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What is a Financial Roadmap and How to Make One for Yourself | INVESTEDMOM

What is a Financial Roadmap?

A financial roadmap is a strategic plan for mapping out your short- and long-term goals for better financial planning. Physically planning your finances using a financial roadmap helps you assess your current financial situation, set realistic goals, and guide your decisions to reach your long-term goals more effectively.

Although a financial roadmap is unique to every person’s situation and financial goals, below we talk about how a typical financial roadmap is created to help you get started.

How to Create a Financial Roadmap

1) Evaluate Your Current Financial Position

Before taking steps to reach where you want to be, you need to know where you currently stand. Evaluate your current financial situation by listing your current expenses, liabilities, assets, and income. You should also note your typical spending habits.

It's vital to be completely honest in this step, as it will be the foundation of your financial roadmap. A good way to check yourself is to look at past expenditures and evaluate your financial position based on that. 

For example, you may think you don't spend a lot of money eating out, but the last few months might say otherwise. 

Evaluating yourself like this will help make a more accurate financial roadmap.

2) Identify and Set Goals

After getting an idea of where you're currently at, you should set realistic goals of what you want to accomplish. 

The best way I've found to set effective goals easily is by setting SMART goals. Basically, that means the goals you set should be:

  • Specific - have a specific goal in mind. Rather than stating something like "save more money," say, "Save an extra $100 every month" 

  • Measurable - the goals you set should be measurable to determine if you’re making any progress on your financial journey or not

  • Achievable - set realistic goals which you are confident can be achieved based on your current financial situation 

  • Relevant - your goals should be relevant to what you want to achieve and align with your long-term goals

  • Time-bound - set a time limit on achieving your goals to prioritize important steps toward your financial freedom

3) Create a Spending Plan

A spending plan includes strategies to reduce expenses and increase income. This is done by first highlighting your expenses and income and then calculating your total cash flow. 

Your total cash flow is your income minus your expenses. The resulting amount is how much you have left after expenses.

It can also be that you don't have any money left after expenses, so we'll have to fix that. That's where the strategy comes in. 

There are essentially two ways of having a positive cash flow: reducing your expenses or increasing your income. 

You can reduce your expenses by:

  • Buying generic products rather than branded products

  • Buying second-hand items

  • Using coupons for grocery items

  • Cutting down on outside food and learning to cook homemade meals

To increase your income, you can:

  • Ask for a raise from your employer

  • Find a higher-paying job or work overtime

  • Start a side hustle or take on a second job to make extra money

  • Take up some freelance work to supplement your day job

By following the above suggestions, you could improve your cash flow. You can start focusing on your financial priorities with a positive cash flow. 

4) Build Up Your Savings

Having a savings plan is a critical component of your financial roadmap. A savings plan provides you with a way to save up money for an emergency fund, retirement, or your child's college fund.

Whatever you may be saving for, your next step may be to find a suitable way to collect your savings. This can be done through opening savings accounts or a tax-advantaged account, depending on your goals.

Finally, you can decide on what money you’ll be adding to your savings. For example, you can save all the money you earn from a side hustle and only spend on the income you get from your full-time job. Warren Buffet sums this up perfectly:

“Do not save what is left after spending; instead, spend what is left after saving.” - Warren Buffet

5) Tackle Debts

Finally, your financial roadmap should include strategies to minimize your debts. The first step to reducing debt is preventing more debt.

Try to reduce credit card debt by using a debit card and not making unnecessary purchases.

Here are some tips to reduce your debt:

  • Pay your bills on time and in full to avoid incurring high-interest rates and late fees

  • Tackle the high-interest debts first to avoid letting them grow and spending more money towards clearing it

  • Reduce the amount of credit cards you have and use a debit card where possible

  • Contact your creditor(s) about adjusting your repayment schedules to something that fits better within your budget

  • Reach out to a credit counselor to develop a plan that effectively enables you to clear out your debt as quickly as possible

  • In the future, avoid incurring any more debt and use a debit card or cash wherever possible

Conclusion

Not being in control of your finances can be a major cause of stress for many people. Without a proper roadmap of your finances, you’ll be unable to make well-informed decisions, reach your financial goals, and worsen your financial well-being.

In this article, we aimed to explain what a financial roadmap is and the importance of having one. To create your own financial roadmap, you need to list and develop strategies to evaluate your current financial situation, identify your goals, create a spending plan, build up savings, and clear any debts you might’ve taken on.

Need more help? Work with me and increase your income through my self-paced financial literacy course today.



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