What is a financial plan? How to get started and what it includes

Whether you're just landing your first real paycheck and wondering where it should go, navigating the financial complexity of raising a family, or counting down the days to retirement, one question tends to show up at every stage of life: "Where do I start?"

Money decisions don't wait for the "right" moment. A 25-year-old might be juggling student debt, a first apartment and a vague sense that they should probably be saving something. A 40-something might be stretched between a mortgage, college funding and an aging parent who needs support. And someone on the doorstep of retirement might realize, it's time to understand how assets can become income.

No matter where you are in life, the challenge is the same: you have goals, you have resources, and there's a gap between the two that feels overwhelming to bridge. That's exactly what a financial plan is for.

A financial plan is a roadmap that helps you identify specific actions to take to reach both your short- and long-term goals. In addition to organizing your retirement ideas, it helps you to make the most of your assets (including Social Security) by developing lasting retirement income sources that match your lifestyle and future plans.

You can create a financial plan on your own. Or, get assistance from a financial advisor who can make the process less stressful to start, implement your checklist and provide accountability to maintain. Let's take a closer look at how to get started.

A financial plan can include your goals, values and circumstances. It typically involves a comprehensive view of your financial picture, including your income, debt, investments, insurance and taxes. However, you don't have to think of everything right away. To avoid feeling overwhelmed, start small and add new topics over time. A financial advisor is skilled in coordinating these topics at your pace so you don’t take too much on at one time.

Financial plans also balance positive emotions with future concerns. For example, it may be important to you to own a home, to occasionally vacation overseas, to provide college tuition for a loved one or to leave a charitable legacy.

However, health care needs or caregiving concerns also can impact a financial plan. You’ll want to account for unplanned expenses as well. Everyone's values differ, so don’t assume your retirement budget must mirror other retirees in your age group.

A well-crafted financial plan is personalized for you. Decisions sometimes involve a trade-off, and a financial plan can help you organize and then balance your resources, responsibilities and priorities.

A financial plan can be hard to conceptualize, so let's consider just one of the many possible examples. Think about what goals you're saving toward. Here are some of the things a plan often includes for someone who is saving for retirement, providing for a growing family and an active volunteer in charitable causes.

You may want to:

• Quantify long-term goals to know whether you’re on track for completing them.
• Create a manageable budget that allocates income among all your day-to-day living expenses.
• Evaluate how much life insurance and disability insurance are needed to protect you against an unexpected loss of income.
• Set up monthly contributions to a traditional IRA or Roth IRA to build your retirement savings.
• Establish an annual giving strategy for your preferred charitable organizations.
• Align investments with your goals in a managed account based on your objectives, risk tolerance and time horizon.

These may not be the steps everyone needs to follow, but everyone can come up with steps for a personalized financial plan.

Financial planning is crucial regardless of your income or level of wealth. For some people, a free coaching program like Thrivent's Money Canvas™ can help you master budgeting, saving and spending. Others may need additional assistance managing their investment accounts.

Whether you create your own roadmap or work with a financial advisor, a financial plan should help you see how everything fits together and let you know what you need to do over time to achieve those results. A cash flow analysis can help you evaluate your spending and identify ways to repurpose dollars toward things that matter most to you. Even if you do a good job of saving and budgeting, ongoing financial planning ensures that you've thought deeply enough about the details to get the most from your efforts.

Regardless of how much is sitting in your 401(k) or IRA account, the economy can be unpredictable. This is why inflation plays a critical role in shaping how your financial plan works.

Everyone from Wall Street execs to auto mechanics are affected by tariffs and taxes. And when there’s an increase in prices over time, that reduces the purchasing power of money.

Any effective financial plan must account for inflation to remain realistic and sustainable. A quality financial plan includes flexible budgeting, saving, investing and risk management to ensure that future needs still can be met.

For example, a budget for your mortgage, grocery bill and health care is more than likely going to rise in the coming years. Your financial plan anticipates these increases. This is why financial plans often emphasize investing more than saving.

