A Step-by-Step Guide to Building a Personal Financial Plan

Invest smart today for a better tomorrow

We Are Rated




Insurance Partners

1 Million+

Trusted Customers

250 K+

Policies Sold

Invest AED 2K/Month & Get AED 1 Million returns*
By Clicking on "Invest Now", I declare that I am a resident of UAE and holding a valid Visa and agree to the website Privacy Policy and Terms of Use.
certified-icon Qualified Policybazaar expert will assist you

Financial planning is crucial for each individual irrespective of their income level. This becomes especially true when there is general inflation in the market, leading to a considerable increase in basic commodity prices. This planning is immensely beneficial as it helps you maintain your budget and form strategies to achieve your financial goal with adequate security. 

A financial plan can be simply considered an extensive outline of your present finances, goals, and financial strategies that can help you achieve those targets as quickly as possible. A decent financial plan includes the details of your savings, debts, cash flow, investments plans, and insurance, along with other financial elements. 

If you want a general idea to initiate your financial planning, the article below gives you the step-by-step guide to building a personal financial plan which can help you outperform market inflation. 

What is a Personal Financial Planning?

Personal financial planning is a way to reduce your monetary stress and help support your current requirements while also creating a base for long-term financial goals like pension and retirement. Financial planning is crucial as it allows you to maximise your assets and facilitates the fulfilment of your financial goals. Thus, more than just building your assets, a personal financial plan also helps you create a roadmap for future investments and expenses. 

You can easily prepare your financial plan based on your income and expenses or take help from a professional financial planner in case you don’t have adequate exposure to financial products. You can also contact our experts to get the best assistance in preparing an optimal financial plan specifically made as per your goals and financial capabilities. The availability of online services has made financial planning from our professionals more accessible. 

Top 8 Ways to Invest Money in UAE

Step by Step Guide to Personal Finance Planning 

If you are unsure about drafting a satisfactory financial plan, you can go through the following steps to get a better understanding of formulating a personal financial plan. 

1. Set Personal Financial Goals

As your financial goals, set in the future, guide your financial plan, you will also be required to forecast your future expenses and the funds needed at that time. All major events like an abroad trip, purchasing a house, children’s education and marriage, retirement, etc., fall under this. 

Thus, you can begin the process by clearly defining your financial goals. When you define your financial goals, it helps you plan your finances better. This exercise will help you understand your risk appetite and the suitable funds for that. 

It should be noted that while you are setting up your financial goals, you should have time-bound planning like where you wish to see yourself in the next 5 to 10 years. This will undoubtedly help you set a good personal financial plan. 

2. Track Your Money (And Shift It Towards Goals)

Understanding your personal cash flow is crucial for keeping a track of your expenses and income. By knowing your cash flow accurately, you can create a better financial plan as it will help you direct your investment to debts, savings, or equities. Watching where your money goes helps you develop short, medium, and long-term financial plans. 

A good way to start your financial planning and budgeting is by following the 50/30/20 rule. Out of your total income, you can put 50% into essential expenses like housing, utilities, recurring payments, and transportation. After that, you can invest 30% of your income into the lifestyle and related expenses like dining, shopping, entertainment, and clothing. The remaining 20% of your income can be directed towards savings and debt repayment. Using the 50/30/20 rule, you can easily devise short, medium, and long-term plans. 

3. Verify If You Have an Employer-Sponsored Retirement Plan

A professional financial advisor would surely ask about your employer-sponsored retirement plan while drafting your personal financial plan. They might also ask you about the kind of contribution your employer makes to your retirement plans. While this type of plan may reduce your in-hand salary, it can also lead to better retirement benefits. When planning your finances personally, you can easily find online how much you should invest and your employer’s contribution to receive decent retirement benefits.    

4. Prepare for Emergencies 

Besides looking towards the future and your goals, preparing your financial plan also includes the creation of urgent funds for emergencies. Irrespective of your financial preparation, you cannot rule out the possibility of getting into financial trouble. Consequently, you can always keep a fraction of your income for emergencies. 

For instance, for small fixtures, repairs, and unexpected bills, you can keep separate an amount of up to AED 1,000 every month.

An easy way to achieve this goal is to start building good credit score, which can also keep your budget shock-proof. With a decent credit score, you have the option of receiving preferential rates on loans and finances. This can help you in budgeting with cheaper rates on insurance and various loans. 

5. Avoid or Manage High-Interest Debts

An important step in a personal financial plan is paying down your high-interest debts like payday loans, credit card balances, and others as quickly as possible. Due to high-interest rates on these debts, you may end up paying 2-3 times the amount you initially borrowed. Opting for a high-interest debt is, thus, a perfect executioner of your financial plan. 

However, in case you are trapped in a debt cycle, you can consider a debt consolidation loan or a debt management plan. These plans may help you wrap several expenses into easy monthly bills at lower interest rates. 

6. Invest to Build Your Savings

Investment may sound like a sophisticated financial instrument meant only for the rich financially-savvy individuals. However, it's anything but that, and can be as simple as opening a brokerage account that doesn’t require a minimum amount for getting started. Even with small investments, you can create considerable wealth provided you invest in a disciplined manner over a long period.

7. Create a Moat to Protect and Grow your Financial Well-Being

Following the steps mentioned above can help you create a moat to secure yourself and your loved ones from financial mishaps. As you grow in your career, keep on improving your financial moat by following the steps below. 

  • Increase investment into your retirement, pension, or long-term investment account. 
  • Add to your emergency funds until you have enough savings to survive for 3-6 months on your own.
  • Use insurance to secure yourself financially. As a life insurance plan secures your dependent family members in case of your demise, you can consider a low-cost term insurance plan that secures you financially, often providing cover up to a period of 35 years. 
Everything You Need to Know About National Bonds in the UAE

Do You Need Financial Planning Help?

It is essential to remember that a financial plan is not static and something sure-shot. Rather, it is a tool that improvises with your progress, requiring constant adjustment and shifting as you grow in your life. This approach towards plans helps you easily adjust after a major milestone or setback like getting married, starting a new job, losing a loved one, having a child, and so on. 

If you believe that you can plan on investing your income into various funds and markets, you can proceed without professional help. As you gain experience, you can indeed get better at planning your finances. However, if you need professional help, you can always reach out to various financial advisors online and offline. These advisors can easily provide you with assistance regarding financial plans based on your requirements and financial goals. 

Complete guide to the Investor Visa in Dubai

Key Takeaways

  • To secure your future financially, you need to have a smart financial plan balancing risk and security. 
  • A financial plan is an optimised way to reduce financial stress and help you grow your wealth to meet short and long-term financial goals. 
  • A financial plan is not a fixed or documented plan, and you will need to improvise as per your needs and age. 
  • When planning your finances, you must balance between investment and insurance. You can choose from various investment instruments such as debt, securities, and equities. To secure your family and yourself from unforeseen events, you can go for life insurance, car insurance, property insurance, etc. 
  • To help your family financially during unforeseen events, you can go for a term insurance plan. You can discover plenty of affordable plans in the UAE that provide a large insured amount. 

If you have any questions, please feel free to contact us without any hesitation. We will be glad to provide you with required assistance at your convenience.

More From Investment