Financial plans sound like the kind of things your parents would have but you’re never to young – or to old – to start building one. The basis of a good financial plan is in the answering of the following questions:

• Where are you now with regards to your finances?
• Where do you want to be or what do you want to achieve in the years to come?
• How do you intend to get from your situation now to the life you want in the future?

If you can answer these three questions with certainty then you have the majority of your financial plan in place but if you can’t then you need to put aside a few hours and crunch some numbers.

Where are you now?
Very few people enjoy looking at their present finances, especially if there are debts involved. It is vitally important though that you understand exactly how much money you owe to creditors, how much you have in savings accounts and other investments and how much you pay out for other financial products, such as insurances and pensions. You need to collect together as much information as possible and organise it in an easy-to-understand format. For some this may be in the form of statements in a ring binder while others may prefer to use a spreadsheet.

Either way, when the information is summarised you can quickly refer to it should the need arise and your summary can easily be updated on a month to month basis.

Where do you want to be?
Every financial plan needs at least one goal otherwise you have nothing concrete to work towards. A good plan will have short term, medium term and long term goals with the ultimate goal being something like your retirement date.

Short term goals should include anything that you want to achieve within the next five years and can include things like paying off credit card debts, saving a set amount of money etc. Medium term goals should then be achievable within 5-10 years and might include being able to afford a bigger house or a new car. You long term goal might be to pay off your mortgage or to retire at 60.

It is important when choosing your goals for the future that you make them specific, measurable, achievable, realistic and timely. By this we mean that your goals shouldn’t be totally unrealistic and involve becoming a billionaire or the owner of Buckingham Palace! If you can put detail into your goals they will become easier to focus on and to achieve.

How are you going to get there?
So now you know where you are and where you want to go all you need is a map to get there. The key to this financial planning map is to prioritise your goals or objectives and work on the most pressing ones first. For most this will be dealing with debt but once this is done you can start work on your other objectives until you complete them all.

Obviously this can’t happen overnight but once you have a financial plan in place it is a lot easier to start towards your goals and to stay motivated. You will need to review your plan and update it on a regular basis so that any changes can be noted – whether for good or bad. It doesn’t take long to build a financial plan but in doing so you will always have something to aim for in the future, and as an added bonus you’ll be surprised how quickly things change when you get your finances organised.