How to Start Your Financial Journey Step by Step

Set Your Financial Goals

Define your financial goals whether you want to save for retirement, create an emergency fund or take a foreign vacation. These goals can be short-term and long term and identifying them will help you create an effective financial plan. Set realistic timelines for your goals so that they’re achievable and align with your financial capacity.

Gather Financial Information

Collect and analyze your financial data such as bank statements, insurance policies, investments and tax returns to understand your financial position. This will help you make a budget by identifying your expenses and income.

Assess Your Financial Situation

Know the in and out of your finances such as your income, expenses, investments and debt etc. This will help you determine your savings available for investments, risk appetite and measure the gap between your current financial situation and your goals.

Prioritize Financial Goals

Identify your short-term and long-term goals and prioritize them as per their importance to create an effective financial plan. You can use certain ready-made strategies, such as SMART (Specific, Measurable, Achievable, Relevant and Time Bound), to rank your goals. This will help you allocate resources and efforts based on their rank in the priority list.

Create A budget

Creating a budget is the most crucial step in financial planning. Evaluate your income, expenses, savings, debt and investments to create a realistic budget that you can follow. It is recommended to keep track of your cash outflows and fix any leaks in your budget, such as unnecessary expenses.

Stick to your budget and through trial and error, you will have an optimised budget that fits your lifestyle and financial plan.

Build an Emergency Fund

Many people confuse emergency funds with savings, but there is a stark difference. Savings can be used for certain expenses, but emergency funds would be used only in case of an emergency. An emergency fund is used for specific situations such as medical emergencies or financial emergencies.

Make Investments

A savings account offers a minimal interest rate while investments in stocks, mutual funds and other assets generally provide a higher interest rate that keeps pace with growth, inflation and preserves the value of your money. Identify and evaluate investment options that align with your financial goals and risk appetite for a secure financial future.

Obtain Insurance

Insurance is a great tool that protects you against financial pressure in times of medical emergencies. Having comprehensive health insurance covers most of the medical treatments, reducing your financial burden. And life insurance ensures the financial well-being of your family in the event of your death.

Review & Adjust Your Financial Plan

Following the above steps will guide you in the right direction in your financial planning journey, provided that you regularly review and tweak your financial plan. As your expenses, income and risk tolerance evolve, adjust your financial planning so you can achieve your goals within the set timelines.