How to Create a Financial Plan: A Step-by-Step Roadmap to Financial Freedom
Money can stir up a whirlwind of emotions. Our experiences with money growing up shape our perceptions and beliefs about it. But here’s the truth: money itself is neutral. The behaviors and actions of people determine whether money becomes a force for good or bad in our lives. So let’s shift our perspective and see money for what it is: just money.
One common misconception is that money can buy happiness or joy. But the reality is happiness and joy are states of mind that can be achieved regardless of our financial status. Money, however, does provide something invaluable: freedom and choices. Financial stability reduces stress and allows us to focus on what truly matters without constantly worrying about bills or expenses. It opens up doors to new opportunities and experiences.
Another myth that needs debunking is the notion that wealth and financial freedom are reserved for the privileged few. It’s not true. While the journey might be more challenging for some due to factors like background or ethnicity, anyone can achieve financial freedom and build wealth. Believing in this truth is crucial because our beliefs shape our outcomes.
Before we dive into designing a roadmap, let me clarify that I am not a financial advisor. I encourage you to seek professional guidance as you navigate your own financial journey.
As a black female who grew up on the south side of Chicago, I do understand the challenges firsthand. I graduated from college burdened with over $40k+ of student loans and credit card debt (I will never get a Discover card again in life). However, I embarked on a financial journey when I started my career, and since then, I have maintained a debt-free status aside from mortgages. I am not a millionaire (yet), but I am financially fit.
- I have no debt but my mortgage. I have been debt free for about 15 years.
- I use my Chase Sapphire Credit card for all my expenses to earn travel points, paying off the balance in full each month without fail. This disciplined approach has allowed me to stay within my means and avoid overspending.
- I strongly believe in saving and investing, making them integral parts of my annual budgeting. Creating an emergency fund with at least three months’ worth of expenses is a goal everyone should aim for.
- Recently, I purchased my third home in 15 years. The intention was not for it to be solely an investment; more importantly, I purchased it for personal enjoyment and fulfillment.
I share my story because, statistically, I shouldn’t be where I am today. What brought me here is my unwavering belief in myself and my dreams, my determination, self-discipline, accountability, and the actions I took. I forgave myself when I stumbled along the way and kept pushing forward.
Remember, your financial journey is uniquely yours. Embrace your dreams, believe in yourself, and take action. Seek guidance when needed, but know that you have the power to shape your financial future. Let’s embark on this journey together, breaking free from the limitations society has imposed. It’s time to create a roadmap that leads us to financial freedom and the life we truly desire.
- The Financial Roadmap
- Budgeting Tools
- Financial Podcasts and Episodes
- Finance Books
- Finance Social Media Accounts
- Ways to Invest
- Financial Resources
The Financial Roadmap
Taking control of your financial journey is a transformative process that begins with changing your money mindset and equipping yourself with essential financial knowledge. This roadmap is tailored to women who want to take action, providing step-by-step guidance on shifting your mindset, understanding your finances, getting out of debt, tracking your finances, and building wealth. Let’s embark on this empowering journey together and pave the way to a brighter financial future.
Step 1: Transform Your Money Mindset
Shifting your mindset is crucial for long-term financial success. Besides the items I mentioned at the beginning of this article, consider the following steps:
- 1.1. Reflect on Your Beliefs: Examine your attitudes towards money, any limiting beliefs, and past financial experiences that may be holding you back. Challenge negative thoughts and embrace a positive mindset focused on abundance and financial empowerment.
- 1.2. Cultivate Financial Confidence: Believe in your ability to make sound financial decisions and take control of your financial destiny. Surround yourself with positive influences, read empowering books (some are linked below), and seek support from like-minded individuals or mentors.
- 1.3. Practice Gratitude and Abundance: Appreciate what you have and adopt a mindset of abundance rather than scarcity. Gratitude can help shift your focus towards opportunities and attract more financial abundance into your life.
Step 2: Educate Yourself on Finances
Gaining financial knowledge is essential for making informed decisions. Consider the following strategies:
- 2.1. Read Personal Finance Books: Start building your financial literacy by reading books on personal finance. Recommended titles are below under “Finance Books.”
- 2.2. Follow Reputable Financial Websites and Blogs: Stay updated on financial news, tips, and strategies by following trusted websites and blogs like Investopedia, NerdWallet, and The Penny Hoarder.
- 2.3. Attend Financial Workshops and Webinars: Take advantage of free or paid workshops and webinars offered by financial institutions, community organizations, or online platforms. These events can provide valuable insights and practical advice on various financial topics.
