Consumer Debt in the U.S. has reached $14 trillion. While debt happens for many reasons, a big issue is poor money management. Unfortunately, most Americans don’t have the resources or education they need to properly manage their money.

One of the best ways to manage your money is by developing a Personal Financial plan. Developing a financial plan forces you to think about what you can and can’t do with your money, and it gives you more power over your spending.

At its core, you need to make money and save money. For tips on making money with a blog, see this checklist on Do Six Figures of how to start a blog.

Ready to learn the key components of a personal financial plan so you can get started today? Let’s do this.

Read also: How to build a nest egg on a small paycheck

Realistic Budgets

One of the most important aspects of a personal finance plan is a realistic budget. Credit cards cause some of the biggest portions of consumer debt because they make people think they have more money to spend.

Instead of using your credit, create a budget focused on your income. Consider what you make each month and start allocating it to the things you need first. Your budget should include food, rent or mortgage payments, utilities and healthcare.

From there, build your budget to include debt payments, savings and more. Through a realistic budget, you may find you have more to spend on the things you need while still leaving room for ad hoc purchases.

Debt Management Strategy

Debt management is another key component of any personal financial plan strategy. If you have any type of debt, it’s crucial to have a plan for paying it off as soon as possible. The longer you have debt, the more you’ll end up paying in interest.

There are several strategies you can use to pay off debt. Depending on your debt, you can consolidate it through personal loans or pay it off with a strategy like the snowball method.

Savings Strategy

Once you’ve budgeted and developed a debt payoff plan, you can start thinking about savings. The best personal financial plans let you prepare for the future with a savings strategy that makes sense.

If you’ve struggled to save in the past, you may not realize all the tips and tricks you can use to cut corners in different areas. There are simple ways to save more, such as analyzing what you’re spending money on and applying various ways to cut your expenses down significantly. You might be surprised at how much you’re wasting on subscriptions you don’t even use or expensive plans that you don’t need.

How to Build a Personal Financial Plan

Personal financial plans can feel overwhelming, but the first step is the hardest. The best way to start is by gathering all your financial information in one place. At this step, you don’t need to agonize about your finances yet.

Take the time to gather your bills, bank statements and anything else that helps you see the big picture. Becoming more organized in this way will make it easier and less stressful to develop a financial plan.

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