What are the First Steps in Financial Planning?

March 30, 20226 min read
What are the First Steps in Financial Planning?
Share on facebookShare on TwitterShare on Linkedin

Key takeaways

  • A solid financial plan can help reduce money-related stress and achieve financial freedom.
  • We identified seven key actions you can take to help streamline your financial planning.
  • Alternative investments can help diversify your portfolio and increase your passive income.

The likelihood of success increases when you plan ahead. This is particularly true when it comes to your personal finances. Let’s look at a few easy steps in financial planning that can get you off to a strong start.

What is financial planning?

Financial planning is a multi-step process that includes assessing your current financial situation, outlining your goals, and developing a strategy to reach them. The aim is to construct an investment portfolio that allows you to achieve them by targeting specific returns, the amount of money you will eventually need, a specific duration of, the timeframe for your investments as well as your spending plans. 

At Yieldstreet, we believe there are seven key steps in financial planning. 

Determining your current status 

The first step is getting an accurate assessment of your income, assets and liabilities. You’ll also need to figure out how much liquidity you have, assets that can be easily monetized in an emergency. In addition, you’ll need to assess your monthly expenses including, your mortgage, lease or rent payments, insurance coverage, as well as utilities and, potentially, car-related expenses.

The information you gather is crucial to determine how much money you have coming in, how much you can devote to achieving your financial goals and, eventually, how to allocate your funds toward that end goal. 

Outlining your financial goals

What do you want your life to look like in five years, a decade from now and when you ultimately retire? 

Making these determinations can help develop a plan that works for you. Your goals can be, for instance, to buy your first home for your family, see your children through college without them taking on debt, and retire debt-free. Identifying your goals will help you prioritize them and craft a plan around seeing them come to life.  

When discussing financial goals, it is important to separate them into categories based upon their timeframe, as this will help identify your immediate cash needs as opposed to longer-term requirements. For instance, a short-term goal can be a cash purchase of a car, a mid-term goal a home purchase, while a long-term goal is usually tied to retirement plans.

What are the goals that matter to you? What do you anticipate your needs will be in the near term, mid-term or long term? These questions and the time horizons they focus on will be relevant when you’re looking at savings and investment options. 

Allocating your funds

Consider creating a spending plan, because where you allocate your expenditures is key to developing an effective financial plan. This wording is preferable to “drafting a budget” as it sounds less cumbersome, and more reminiscent of joyful moments after all, spending is fun, otherwise, what other reason would there be to save? 

Developing a spending plan will help you allocate your available dollars to what gives you the most joy. It may also help you identify additional needs, and it can uncover misallocations of funds, ultimately making you rethink the way you are currently using your money. But such a plan can also identify substantial unused disposable income that can be re-assigned to your spending priorities. 

The ultimate aim is to live comfortably within your means. 

Establishing an emergency fund

Maintaining a certain amount of resources in liquid assets – cash, public market securities – is key to any good financial plan. When in need, these assets can be easily sold to pay for short-term liabilities and can often avoid having to take on debt instead.  

Most experts recommend keeping three to six months worth of current expenses in highly liquid assets. These assets can cushion a potential job loss, severe illness, or other unexpected short-term expenses with limited negative impact – if any – on your financial plan. 

Invest in Alternative Assets

Get consistent returns in times of market volatility.

Eliminating bad debt

“Good” debt can be seen as a financial obligation you take on that is expected to ultimately help improve your income, while bad debt may be – for instance – a consumer loan or credit card debt you take on to satisfy an immediate need even as you lack the means to repay it. 

Examples of good debt can be a home mortgage – if it is within your means – or a car loan if it helps reduce your commute time and makes you more productive at work. Education is also a goal worth getting into debt for, with the caveat that some degrees are unlikely to be worth the financial investment. 

Debt and leverage are not bad per se, though it is preferable to keep leverage levels low, as compound interest can start working against you. However, successful businesses sometimes rely on high levels of leverage – at the end of the day, it all depends on whether the debt has a purpose and is sustainable. 

Saving and growing your assets

Does it make sense to save (beyond creating an emergency fund) and invest while you’re in debt, or should you get rid of debt first, then start saving and investing? The consensus is it makes sense to eliminate high interest debt first, because the rate you’ll pay can be higher than what you’ll achieve from saving and investing. For instance, credit card debt should be paid off first as its rates are extremely high. 

