Make 2014 the Year You Draft a Financial Plan

The verdict is in. BMO Financial Group released a report Tuesday that found that 80 percent of respondents are making at least one New Year’s resolution. While heath-related resolutions are at the top of the list, those related to money ranked second.

More than half -- 60 percent, in fact -- of respondents said they made financial resolutions last year and kept them, versus the 42 percent who kept their health and fitness goals. This seems to corroborate another study, that noted 60 percent of people who made a fitness goal abandoned it after six months.

The BMO survey found 59 percent of respondents have a financial plan, down 64 percent from 2012 levels. 82 percent, meahwhile, said their plan helped them reached their stated goals  -- while 69 percent wished they would have created a plan earlier and 93 percent of those with a plan apparently re-evaluate their plan on an annual basis.

But what about all of those people who don’t have a financial plan?

37 percent said that, in order to have a financial plan, they would need money -- while 29 percent said that it never crossed their mind. 28 percent said that they don’t know how to start the process, and 19 percent don’t know what they should put in their plan.

In response to these results, here’s a financial planning overview: 

According to the Financial Planning Association, “Financial planning is the long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life. Remember, financial planning is a process, not a product.”

First, establish your goals. Maybe you want to retire at age 60, pay for a child’s college education or pay off debt.

Another part of the plan should involve preparing for the unknowns. Your car dies, your house needs a new roof, or the more unthinkable events like a death in the family or job loss.

Next, gather data. Where are you now? Do you have a savings account that houses an emergency fund? Are you saving at least 12 percent annually for retirement? What are your debts?

And then, develop a plan. A true financial plan is often drafted using a professional like a Certified Financial Planner -- but if you’re looking for more of a do-it-yourself strategy, first start with a budget. How much do you need to save to fund retirement and an emergency fund, for example?

The good news is you can find plenty of resources online to help; but understand that a true financial plan is probably not something you can put together on your own.

And those 37 percent who said they don’t have enough money to follow a financial plan? Don’t fall into that mindset. Regardless of what you do or don’t have, you can manage it better. With money, constant education and re-evaluation is the key to financial success.