Step 3: Assess Your Current Financial Situation
To lay a strong foundation, evaluate your current financial status. Remember to get a free credit report from annualcreditreport.com. Take the following steps:
- 3.1. Calculate Your Net Worth: Determine your net worth by assessing your assets (savings, investments, property) and subtracting your liabilities (debts). This snapshot will provide a clear starting point.
- 3.2. Evaluate Your Debts: List all your debts, including outstanding balances, interest rates, and monthly payment obligations (Use a digital spreadsheet like Notion, Google Sheets, or Microsoft Excel). Prioritize paying off high-interest debts first to reduce financial stress.
- 3.3. Create a Budget: Establish a realistic monthly budget that covers essential expenses while leaving room for debt repayment and savings. Utilize tools like Mint, You Need a Budget (YNAB), or personal finance apps to track and categorize your spending (for more examples, look under “Budgeting Tools” below).
Step 4: Develop a Debt Repayment Strategy
Getting out of debt is a crucial step toward financial freedom. Consider the following steps:
- 4.1. Set Clear Debt Payoff Goals: Determine each debt’s timeframe and specific targets. Choose a strategy that works best for you, such as the snowball method (starting with the smallest debt) or the avalanche method (tackling high-interest debts first).
- 4.2. Negotiate Lower Interest Rates: Contact your creditors to explore options for reducing interest rates. Consolidating debts or transferring balances to lower-rate credit cards can also save money.
- 4.3. Increase Debt Payments: Allocate as much as possible from your budget towards debt repayment. Consider additional income sources or cutting expenses to accelerate the process.
Step 5: Master Financial Tracking and Management
To gain financial clarity and control, implement the following practices:
- 5.1. Track Your Spending: Regularly monitor and review your expenses against your budget. This habit will help identify areas where you can make adjustments to save more.
- 5.2. Automate Savings and Bill Payments: Take advantage of automation to boost your savings and ensure timely bill payments. Once I paid off my car a few years ago, I set up automatic transfers to redirect the former car payment amount directly into my savings. This simple step allowed me to effortlessly increase my savings without affecting my monthly expenses. Consider automating your bill payments as well to avoid late fees or missed payments. Additionally, make it a yearly habit to negotiate your bills and be open to switching to another provider if you find yourself being overcharged.
- 5.3. Build an Emergency Fund: Aim to save 3-6 months’ worth of living expenses in a separate account. This fund provides a safety net during unexpected events or financial emergencies. I suggest putting it in a money market or high-yield savings account.
Step 6: Cultivate Wealth-Building Habits
Now that you have a solid foundation focus on growing your wealth. Consider the following strategies:
- 6.1. Invest for the Future: Educate yourself about investment options such as stocks, bonds, mutual funds, and real estate. Consult a financial advisor if necessary to determine the best investment vehicles aligned with your goals. Two really good books are Invested and Quit Like a Millionaire.
- 6.2. Maximize Retirement Contributions: Take full advantage of employer-sponsored retirement plans, such as 401(k) or similar accounts, ensuring you contribute enough to receive the maximum employer match. If you’re self-employed, consider opening a Solo 401(k) or a SEP IRA to maximize your retirement savings potential. Take advantage of the tax benefits and contribute as much as you can to secure your financial future. Remember, saving for retirement is equally important, whether you’re an employee or self-employed.
- 6.3. Diversify Your Income: Explore ways to generate additional income, such as freelancing, a side business, or investing in passive income streams like rental properties or dividend stocks.
So that is the plan, my friends! Remember, it’s not a one-time thing. Make sure to review your financial plan every year (yes, every year) to stay on track and make necessary adjustments. And here’s a valuable tip to supercharge your progress: consider finding an accountability partner or joining an accountability group. Having someone to share your goals, progress, and challenges with can provide the extra motivation and support you need to stay committed and achieve even greater financial success.
I’ve included a list of helpful resources below to assist you on your financial journey. If you have any questions or need further guidance, please don’t hesitate to leave a comment.
