Steps for long-term financial planning
Quick insights
- Long-term financial planning is the process of managing your money over a period to achieve personal goals and a degree of stability.
- The most helpful steps and strategies of a long-term financial plan typically include specific amounts and dates.
- Planning how you’ll manage money over a longer period usually includes a financial safety net and common life events, as well.
People may take similar financial steps when crafting a long-term plan. However, the details depend on individual circumstances and goals—present and future included.
What is the process of long-term financial planning?
Long-term financial planning is like making a detailed roadmap for how you’ll manage your finances over an extended period. This plan you make could span decades, but it doesn’t just mean saving for retirement. Education costs, family needs, large purchases and emergencies are also part of long-term financial planning.
How you can plan finances for the long run
Below, we've outlined one approach to long-term financial planning that may set you up for success.
Step 1: Assess your current financial situation
Start by evaluating your current financial health—look at your income, expenses and debt. Before setting any long-term goals, take a close look at your financial picture. This includes understanding how much you earn, how much you owe and where your money is going. A budget is an important tool here—almost like a financial GPS, showing you where you’re starting and how to get where you want to go.
Step 2: Define your financial goals
Goals are at the heart of a long-term financial plan. Define clear financial goals that you want to achieve in the next five, 10, 20 years or more. Common long-term financial goals are retiring by a certain age, buying a home or funding a child’s education. Clear goals give you something to aim for, but it’s important to be specific with amounts and time frames. For example, don’t just say “save more”—try “save $100 a month for the next year, so I can put a down payment on a car.”
Step 3: Develop a strategic financial plan
Your plan should contain actionable steps based on specific goals, such as saving a set amount monthly, paying down debt and possibly investing. Your plan should be structured and straightforward enough to follow, but flexible to adapt to life changes. With clear goals and steps you’ll take, you can merge your long-term plan into your monthly budget.
Step 4: Follow your plan
Start executing your plan by setting up the necessary accounts (such as savings or retirement accounts) and automating transfers to them. A long-term financial plan can be an effective guide to help you meet both short-term needs and long-term dreams, while maintaining financial stability along the way. It helps you take control of your finances, ensuring you save, invest and spend wisely.
Step 5: Monitor and revise your financial plan
Review your financial plan at least once a year, or whenever there’s a significant life event like marriage, having a child or a job change. Financial plans are not static. They can be flexible as your life changes and should evolve with changes in income or market conditions. Adjust your plan when key events in your life change, so that the plan aligns with evolving goals and circumstances.
In summary
Long-term financial planning is about creating a plan for how to manage your money over a period you decide. Start by assessing your current financial situation, including income, expenses, debts and assets. Next, set goals based on what’s important to you, then declare the steps or strategies for reaching those goals, such as setting aside monthly savings.
Remember to reward yourself for hitting milestones, too, which can keep you motivated to continue following your plan. With clear goals, steps, regular check-ins and refinements, you can succeed financially and navigate what life throws your way.