However, if your debt load is such that all you have is good debt — at interest rates lower than you could realize from an investment strategy — then it could make sense to do both simultaneously, as investment income can at times offset debt interest payments. 

Whatever the choice, finding ways to generate passive income is key to a successful financial plan. Passive income is money made from investments in various forms –  mainly trading securities such as stocks and bonds, or purchasing rental property. One easy way to grow your money is to take advantage of your employee 401(k) savings plan, especially if your employer offers matching funds. 

The overarching goal is to have put your money to work so that you won’t have to — eventually.   

This once again highlights the importance of determining your short, medium and long-term goals, as you’ll find it easier to adopt specific investment strategies for each category. 

Diversifying your investments

When it comes to investing, it is worth keeping in mind two fundamental concepts: diversification and risk tolerance. Spreading your investment dollars around different asset classes, rather than concentrating them in one area, can help mitigate market volatility. You can split your investments between those that are more likely to be stable (but low yielding) and riskier ones (but potentially high yielding), but you should always take into account the overall risk profile of your entire portfolio. 

The need to diversify can lead to investing in assets beyond public securities. Yieldstreet can help you achieve diversification through multiple investment offers, across different asset classes within private markets, including Real Estate, Legal Finance, Marine Finance, Art Finance, and Commercial and Consumer Finance. 

Even better, you can tailor the nature of your Yieldstreet investments to your specific situation, whether you’re looking to generate income, grow your overall portfolio value, or some combination of both.

Learn more about the ways Yieldstreet can help diversify and grow your portfolio.

We believe our 10 alternative asset classes, track record across 470+ investments, third party reviews, and history of innovation makes Yieldstreet “The leading platform for private market investing,” as compared to other private market investment platforms.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

5 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

6 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

7 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Alternative Income Fund before investing. The prospectus for the Yieldstreet Alternative Income Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetalternativeincomefund.com. The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

8 This tool is for informational purposes only. You should not construe any information provided here as investment advice or a recommendation, endorsement or solicitation to buy any securities offered on Yieldstreet. Yieldstreet is not a fiduciary by virtue of any person's use of or access to this tool. The information provided here is of a general nature and does not address the circumstances of any particular individual or entity. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information before making any decisions based on such information.

9 Statistics as of the most recent month end.

300 Park Avenue 15th Floor, New York, NY 10022


No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice, except for specific investment advice that may be provided by YieldStreet Management, LLC pursuant to a written advisory agreement between such entity and the recipient. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and are willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

YieldStreet Inc. is the direct owner of Yieldstreet Management, LLC, which is an SEC-registered investment adviser that manages the Yieldstreet funds and provides investment advice to the Yieldstreet funds, and in certain cases, to retail investors. RealCadre LLC is also indirectly owned by Yieldstreet Inc. RealCadre LLC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Information on all FINRA registered broker-dealers can be found on FINRA’s BrokerCheck. Despite its affiliation with Yieldstreet Management, LLC, RealCadre LLC has no role in the investment advisory services received by YieldStreet clients or the management or distribution of the Yieldstreet funds or other securities offered on our through Yieldstreet and its personnel. RealCadre LLC does not solicit, sell, recommend, or place interests in the Yieldstreet funds.

Yieldstreet is not a bank. Certain services are offered through Synapse Financial Technologies, Inc. and its affiliates (collectively, “Synapse”) as well as certain third-party financial services partners. Synapse is not a bank and is not affiliated with Yieldstreet. Bank accounts are established by Evolve Bank & Trust. Brokerage accounts and cash management programs are provided through Synapse Brokerage LLC (“Synapse Brokerage”), an SEC-registered broker-dealer and member of FINRA and SIPC. Additional information about Synapse Brokerage can be found on FINRA’s BrokerCheck. By participating in a Synapse cash management program, you acknowledge receipt of and accept Synapse’s Terms of Service, Privacy Policy, and the applicable disclosures and agreements available in Synapse’s Disclosure Library.

Investment advisory services are only provided to clients of YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission, pursuant to a written advisory agreement.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure