One minute, you're excelling at work and backpacking through Europe for months at a time — the next, you're scraping pennies to cover rent and car insurance. When life throws unexpected curveballs in your direction, you must respond by adjusting your spending and saving habits. Here is an overview of financial flexibility, ways to create more flexible money management and how to amend your financial goals in the spur of the moment.

What Is Financial Flexibility?

Financial flexibility is the capacity to manage your money, save for the future and have something to fall back on when unexpected expenses arise. You want to balance enjoying the fruits of labor today with ensuring your financial comfort in retirement.

This means budgeting for specific financial goals — a house, new car, marriage or baby — and modifying habits to account for lifestyle changes. Aside from achieving your financial goals, maintaining flexibility in money management can also help you feel in control of your spending, absorb economic shocks and have the financial freedom to make personal spending decisions, such as taking a vacation or buying other big-ticket items.

Tips for Creating a Flexible Personal Finance Plan

You don't want to be in a money pinch when life happens. Creating a flexible personal finance plan allows you to work toward your money goals while protecting yourself from unforeseen expenditures. Here are five essential financial planning tips to keep in mind.

1. Save for Emergencies

Unfortunately, 36% of people couldn't cover a $400 emergency expense, which is why saving for unforeseen costs is critical. Financial experts agree you should have three to six months' worth of savings in case of an emergency. These funds can help cover rent, groceries and gas if you lose your job or have unanticipated medical bills.

Of course, it's OK to tap into some of the money even if you haven't accumulated the total amount. Emergency savings are meant to be used and replenished as necessary.

2. Prioritize Debt Repayment

The best way to address debt repayment is to pay off high-interest debt first and save on long-term interest charges. You can also consolidate your debts into one loan to decrease your interest rate, streamlining paying them off. More obvious ways to tackle debt are boosting your income with a side hustle, asking for a raise, and cutting back on eating out, streaming services and entertainment.

3. Grow Your Wealth

Generally, you need about $1 million in savings to retire. Yet, 30% of people earning $80,000 and within 10-15 years of retiring have less than $200,000 saved.

The earlier you start saving, the better prepared you'll be, even if it's a small amount. You can even boost your contributions with compounded interest over time. Set up automated monthly transfers from your bank account into your retirement funds so you aren't tempted to skip contributions. If necessary, adjust the amount to correspond to your financial situation.

4. Become Tax-Savvy

Taxes can cause stress each year, especially if you owe money. The best approach is understanding your tax bracket early and identifying saving options.

For instance, you may be eligible for student loan interest deductions, charitable contributions and earned income tax credits. Contributing to a traditional Individual Retirement Arrangement, 401(k) or Simplified Employee Pension Plan can also lower your taxable income.

5. Download Budgeting Apps

Budgeting apps are an excellent way to monitor your spending, set financial goals and stay on track. Many of these programs have visualization tools to provide a clear picture of your money-related habits, giving insight into areas for improvement. Some come with automation features you can sync with your bank account, saving you time and improving the accuracy of manual expense tracking.

Adjusting Financial Goals for Unexpected Circumstances

Life is full of twists and turns. As your circumstances evolve, it's important to reexamine your situation and tweak your personal finance plan accordingly.

According to experts, you should review your financial goals at least once annually, if not more frequently. This doesn't mean you must modify them weekly or monthly, but rather, do what makes the most sense at the moment.

Schedule time to review your financial goals, particularly during significant life events like switching jobs, being promoted or laid off, getting married, or having children. Compare your current financial situation to your goals, asking yourself whether you are progressing or have achieved specific targets.

Did you put a down payment on a house? Did unexpected expenses — medical bills or income changes — hinder your chances of reaching particular aims?

Adjustments may include reducing your retirement contributions temporarily or getting a higher loan repayment after receiving a raise. Update your budget and investment tactics to reflect your new financial situation and goals.

Flexible Financial Planning Is a Soft Cushion to Land On

Your flexible financial plan will allow you to attain what you want most, enabling greater peace of mind regarding financial matters and the future. Remember — you are in the driver's seat when it comes to money management and can steer your wealth in any direction you please.