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1. Set financial goals.

Before calculating how you’ll accomplish something, you need to decide why you want to do it in the first place—your goal. The same is true with a financial plan: You need to identify what you want to achieve financially and why. They may be highly specific or kind of generic, such as:

• Saving a 20% down payment on a new home
• Establishing a college education fund for your children
• Paying down or minimizing debt
• Launching a small business
• Accelerating retirement savings

Once you’ve created a list of goals, you can probably sort them into three time-frame buckets. Those are:

• Short-term financial goals (six months to five years): What can accomplish relatively quickly? This may include paying down a debt and starting an emergency fund.
• Mid-term financial goals (five to 10 years): These financial goals probably feel relatively achievable, but may take a little bit of planning and saving. For example, you may have to gradually put money aside for a down payment on a home.
• Long-term goals (10+ years): The difficult part of a long-term goal is, while it is far enough in the future to feel less tangible, it’s probably also big enough that you’ll have an easier time reaching it if you start planning now—for example, paying for a few years of college tuition. It may take insight from someone like a financial professional to help.

If you can, attach specific timing to a goal. Say you’d like to set aside at least two years of college tuition for a child who is now three years old. You have about 15 years to do that.

Lastly, so you can build in some flexibility to your thinking, identify your financial goals as either needs and wants. You need to pay off your debt; you want to own a vacation home. That gives you some room to adjust through the years and as priorities change.

Tool: Record your decisions .

2. Establish and follow a budget.

A budget isn’t about restricting your spending; it’s a way to plan to reach those financial goals. Your budget should include all sources of income and expenses. One way to organize expenses in your budget is fixed expenses (think housing, transportation, debt, etc.) and discretionary expenses (restaurants, entertainment, gifts, etc.). The more detail in your budget, the better you’ll be able to spot pockets of opportunity—where you can tuck away more for retirement or allocate a little extra to an emergency fund.

When you create and manage a budget, lean in to what works best for you. Some people favor a spreadsheet, while others use a digital app or online tool. (You can create and track your budget in your �鶹���³�Ʒ dashboard. Log in and scroll down on the dashboard page to the “Your budget” section.)

Tool: Learn how to create a budget that works for you, with a downloadable budgeting sheet included.

3. Build an emergency fund.

All the planning in the world won’t help if life throws you a financial curveball and you’re not prepared: Just over half of all adults have three months of emergency savings put aside. It matters because if you can slowly build up and add to an emergency fund, you may be able to avoid dipping into savings or going into debt. Here’s how you can create yours:

• Calculate how much emergency savings you may need. There are recommendations—three months of living expenses is one—but those can sometimes feel out of reach. Instead, consider how much you’re reasonably able to set aside. Start small, if you must, but just start: $100 a month over time adds up.
• Pick a saving method. Automation makes it easy, but you may like to transfer small amounts as you’re able.
• Choose where you’ll save. Emergency funds are designed to be accessible, but not impulsive. Perhaps it’s as simple as a separate savings account.
• Decide when it’s OK to use the emergency fund, and how you’ll replenish it. One option: Is the expense unexpected, unavoidable, and urgent? If so, it’s more likely you need to use an emergency fund. And, much like it took time to build the fund, it may take time to build it back up.

Tool: Find steps to create and accelerate your emergency fund.

4. Manage debt.

The average American household carries a debt of over $104,000 , including mortgages and credit cards. Whatever your total is and however it’s spread across car loans, student loans, credit cards, and more, managing and minimizing debt is the next part of your financial plan. There are a couple of common strategies.

• The snowball method prioritizes paying smaller loans first, giving you a feeling of immediate progress that you can build on.
• The avalanche method suggests paying off loans with the highest interest rates so you pay less overall, even if you have more loans for longer.

Why does managing and paying off debt matter to your financial plan, in both the short and long run? Debt impacts credit scores, and a higher credit score generally equals a lower interest rate on big ticket items like homes and cars. In addition, debt like credit cards has a higher interest rate, which means purchases that linger on your balance end up costing you more.

