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An Example Financial Plan That Will Make Yours Better

by Jan 27, 20221 comment

Everyone wants to be financially free. Unfortunately, most Americans believe that financial security is a dream reserved for the lucky few. To make it a reality, you’ll need a solid plan. If you don’t know how to do this, you can follow my example financial plan.

What is a financial plan, and what should be in it?

A financial plan is exactly what it sounds like–a plan for your finances. Specifically, it is a tool you can use to visualize your money. It contains your current assets, liabilities, and risks. This will help you see if you’re growing your wealth or depleting it over time. 

Think of a financial plan as a yearly check-up for your money to see if your finances are in good health. Financial plans are there to make sure that you’re making the most out of your money, build assets, and monitor whether you’re growing or depleting your wealth over time. It can also help you look at risks that you’re taking that could be stopping you from achieving your financial goals.

If you want to know why financial goals are important, read my article on the topic.

Every financial plan is different because everyone has unique assets and life goals. For some, homeownership is their endgame, and their financial plan is dedicated to acquiring enough assets to buy a home.

How do I make a financial plan?

There are a lot of tools available online that will help you make a financial plan. If you’re spreadsheet-savvy, then it might be best to make one yourself.  Otherwise, there are a few apps that can help you track all your money.

If you’re old-fashioned, even a simple ledger will do the trick.

But having the tools means nothing if you don’t know what to put in your financial plan. That’s why you need to know…

Download Your Free Financial Planner

CLICK THE IMAGE ABOVE TO DOWNLOAD YOUR FREE FINANCIAL PLANNER!

What’s in a financial plan?

Every plan should have a few fundamental building blocks. These key pieces will allow you to assess your current finances and goals accurately. In my example financial plan, I have the following:

Assets

The first thing you should put in your financial plan is your current assets. Your assets are items that you own that have or generate value by courtesy of ownership. This includes the following:

Liquid Funds

Any cash that you have, be it in your wallet or sitting in a bank account, is considered an asset. When accounting for liquid funds, make sure to be thorough and include every cent.

Tangible assets

Typically, these are any item that you own that’s worth a lot of money. Cars and real estate are the most common assets to list, but you may want to include anything else you own that has sizable value. Jewelry, watches, and even your phone can be considered tangible assets.

Investments

Stocks, bonds, index funds, and cryptocurrencies that you currently own should all be listed here. If you have investment accounts, like a 401(k), Roth IRA, or 529 Plan, then you should also include them in this section. Read more about the different investment accounts here.

How do I protect my assets?

It’s very important that you try to protect your assets as much as you can. There are different ways to protect different assets, such as:

Banks

Banks will keep your money safe for you, but only up to a certain amount. The FDIC will only insure up to $250,000 per depositor, per FDIC-insured bank. If you have more than this amount, it’s best to store it in separate bank accounts.

Insurance

Insurance will help you pay for any loss or damage to your possessions or well-being. This can help you protect assets that you can’t live without, like your house, car, or even computer. Insurance costs can add up, so it’s best to do your research and only get the plans that you need.

Will

This legally-binding document will determine what happens to your assets in the unfortunate event of your passing. Things can get ugly when families talk about inheritance. Even when you think you won’t need it, having a will helps minimize drama and fighting after a tragedy.

Note that having a will is the only way to convey your assets to non-family members upon your passing.

Expenses and Liabilities

Expenses are money that you have to spend to survive. It’s for essentials, like food, rent, electricity, and even leisure. It’s important to try and strike a reasonable balance between what you want and absolutely need.

Having too many liabilities can deplete your wealth over time. As such, you should try to keep your number of liabilities to a minimum.

Monthly expenses budget

This is how you plan to spend all of my money every month. I make sure not to leave a single penny unaccounted for.

The “zero-dollar” budget is something I picked up from one of my favorite financial minds, Dave Ramsey. I have a whole article on the topic here.

Social Security and other taxes

It’s important to put your current tax information in your financial plan. This includes your taxable income, tax bracket, and tax rate.

There are a few ways to save money on taxes. One example is to open a Roth IRA, a retirement account, where gains are entirely tax-free.

Debt

Make sure to list all debts that owe (e.g. credit card, mortgage, auto loans, or personal) here. If you have too much debt, then you should try your best to eliminate some of it immediately.

Here’s an article of mine on tips to live a debt-free life.

What do I do after making my financial plan?

That’s for you to decide. Once you have all your assets, expenses, and liabilities listed down, it’ll be easier to think of your next step. For example, you can see if you’re in a good situation to buy a house, car, or start a business. A financial plan is there to help you make the right choices when trying to reach your goals.

Why should I make a financial plan?

Having a financial plan can help you make sure that your money lasts. This happens because you start to take an in-depth look at what you’re spending your money on. For example, you may be spending too much money on your insurance that it’s eating into your savings. You then realize that you might not need that insurance after all. 

Setting a financial plan will also teach you to be more intentional about spending money. When you follow the example financial plan, you’ll start looking at where you’re currently spending money. You’ll then be able to weigh whether the money used to make those purchases could be better used elsewhere.

Finally, a financial plan can make it easier to track your assets and monitor your progress towards your goals.

What if you don’t make a financial plan?

This example financial plan is supposed to help you figure out how to achieve your financial goals best. If you don’t have a financial plan to follow, you may never be able to make your financial dreams a reality.

If you want to be financially free, you need to make a financial plan for yourself. Once you have one, you’ll find it much easier to hit your financial goals.

If you want more financial security tips and tricks, join the financial fam. You’ll get weekly personal finance tips from me and the occasional freebie. Signing up costs absolutely nothing, so why not join now?

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Carola Jain
4 months ago

It’s good to know how to create a financial plan that suits your needs, whether it’s for your personal finance or business. These are some good pointers to consider.