How to make a financial plan in 5 easy steps

Step 1: Know the flow

The very first thing you'll need to do is determine your monthly cash flow. That's the amount of money that comes in and out of your account every month.

Some folks already know their cash flow, since they still keep a check register.

I admit I'm not one of them (I suppose my planning skills do have limits). But there's hope for the rest of us yet!

In the past few years, a number of handy personal finance apps have popped onto the scene.

• One of them is Empower, which is a free budgeting software. This platform has great tools to help you determine your cash flow, as well as your net worth and other vital information that can help you get your finances on track.
• YNAB is another great budgeting software with some cool tools and features, but you'll have to pay a fee of $14.99 per month. YNAB review
• You can also check out PocketSmith, a personal accounting software option that can not only help you track your current finances, but also predict where they'll be in the future. It does this through its budget calendar, which is as easy to navigate through Google Calendar.

You could also figure it out for yourself with your bank statements and a spreadsheet.

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Step 2: Set a goal

After you have a clearer idea of your cash flow and how much you can set aside to invest, you can start looking forward. The next thing you need to do is figure out your investing goal itself.

For a lot of us, that big goal is retirement. But it could be something else — you might be looking to buy a home or pay for a college education for your kid.

Since your goal will determine your strategy, it's important not to skip this step. You should be as specific with yourself as you can be: “I want to retire at age 65” or “I want to buy a house in two years” are both concrete, manageable goals you can set for yourself.

Related:How to use your goals to create a successful investment strategy

Step 3: Make sure your time frame is realistic

Once you've set that goal, double-check that your time frame is realistic. If you want a down payment for a house and are expecting to turn $5,000 into $50,000 in two years… well… good luck with that!

However, if you have $5,000 to invest at age 25 and want to retire comfortably or even rich at age 65, you're in a good position!

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Step 4: Establish your asset allocation

Next, it’s time to research your investment options and decide on an asset allocation that will help you reach your goals within your specified time frame.

The term “asset allocation” refers to how much of your total portfolio (investments) you will put toward stocks, bonds, commodities, etc. Each of these investments represents a different asset group, and you can divvy up your portfolio however you like.

Lucky for you, the magic of the internet has led to the development of robo advisors. These automated investment platforms can help tailor the perfect asset allocation for you.

Step 5: Keep checking

Every investing plan will need some tweaking as you go along. You might even need to make substantial changes if something major and unexpected should happen with your finances or in your personal life. And here again is where technology can be awesome. Use those robo advisors to monitor the health of your portfolio!

Still, make sure to perform an audit of your investing portfolio once a year at the very least and make any necessary changes.

Although things inevitably come up, the best thing you can do for your financial future is to make a financial plan and stick to it as best as you can.