Creating a Financial Roadmap: The First Step to Wealth

Building wealth isn’t easy, and it’s not for everyone. It requires a series of best practices and a long-term perspective.

The first step in this process is creating a financial roadmap. This will help you identify where you are financially and where you want to be. It will also allow you to create a plan to get there.

  1. Set Your Goals
    A financial roadmap is a tool that provides a realistic view of your goals, both short and long-term. It’s also a great way to stay motivated, especially when life circumstances arise.

Short-term financial goals include paying down debt and saving for emergencies. Long-term goals are more complex and include creating wealth through retirement planning, investing and achieving financial independence.

Use the Financial Roadmap feature in EveryDollar to create a budget and prioritize your short- and long-term goals. Label each goal as a critical, need or want so you know what to fund first.

  1. Track Your Expenses
    Getting an accurate picture of your spending habits requires compiling a list of your fixed and variable expenses. This includes recurring items such as housing costs, car payments, insurance, and food, as well as discretionary items like entertainment, clothing, and streaming subscriptions.

Next, comb through pay stubs and bank statements to find your income sources. Finally, determine your net income by subtracting expenses from total income. This is the baseline from which to work toward your goals.

  1. Create a Budget
    Once you have your goals set, it’s time to develop a savings plan. This involves creating a budget, and tracking your spending to see how well you’re sticking to it.

Using credit cards responsibly is another key aspect of this process. It’s important to minimize debt and to save enough money for things like a car or a home.

Financial freedom and security are major goals for Millennials, Gen-Z and Baby-boomers alike. Achieving these goals takes more than just good intentions, however. Calculated steps are necessary.

  1. Create a Savings Plan
    Call it a cushion, nest egg or emergency fund, having an extra stash of money can help you reach short and long-term financial goals. Start by taking a close look at your cash flow to get an accurate picture of what you’re spending and find ways to save.

Make savings a priority by putting it in your budget or on your schedule each month. And don’t give up if life throws you a curve ball. A financial advisor can help you rework your plan to keep you on track.

  1. Create a Spending Plan
    The next step in building a spending plan is to categorize expenses as needs and wants. For example, gasoline is a need, but a music subscription might be a want.

This helps you get an accurate picture of what you’re spending and can reveal ways to redirect more money toward your goals. It’s also an excellent way to see the impact of various strategies, like stock option exercises, college education funding, or family gifting programs.

  1. Create a Retirement Plan
    As you look forward to the future, it’s important to consider your retirement income. Make sure you have a savings plan in place and are maximizing any income from sources like Social Security, pensions and investments.

An immediate plan might include creating a budget and paying down debt. A medium-term plan might involve investing in a diversified portfolio, and a long-term plan might include saving for college or buying a home. This feature ranks planning topics based on how important they are to you, and as your priorities change, it updates the recommendations accordingly.

  1. Create a Savings Account
    It’s important to have a savings account to help you save money. This allows you to keep your funds separate from your checking account and also earn interest.

This will encourage you to save and reach your financial goals faster. It is also a great place to store your emergency fund.

If you’re not saving enough, consider increasing the amount you’re contributing each month or making additional contributions to your retirement accounts or other investments. It could make a big difference in how much you’ll have when you retire.

  1. Create a Debt Reduction Plan
    Debt can feel like financial handcuffs, and can make it difficult to work toward your financial goals. The right debt reduction plan can help you break free and get back on track to a more prosperous future.

Start by assessing your current situation and finding ways to free up funds you can use to pay off your debts. Then, choose a debt payoff method, such as the avalanche or snowball approach.

It’s important to remember that your life won’t always look the same as it does now. Your income may go up or down, and you’ll need to adjust your budget accordingly.

  1. Create an Investment Plan
    Many financial professionals now consider strategic financial planning a part of their holistic approach. One institution even had the Board add a roadmap as an additional part of their strategic planning process.

Start by understanding where you are financially and where you want to be. This includes determining your personal net worth, investment risk tolerance, and life milestones.

Next, create an investment plan that will help you reach your goals. This can be as simple or sophisticated as you wish. It can also change over time.

  1. Create a Savings Account
    A savings account is an excellent place to put money that you don’t need to access on a regular basis. It also helps your money “work for you” by earning interest.

Keeping your savings separate from spending money can help you stay on track with your savings goals and curb overspending. But it’s important to weigh options and compare rates before you choose an account.

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