Tool: Learn how to pay off the debt you owe now and build a long-term debt-management strategy (worksheet and calculator included).

5. Review your insurance, especially disability and voluntary insurance benefits.

Disruptions to your life—and your financial goals—because of disability happen more frequently than you might realize: A disabling condition will push one in four of today’s 20-year-olds out of work for at least a year before they’re retired.

If you’re employed, you may have some sort of disability insurance through work, but it’s worth investigating how much it is, and if you can or want to purchase more. Check with your HR department; one key question to ask about is the elimination period, or how long you would wait to receive benefits if you do become disabled. And, a financial professional can help you determine if your coverage level is high enough to protect you and your family.

As part of your financial plan, take time to dig into voluntary benefits if you have them, some of which may help your savings goals from getting derailed during big life events. For example, hospital indemnity insurance helps cover costs during accidents, illness, or maternity care; typically an employer doesn’t purchase it but may offer it for you to purchase, should you wish.

Tool: Use the disability income calculator to figure out how much disability insurance you may need.

6. Plan for taxes.

Paying taxes is part of your inevitable financial routine. How do you plan for them? First, know your current tax bracket and check with your tax advisor to ensure you’re not having too much (or too little) withheld. It’s also a chance to review deductions and credits, and better understand how saving in different accounts, from Roth IRAs to 401(k)s, affects your taxes. If you have access to a benefit such as a health savings account and expect to use it to pay for out-of-pocket medical costs, that could help reduce your overall tax burden. If you’re age 50 or older, you may be able to make catch-up contributions with your retirement savings.

Tool: Use our tax center on principal.com for information on ways to save on taxes and a tax planning worksheet.

7. Start saving for retirement as soon as you can, and as consistently as you’re able to.

Heard the adage, “It’s not timing the market, it’s time in the market”? What that means is, the longer you’re able to save for retirement, the more years your savings have to possibly grow. Perhaps when you’re starting your career, you’re only able to save enough to get the match from your employer for your 401(k). That’s OK. When you’re able, start layering in other savings funds and opportunities, from a post-tax Roth IRA to a pre-tax IRA. That will give you more options as you get closer to your own retirement. And know that, like many people, your savings may ebb and flow as other goals come into view; that’s the whole point of revisiting your financial plan on a regular basis.

Tool: Create your own custom retirement plan to help you take a more holistic approach to retirement.

8. Diversify your savings.

To reach your mid- and long-term goals, take your savings strategy and put an engine behind it. That’s what investing can do. Does your timeline and risk tolerance favor a more conservative approach, with options such as government bonds or certificates of deposit? Or do you prefer more aggressive investing in stocks and private equity? Regardless, diversifying your investments can help you generate more consistent returns over time to withstand volatility. To understand how to take a thoughtful, diversified approach—including regularly rebalancing your portfolio to account for market shifts and life stages—consult a financial professional.

Tool: Learn the basics of broadening your investments with these three steps.

9. Create an estate plan.

In the simplest terms, an estate plan details who makes financial and health care decisions for you if you can’t make them yourself. You don’t have to be wealthy, old, married, or a parent to need an estate plan. An estate plan, ideally including a will, enables you to clearly articulate your intentions for your assets after you’re gone. Who will wield power of attorney on your behalf? Will you include a living will in case you’re incapacitated and unable to communicate your wishes?

Tool: Learn the basics of estate planning and options for creating one.

The last step: Regular reviews of your financial plan

Put time on your calendar once a year to review and adjust your financial plan. And, if you have a big life change, changes may be necessary, too. Those include:

• Significant change in income
• Job change
• Change in family dynamics like adopting or having a baby, marriage, divorce, or death of a spouse/partner
• Selling or buying a home
• Inheritance
• Unexpected debt
• Change in financial goals