what is a financial plan 
a financial plan is a document that details a person s current financial circumstances and their short and long term monetary goals it includes strategies to achieve those goals a financial plan can help you to establish and plan for fundamental needs such as managing life s risks e g those involving health or disability income and spending and debt reduction it can provide financial guidance so that you re prepared to meet your obligations and objectives it can also help you track your progress throughout the years toward financial well being financial planning involves a thorough evaluation of one s money situation income spending debt and saving and expectations for the future it can be created independently or with the help of a certified financial planner understanding a financial planwhether you re going it alone or with a financial planner the first step in creating a financial plan is to understand how important it can be to your financial future it can provide the guidance that assures your financial success start your planning effort by gathering information from your various financial accounts into a document or spreadsheet then make some basic calculations that establish where you stand financially you may complete the following steps as an individual or a couple to calculate your current net worth subtract the total for your liabilities from the total for your assets begin by listing and adding up all of the following cash flow is the money you take in measured against the money you spend to create a financial plan you must know your income as well as how and when your money is spent documenting your personal cash flow will help you determine how much you need every month for necessities how much is available for saving and investing and where you can cut back on spending one way to get this done is to review your checking account and credit card statements collectively they should provide a fairly complete history of your income and spending in a wide range of spending categories for example document how much you ve paid during the year for housing expenses like rent or mortgage payments utilities and credit card interest other categories include food household including clothing transportation medical insurance and non covered medical expenses still others can include your spending on miscellaneous entertainment dining out and vacation travel once you add up all these numbers for a year and divide by 12 you ll know what your monthly cash flow has been and where you can improve it 