How to Create an Investment Plan

One of the best ways to ensure that you are saving and growing your money in an effective way is to create an investment plan. An investment plan doesn’t have to be complicated – in fact, the simpler it is, the better! It should include four main components: budgeting, savings, debt reduction, and investing/re-investing. To learn more about how to create your own investment plan and start putting together your personal finance strategies today, keep reading!

Step 1: Identify your financial goals

The first step in creating a sound investment plan is to identify your financial goals. What do you want your life and money situation to look like 5, 10, or 20 years from now?

Step 2: Set up automatic contributions into a savings account

Set up automatic contributions into a savings account, so that your money is protected and won’t get spent on things you don’t need. Keeping your cash under your control can also help with self-control, especially if you’re prone to overspending or impulsive purchases.

There are different options for how much money you can contribute each month; pick one that works for you.

Step 3: Identify your investment options

Investments are broken down into two categories: liquid assets and illiquid assets. Liquid assets include cash, stocks, bonds, mutual funds, and other investments that can be converted into cash within a relatively short period of time (usually 30 days or less). Illiquid assets are things like real estate and art, which can’t easily be converted into cash. You should have both types of investments in your portfolio for long-term financial security.

Step 4: Choose the best investments for you

The amount of money you invest and how often you invest it is unique to your goals and financial situation. As a general rule, though, most experts recommend investing 10% of your income in stocks, 15% in bonds, and 75% in cash. The table below shows how much you should invest based on age

Step 5: Review your plan annually

As you begin to accumulate wealth, review your financial plan at least once a year and make any necessary adjustments. Taking time each year will help ensure that your financial plan continues to fit your needs as your life changes.

Also, as time passes, you may find that you’re losing money with certain investments (like mutual funds), even though they have performed well in previous years. Reviewing your overall strategy is vital for long-term success.