Financial planning can be your ally to avoid such scenarios. Continue reading below to discover how to start your journey to financial health.

What’s Financial Planning?

A financial plan provides a comprehensive overview of your finances and outlines a strategy for meeting your financial goals. A reliable plan should outline your cash flow, savings, investments, and debts.

Contrary to popular belief, financial planning isn't just for the wealthy. In fact, it's a crucial skill for everyone regardless of income or career status. Whether self-employed, a freelancer, or working full-time, you can always benefit from developing a sound financial plan. Here’s what it can do for you:

• You’ll be more mindful of your money habits.
  No more falling victim to holiday sales—at least not every time. An accurate picture of your financial situation will encourage you to manage your cash flow more responsibly. While you can indulge in the occasional treat, remember that even the most minor purchases add up to affect your savings.
• You’ll be prepared for financial emergencies.
  In today’s volatile economic landscape, you can never be too prepared for a sudden job loss, a serious illness, an investment gone wrong, or an accident. Responsible financial planning pushes you to pursue enough insurance coverage for a healthy emergency fund.
• You’ll have a brighter financial future.
  Achieving your life goals—such as buying a house, getting married, or traveling the world—may seem far off in the future, but you’ll be surprised to know their costs. Balancing out the desire to live in the here and now with financial planning will ensure you don't worry about money constantly.

How to Start Financial Planning

Beginning your financial planning journey may seem daunting, but it's a necessary part of retirement planning and financial security. Here are a few tips to get you started.

1. Assess your financial situation.

There is no one-size-fits-all strategy for financial planning. Before you start dissecting your budget on an Excel sheet, collect relevant financial documents like payslips, billing and bank statements, transaction records, insurance policies, and receipts. You can use these documents to help you compute your net worth: Subtract your total liabilities (like loans, debts, bills, and insurance premiums) from your total assets (such as cash, investments, and property). This calculation gives you the net value of what you own minus what you owe.

2. Set financial goals.

With a clearer image of your financial situation, it's time to identify the monetary goals you want to achieve. Think about how you want to live your life in 10 or 20 years. Reflect on your financial habits. Are you good at budgeting for groceries, but succumb to impulse buys? This self-awareness guides your plans.

Separate your goals into two categories:

• Short-term goals include building an emergency fund, paying off any credit card debt, and saving enough capital to purchase a new car.
• Long-term goals involve paying off a mortgage, setting up a retirement fund by a certain year, or setting aside money for a graduate degree.

3. Work with a financial advisor to develop a strategy.

After identifying where you stand and outlining your goals, it's time to develop your financial strategy. While you can navigate your finances yourself, working with a financial planner can help you make complex money-related decisions.

Financial planners can help create tailored financial plans aligning with your goals and current financial situation. They offer expertise in investments, savings, and budgeting, providing insights on managing debts and preparing for retirement.

4. Implement your financial plan.

Now, it's time to put your plan into action. Start by tackling the most manageable steps first. This could mean setting up automatic savings, reducing unnecessary expenses, or paying off small debts. Remember, consistency is vital to making your plan work.

5. Regularly review and adjust your plan.

Life changes, and so should your plan. Periodically assess your financial situation and adjust your plan accordingly. This could mean reallocating funds, revising savings goals, or adapting to new economic opportunities or challenges. Stay flexible and ready to make changes as your needs and circumstances evolve.