Get expert advice on every topic you need as a small business owner, from the ideation stage to your eventual exit. Our articles, quick tips, infographics and how-to guides can offer entrepreneurs the most up-to-date information they need to flourish.

Subscribe to our blog

Personal Finance Planning: How to Start Budgeting and Paying Off Debt

Posted by Neha De

September 14, 2021

Personal finance planning is a comprehensive and essential financial wellness process that empowers you to meet various goals, from saving for short-term necessities, to achieving your long-term aspirations, like a comfortable retirement or funding your child's college education.
Your personal wealth journey is one that requires meticulous financial goal setting, effective budgeting, strategic debt management, and careful risk management, throughout every stage of life. And while the personal finance planning process can be a complicated one, achieving the goals that mean the most to you is always worth the effort.

What are the major personal financial planning areas?

Optimizing your personal financial health doesn't have to be daunting. By following these three financial fundamentals, you can pay off debt efficiently, plan for the goals that matter, and experience lasting financial health:

Prioritize good financial habits

Prioritization is the essential first step towards effective personal finance planning, because it pushes you to focus on the income-generating activities and essential expenses needed to maintain your lifestyle.

By aligning your financial resources and income pursuits with your core needs and goals, you can create a robust foundation for financial stability and growth. Together, budgeting and revenue planning play a pivotal role in the prioritization process, helping you allocate your incoming resources efficiently, so you can avoid unnecessary expenses and have enough left over to enjoy your life.

Assess your financial trajectory

Before you can begin financial goal setting, you have to know where you're at—and where you want to end up.

For example, in order to understand how much you'll need to save to retire comfortably, you first have to estimate how much your current lifestyle costs. This initial assessment gives you an idea of how much and how long you need to save to reach the goal you're aiming towards. And once you have a clear assessment in mind, you can begin to fit your investment strategies, debt management, and tax planning around that goal.

Financial assessments like this require a thorough evaluation of your income, investments, side hustles, and other income-generating opportunities, now and in the future. That's why financial planning for beginners often involves a bit of a learning curve, while you get the hang of tracking, estimating, creating a budget, and goal-setting. Many people choose to work with a financial advisor during this assessment stage—a professional who can make the financial planning process easy and accurate.

With your financial trajectory defined, you can move to stage three of personal finance planning:

Practice restraint and debt management

Living within your means—saving and investing more than you spend—requires intentional restraint. Spending money is easy, but growing your emergency fund, paying off debt, or following your student loan repayment plan? That takes a planned effort.

Effective debt management is rooted in the principle of restraint. At its core, restraint means controlling your expenses and prioritizing healthy habits (like paying off debt) while you work to build a positive personal net worth. That's where frugal living tips—like cooking instead of eating out, or buying used instead of new—come in particularly handy.

Together, restraint and debt management can have a huge impact on your financial health, leading to a credit score improvement, enhanced financial security, and a more stable financial future.

How to make a personal financial plan

A well-crafted financial plan is the roadmap to achieving your financial goals. Follow these steps to create a comprehensive plan that positions you for financial success:

Step 1: Assess your situation

Take a look at your overall financial situation. Add up your assets, emergency fund, expenses, debt, and ongoing financial obligations to get a clear idea of just how much you need to maintain your lifestyle.

Step 2: Set personal finance planning goals

Identify the short-term and long-term financial goals that mean the most to you. Don't forget to include your ideal emergency fund total and tax planning needs. A comprehensive plan budgets for both unexpected expenses and upcoming taxes.

Step 3: Identify potential challenges

Could slowing cash flow, a big tax bill, or housing needs derail your financial plan? Make a list of the potential obstacles you may face in saving and following your investment strategies—then come up with a backup strategy for overcoming them.

Step 4: Create a written plan

Document the financial strategies you've come up with, including your ideal budget, investment plan, and debt management goals. By getting these numbers down on paper, you can track your progress—and celebrate your momentum.

Step 5: Implement your plan

Begin executing your personal finance plan, focusing on following your planned budget, paying off debt, and growing your savings.

Step 6: Review and reassess

Periodically review your financial plan, making the adjustments needed to stay in alignment with your financial goals. If your situation has changed, don't be afraid to create a new savings plan that meets your updated needs.

Optimizing your personal financial health is a lifelong process

Financial advisors can make the personal financial planning process simpler, especially if you're new to budgeting, investing, and tax planning. If you're overwhelmed by the planning journey—or just want a second opinion—consider partnering with a financial pro who can help you build a plan that meets your needs.

Personal finance planning is not a one-size-fits-all journey. It’s a personalized experience that evolves with your unique financial goals and challenges. By focusing on effective budgeting, strategic debt management, and targeted financial goal setting, you can make financial decisions with confidence—and enjoy the rewards of your hard work. 


Neha De
Neha De

Neha De is a writer and editor with more than 10 years of experience. She has worked on a variety of genres and platforms, including books, magazine articles, blog posts and website copy. She is passionate about producing clear and concise content that is engaging and informative. In her spare time, Neha enjoys dancing, running and spending time with her family.

We provide you with essential business services so you can focus on growth.