The first step to creating a financial plan is to sit down and think about what you really want—your financial goals—both now and in the future.

The best financial plans include:

An emergency fund. Life happens! An emergency fund means you won’t have to worry about how to pay for that leaky roof, new transmission or any other problems that will inevitably creep up when you least expect it.

A plan to manage debt. Debt is a reality for many folks. But if it’s not managed carefully, it can be a drag on your ability to meet your financial goals over time.

Ways to protect your finances. While an emergency fund helps cover short-term expenses when something goes wrong, insurance protects you and your family financially against big risks, like losing the ability to work or the death of a loved one.

A plan to grow your money. Investments like stocks and bonds can help grow your money over time for long-term goals like buying a home, paying for college or saving for retirement. A financial plan will make use of tax-advantaged accounts whenever possible to stretch your dollars even further.

An estate plan. Whether you’re young and starting out or already in retirement, an estate plan is an important part of making sure your wishes are carried out after you’re gone.

A retirement plan. When you get to retirement, a retirement plan will help you tap all the options in your financial plan to reliably generate the income you’ll need to support your lifestyle. These options could include your investments, life insurance and annuities, which pay guaranteed income.

While some plans may focus more on one area than another based on your situation, all these components work together. For instance, having an emergency fund helps you avoid taking on more debt or withdrawing from your investments if you lose your job.

Source:  https://www.northwesternmutual.com/life-and-money/what-is-a-financial-plan/?