Best Guide to Build a Personal Financial Plan

Best Guide to Build a Personal Financial Plan

Personal Financial Plan: Financial health is a core part of wellness-centered life. Nutritional, physical, emotional, social, spiritual, intellectual, environmental, and financial wellness forms the key pillars of holistic living. Each of these pillars contributes to your body, mind, and soul, determining a picture of health. A personal financial plan helps you get your finances in order. 

What is a Personal Financial Plan?

In simple terms, a personal financial plan is a documented analysis of your finances, including your investments, assets, liabilities, and earnings. It seeks to help you put your personal goals in perspective and understand how you will achieve them. Building a personal plan boosts financial literacy. You will understand how collections are lowering your credit score and other financial blunders like living paycheck to paycheck and not investing in retirement affect you. 

A financial plan can stretch through weeks, months, and even years, depending on the projection of your goals. You can always adjust it to reflect any developing priorities. While having a personal financial plan boosts your confidence with money, many people are stuck and do not know where to start. It is never too late, costly, and complicated, as you may assume. See below for practical steps to help you create one. 

Steps to Creating Personal Financial Plan

  • Review the Current Situation

Before embarking on a journey, you must know the beginning and destination. The same applies to your financial situation. Before starting the planning, you need to look at and understand your current financial situation. This step will help you determine the best actions to take. 

You will need to be more financially conscious by getting involved and checking how much you spend on electricity, gas, internet, Netflix, and other utilities. Using one color, highlight every regular outgoing expense on your last 6-12 months’ bank statements. Take a different color and highlight the irregular expenses. 

Consider grouping the costs into important and personal expenses. Analyze areas where you can cut down on costs or spend less if you change the service. Check if you need the optional expenses. 

  • Set both Short and Long-Term Goals

Setting goals will give you clarity and direction when making your financial decisions. Goals help you to define your destination and keep you on track. Your goals always point you in the right direction. 

Ensure your goals are Specific, Measurable, Attainable, Relevant, and Time-Bound (SMART). Instead of writing that you need money in your savings, explain what you wish to accomplish, and indicate the time frame when writing goals. Example: I want to have $ 5,000 for a car by the end of next year

Write short-term financial goals like ‘Save $200 in my account next month’. Short-term goals keep you motivated as you see that progress constantly. On the other hand, long-term goals will direct you more consistently

  • Make a Plan for Your Debts

Many people opt to bury their heads in the sand when in debt. Bad debts can be annoying and painful to look at as it screams bad financial decisions right in your face. Unfortunately, you cannot ignore your debts if you seek financial health. 

Debts include long-term expenses like mortgage, student debt, and immediate ones like credit cards. Interests and repayments weigh anyone, even with the most tangible goals. Start by drawing a plan on how you will pay your debts. 

Create an achievable plan for getting rid of any problematic debts, as they are costly due to excessive fees and interest rates. Getting rid of them will set you on the right track. 

Handling several debts at once is overwhelming; consider the option of consolidating all of them into one cheaper loan. Take action and get going towards a debt-free life. 

Establish an Emergency Fund

An emergency fund is a financial safety blanket to cushion you against unprecedented happenings. No matter how prepared and financially woke you are, you cannot avoid unexpected events. Unexpected illness, sudden job loss, or a road accident can happen anytime. The COVID-19 pandemic is a great lesson on the need for an emergency kitty. 

As a general financial rule, the amount of the emergency fund should cover all your fixed expenses for 3-6 months in case calamity strikes. Consider saving enough to cover variables like entertainment if possible. 

While everyone needs emergency funds, it is extremely important to people with poor credit scores, freelancers, and those with variable incomes. 

Invest in The Future

Start focusing on your savings and consider making investments. Include the steps you will take to build wealth in your short-term goals and a retirement plan for your long-term goal. The best way to ensure that your golden age is peaceful and enjoyable is by securing in your future and investing for retirement. 

Finding the right medium to invest in can be hard, that’s why you need to lean toward what interests you. For example, if you like and believe in financial technology (fintech), you’d logically invest in fintech, whereas if your expertise was elsewhere, like artificial intelligence, you’d invest in that instead. You can invest in fintech on the stock market or even invest in private stock instead. To make any financial plan make sense, you need to apply proper research beforehand and invest in something you know something about. If you don’t, the investment might not pay off, and you’d be better off investing in a managed fund.

To help you prepare better for retirement, consider your desired retirement age, savings rate, health, and desired lifestyle. You may need a wealth advisor if this is a new field. 

Ensure the Insurable Where Possible

Shop around for an insurance product that you need. Having the right one protects you from constantly spending your savings on emergencies. Defend your cash from unforeseen risks like natural disasters and break-ins through reliable insurance. 


Even with the best financial plan, you must commit to living it intentionally. The purpose is to keep track of your financial plan and make constant adjustments. Consider checking your plan after every three months. Very many things can change within a few weeks.



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