Investing in stocks, real estate or inflation-protected securities can grow your money at a rate that has the potential to outpace inflation—and beat the interest rates for CDs, bonds and savings accounts. Financial advisors help you to use projected inflation rates to calculate your future needs based on your ideal life at retirement.

Inflation also influences investment strategy. A well-diversified portfolio often includes assets that historically perform well during inflationary periods, helping to balance risk and return. Additionally, regular reviews and adjustments are essential because inflation rates can change over time.

Typically, when developing a financial plan, here are the steps to start with:

1. Identify what you own, how much you owe, what you have earned and what you will need to spend. To do that, you should review all of your financial documents and gather information about your investments, insurance policies, retirement plans and bank accounts.
2. Define financial success so you can outline your goals. Is it retirement by a certain age? Career flexibility? Becoming debt-free? Giving to others? A truly comprehensive plan will include a combination of your goals, along with a timeline of when each goal might be reached.
3. Think of some events that might move you into a worse financial situation. These may be things you want to use your financial plan to address and prepare for.

It can help to talk through a plan with a financial advisor. According to findings in Thrivent's Financial Crossroads survey, roughly two-thirds of Americans agree that they would benefit from talking with a financial advisor, having a written strategy or seeking virtual advice.

Beyond understanding the technical aspects of money and investment tools, financial advisors know how to narrow down what’s truly important in the short- and long-term.

For example, they might ask:

• What or who needs your immediate attention?
• Imagine it's 10 years from now. Who would you trust the most to be your power of attorney or executor?
• Thinking into the far future, what would make you look back and say you spent your time productively?

You'll notice these questions aren't strictly about dollars. Financial advisors try to get to the heart of what resonates with you and your loved ones so your financial plan will reflect your individual values.

Family plays a major role in shaping financial plans for retirement because financial decisions rarely affect just one individual. They are often influenced by responsibilities, relationships and shared goals within a household.

Couples, for example, must consider how both partners envision retirement—whether that includes travel, downsizing, or living near (or with) children and grandchildren. These choices directly impact how much money needs to be saved.

Additionally, the number of dependents, such as children or even aging parents, can increase financial obligations and reduce the amount available to invest for retirement.

Caregiving responsibilities are another major factor. The sandwich generation may find themselves surrounded by adult children longer than expected or caring for elderly parents. These responsibilities can delay retirement or require adjustments to savings goals. Financially, this could mean helping a child with college tuition or assisting a parent with medical expenses.

Family also influences risk tolerance and investment decisions. One family with a spouse or dependents may choose a more conservative investment strategy to protect their family’s financial security. Another family with dual-income households might be able to take on slightly more risk because you have multiple sources of income and more support.

The adult child living with you may reduce the risk of needing to incorporate senior living facilities in your financial plan. Life insurance, estate planning and emergency funds also become more critical when others rely on that financial support.

Another key consideration is inheritance and legacy planning. Decisions about wills, trusts and beneficiaries ensure that assets are distributed according to your wishes while minimizing complications for loved ones.

Communication within the family about your financial plan is just as important as the financial strategies themselves. Open discussions about estate plans, executors and a power of attorney (POA) documented within the plan can help prevent misunderstandings and ensure everyone is aligned.

While it may be a tough conversation to have for some, these honest conversations ahead of time about your financial wishes will ideally decrease conflict and keep your family out of probate court later on.

Remember, a plan is a set of action items. Once your plan is in place, you'll need to follow through. This might mean opening new accounts, setting up recurring payments or filling out insurance applications. It also means monitoring your progress and updating your plan as your needs change.

As you get started, remember that progress takes time, but even small steps can add up. Prioritize yourself and your goals, and you'll see improvements.

Working continuously with your financial advisor and checking in to see if you're on track with your plan can help you stick to your financial goals. At a minimum, you should meet to check your progress once a year, including reviewing POAs and executors in case of life changes.

Notify your financial advisor whenever your life circumstances change and discuss how those changes might affect your plan.

Everyone deserves a financial plan. The approach you take depends on your needs and preferences. If you aren't sure where to start, contact a Thrivent financial advisor.

These experts can help you define a clear picture of your finances and work with you to develop a strategy to achieve your ambitions.