- Quicken Mac + PC (This is the finance tracker I use; paid only)
- Mint (Finance Tracker; free and paid version)
- You Need a Budget – YNAB (Finance Tracker; paid only)
- The 8 Best Budget Apps for 2022 by Nerd Wallet (The top three listed are what I recommend, but there are others to consider in this article)
- How Safe Are Budget Tracking Apps and Software? (US News)
- How to Know If Your Mobile Finance Apps Are Safe (Mcafee)
Financial Podcasts and Episodes
- Studio 78 Podcast: 157. Financial Wellness: Set and Achieve Financial Goals
- Studio 78 Podcast: 03. Financial Preparedness and Money Mindset with Marsha Barnes from The Finance Bar
- Studio 78 Podcast: 75. Money Mindset and Revenue Generating Tips For Your Side Hustle with Kara Stevens the founder of The Frugal Feminista
- Studio 78 Podcast: 142. Money Talk: Debt Pay Off, Building Wealth, Emergency Funds, and Money Mindset with Latosha Thomas
- Financial Feminist Podcast – Her First $100k
- The Financial Confessions Podcast by The Financial Diet
- The Get Paid Podcast (Claire Pelletreau interviews women in several industries and discusses real numbers)
- The Smart Passive Income (I’ve been listening to Pat Flynn forever. If your financial plan is to start a business, you should listen to the podcast)
- The Purpose of Money Podcast with Acquania Escarne
- So Money with Farnoosh Torabi
- InvestED with Phil Town and Danielle Town
When it comes to financial books, the options can be overwhelming. It’s challenging to know whose advice to follow. As you embark on your financial journey, choose strategies that align with your life and seek out books that resonate with your goals. However, keep an open mind to alternative approaches that may complement your financial plan. While older books offer timeless wisdom, don’t forget to explore recent publications for the most up-to-date information.
I’ve had the opportunity to read numerous financial books over the years, and I’d love to share my recommendations. I’ve enjoyed all of them, but I’ve marked ⭐️ those that I highly recommend. Feel free to browse through “My Bookshelf” for more titles I’ve found valuable. I also highly suggest getting a library card and adding it to the Libby app. You can then read digital versions of books in text and audio form.
- Girl, Get Your Money Straight: A Sister’s Guide to Healing Your Bank Account and Funding Your Dreams in 7 Simple Steps by Glinda Bridgforth (the 1st book I ever read on money circa 2002)
- ⭐️ How to Unf*ck Your Finances a Little Bit Each Day: 100 Small Changes for a Better Future by Jo Stewart (This is a quick, easy read with practical steps and tips)
- ⭐️ Invested: How Warren Buffett and Charlie Munger Taught Me to Master My Mind, My Emotions, and My Money (with a Little Help from My Dad) by Danielle Town
- Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine by Mike Michalowicz
- Pogue’s Basics: Money: Essential Tips and Shortcuts (That No One Bothers to Tell You) About Beating the System by David Pogue
- Quit Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required by Kristy Shen, Bryce Leung (She teaches the FIRE (Financial Independence Retire Early) method)
- ⭐️ The Life Cleanse Journal (TLC) by Nache Snow (This is a journal I created to have people evaluate and take action on 10 areas of their lives. I, of course, have an entire chapter dedicated to reflecting on your finances)
- The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime by MJ DeMarco (He teaches the passive income method; warning he’s a bit crude, but there is some good stuff in the book)
- The Money Book for Freelancers, Part-Timers, and the Self-Employed by Joseph D’Agnese and Denise Kiernan
- The Overspent American: Why We Want What We Don’t Need by Juliet B. Schor
- ⭐️ We Should All Be Millionaires: A Woman’s Guide to Earning More, Building Wealth, and Gaining Economic Power by Rachel Rodgers
- ⭐️ Work Optional: Retire Early the Non-Penny-Pinching Way by Tanja Hester
- 7 Money Mantras for a Richer Life: How to Live Well with the Money You Have by Michelle Singletary
- Your Money and Your Man: How You and Prince Charming Can Spend Well and Live Rich by Michelle Singletary (If you are thinking about getting married, this is a really good read)
- ⭐️ You Are a Badass at Making Money: Master the Mindset of Wealth by Jen Sincero
Finance Social Media Accounts
- @erikakullberg (TikTok + IG) Lawyer that reads the fine print to save you money
- @TheBoujeeBanker (TikTok + IG) Lots of investment tips with other budget goodies
- @your.richbff (TikTok + IG) Wall Street Women that passes along a ton of tips
- @frugalfeminista (IG) Finance coach
- @financebar (IG) Great for learning money basics
- @latosha_n_thomas (IG) Money motivation; debt challenges
- @itsrosehan (IG + YouTube) Vanlife, empowers people to be better financially
- @ifundwomen (IG + TikTok) Funding marketplace
- @ellevest (TikTok + IG) Finance company that shares tips
- @thekeyresource (IG) Real estate advice
- @onesavvydollar (IG) Real estate investor
Ways to Invest
- IRAs (IRS breakdown and Nerd Wallet article)
- 401ks (IRS breakdown and Nerd Wallet article)
- Late planning for retirement? Read these articles from Investopedia, fool.com, and Business Insider
- annualcreditreport.com (free credit report)
- Chime Credit Builder (One option to help build your credit)
- Find old 401ks -US Department of Labor (Good article: Nerd Wallet)
- Estate Planning Checklist: A 7-Step Guide to Getting Your Affairs in Order by Nerd Wallet (I can’t stress enough how important this is)
- The Ultimate Side Hustle List: 100 Ways to Earn Extra Money
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