When you think of financial planning, maybe you picture the dull, boring slog of dealing with taxes and mountains of paperwork. But financial planning doesn’t need to be this way. As long as you have a clear idea of your goals and are committed to setting aside some time to maintain them, financial planning is simple. So, what are the key things you need to know for good financial planning? Let’s explore this:

Define and agree your financial goals

If you’re putting a financial plan together, these goals and objectives will be the guide to your financial plan. These goals should be clear, quantifiable and achievable, with an agreed timeframe and with your needs clearly separated from your wants. Are you perhaps saving for a wedding or a house? You should also check up on how you’re meeting your financial goals every now and then to see how you are getting on. On top of this, it’s fine for your financial goals to change and evolve.

Collect your personal and financial information

It will be easier to work on your finances if you have your information and papers together. This includes things like bank statements, records of your income and expenditure, receipts for your assets or large purchases, and anything else relevant. You could use your bank app to look at your spending every month, or use online banking to download your bank statements. This information can help you develop a monthly budget or just get a sense of your past expenditure.

Think about the future

The longer into the future you think about, the better your financial planning. If you are at an early stage in your life, you are able to take some risks with your money, but you should still be fairly cautious. Try investing some money in risky yet high yield ventures, but always have a safer savings account to back yourself up. Save as much as you can at this early stage.

Spend less than you make

It’s a cliche, but taking care to spend less than you earn is some of the most prudent financial advice there is. Who wouldn’t do this? Spending less than you make can be surprisingly difficult in practice, however. The best way to spend less than you earn is to first make a budget. Get a sense of what you’re spending every week, day, and month. Try to get a sense of the prices of things and don’t allow yourself to splurge on anything too pricey. If you can keep up spending less than you make over a long time, you’ll do well and develop good financial habits.

Keep up your emergency fund

You just never know when life is going to decide to throw a surprise your way. You may face unexpected medical bills, need a car repair, or have to do some work on the house. So, setting aside a certain amount of emergency savings can give you the confidence and security you need to face life, make big decisions and do other things with your money.

How large should your emergency pot be? Ideally, an emergency fund is as much as you can spare. However, some famous rules of thumb are at least 3 to 6 months of your average expenses, 20% or so of every paycheque, or somewhere between $12,000 and $24,000.

Try not to get into debt

Easier said than done, we know, but debt greatly limits your ability to do much, finance-wise. Sure, it can seem like a loan will tide you over until your next paycheque. But debt causes long-term problems that can decrease your ability to make investments and save for the future. Debt can magnify existing financial problems.

Plan for your retirement

Making a plan for your retirement has grown more important than it was a decade ago. With today’s increased life expectancy and more sedentary lifestyle, we’ve grown more prone to certain ailments. This has led to the cost of healthcare skyrocketing. This, coupled with the more well-known costs of retirement means that it’s now imperative to plan for your retirement early on. So, start planning how much you’ll need during retirement early.

Figure out your estate

What’s your estate? It’s not just your house – all your assets, including your car, savings, and any other large purchases form your estate. It’s your responsibility to decide what will happen to your set of assets when you pass on. You must plan who will receive each asset and allocate everything to the right person.

If you want to make sure your assets make it to the right person, you must plan out your estate as soon as you can. Simply make a list of your assets and your beneficiaries. Then, decide which proportion of your assets should be given to each person. When you’ve finished this, make your will to ensure all the recipients get what you intended.

Have a diverse portfolio

If you want to create a portfolio of assets, you’ll need to distribute your assets. This typically means allocating your assets between classes like debt, equity, and cash. Each has its own unique set of advantages. While equity is tax-efficient and counters inflation, diversifying your funds into a wide range of investments is usually a better idea. Allocate your assets in accordance with your financial goals. On top of this, always review your portfolio to check it is on par with market fluctuations.

Prepare for taxes

Tax planning is one of the best ways to optimize your finances. When you plan your taxes, you can take advantage of tax deductions, exemptions, and other benefits. This can reduce your tax liability at the end of every financial year.

Anticipate risks

One of the keys to financial management is risk management. Whatever investment you make, from staking it all in cryptocurrency to just using a normal, everyday current account, your life and property are always at risk. You probably have a financial plan, but do you have an insurance plan? A term insurance policy gives you a higher risk coverage, while the policy premiums are a reasonable price to part with. A typical term insurance policy has an assured sum of about ten times your annual income. You may also need health insurance, too.