A financial plan is an instrument everyone with money should create. A financial plan is any drawn out concept in which showcases some direction of where you would like your finances to go. Whether you are taking your financial situation into your own hands or seeking advice from a professional, with both options, individuals should have a written plan of expectations. However, when crafting these expectations, there are many factors one should consider in order to account for life. Here are some factors that one should consider while planning their life’s financial plan:

• Employment – What is your employment status? Do you feel stable in your current position? Are you happy at your current job? If you are unhappy, are you considering switching to a new company? These are important questions regarding one’s employment that should be considered. The most ideal position someone could be in is one in which an individual is happy and feels stable within the company. However, if you are unhappy with your job and you are considering moving position, consider how the job change may affect your level of income when creating your financial plan. Can you still afford your current lifestyle with your new level of income?

• Income and Expenses – What is your monthly income? What are your monthly expenses? Do you see an increase in income in the foreseeable future, such as an employment bonus? Do you see an increase in expenses in the foreseeable future, such as a mortgage repayment increase? These are important questions to consider regarding one’s net worth. Ideally, an individual should have a positive net worth when subtracting monthly income from monthly expenses in order to afford any expenses that may arise out of the ordinary. It is recommended that individuals have at least six months income readily available for such new expenses that arise. However, when creating your financial plans, it is important to know net worth in order to create realistic goals. A financial plan is made to set a benchmark for our financial life, so income and expenses should be noted in order to allow for comfortable, realistic living.

• Children – Do you have children? If so, how many children do you have? Are your children planning on attending college or university? If you do not have kids, are you planning on having children? Children are expensive so it is important to consider children into your financial plan. In some countries this may be more important than others. For example, college in the United States can range up to $80,000 per year to attend a top university. Therefore, in the United States, if a parent plans on helping a child through college, it is very important to plan and save for your child’s education. However, whether your child is planning on going to college or not, children need food and are constantly growing out of and needing new clothes. Therefore, child expenses based on how many children and your children’s plans need to be considered when creating your financial plan.

• Life Cycle Investments and Risk  – How old are you? How would you like to invest your money? How much risk can you afford to take on at any stage of your life? Age is a factor that contributes to financial decisions such as what financial instrument you use and how risk tolerant you can be at any moment. For example, an employed eighteen year old with limited financial responsibility can afford to be far more riskier in their investment strategy than a fifty year old with children and a mortgage. This is simply because the eighteen year old is younger, has more time to make up for losses if they arise, and has less financial responsibility. Therefore, when creating a financial plan, consider when are instances in your life when you can be more risk tolerant and stages in your life when you should be a little more risk averse. Once determining your risk, consider which instruments (stocks, bonds, derivatives, real estate) allow you to achieve both your goal to grow your money while also protecting your assets.