A financial plan isn’t only for people with a lot of money, and it doesn’t have to be expensive. The point is to create a clear “roadmap” for what you want your money to do—so when big decisions show up (job changes, debt paydown, retirement choices, inheritances), you’re not guessing in the moment.
Below is a practical nine-step process you can do on your own.
1) Write down specific goals (with dates and numbers)
Start by identifying goals in three time buckets: 1–2 years, 3–10 years, and 10+ years (often retirement or education). Make each goal measurable by writing down a target amount, a target date, and the monthly savings needed to get there.
2) Calculate your net worth
List your assets (bank/investment accounts, real estate, valuable property) and your debts (mortgage, credit cards, student loans, etc.). Subtract debts from assets to get your net worth. If it’s negative, that can be common early on—what matters is having a starting benchmark.
3) Review your cash flow
Cash flow is simply money in vs. money out. Add up all income sources, then track monthly spending (including expenses that only happen once or twice a year). This shows whether you consistently overspend or whether there’s room to redirect money toward savings goals.
4) Build a budget that reflects your priorities
Use your cash-flow review to categorize spending into essentials (housing, insurance, food, transportation, utilities, loan payments) and nonessentials (restaurants, entertainment, clothes, etc.). Don’t forget irregular big items like car repairs, out-of-pocket medical costs, and property taxes. Then check: does your income cover it, is saving included, and does spending match what matters most to you?
5) Make a debt plan (and prioritize high-interest debt)
Debt can slow progress, but it isn’t all the same. A mortgage can help build equity, while high-interest consumer debt (like many credit cards) is often the biggest drag. One guideline mentioned is keeping housing costs at no more than 28% of pre-tax income and total debt at no more than 36%. Then list each debt and create a payoff plan.
6) Get retirement savings on track
No matter your age, retirement savings needs a place in your plan. Starting earlier usually means you can save less per year to reach the same goal. Contribute what you can to accounts available to you and try to increase your savings rate as income grows.
7) Build (or verify) an emergency fund
An emergency fund can keep you from raiding long-term savings when life hits—job loss, medical bills, surprise repairs. A common target is 3 months of essential expenses, ideally 6 months, kept somewhere accessible like a checking or savings account.
8) Check your insurance coverage
Insurance is part of financial protection. Beyond health, auto, and homeowner’s/renter’s coverage, disability insurance can protect your earning power while you’re working (since it helps protect the income that funds your goals). You may also consider umbrella coverage depending on your situation, and life insurance if you have dependents. Review policies to confirm you have the right type and amount.
9) Create or update your estate plan
At minimum, have a will—especially to name guardians for minor children. Make sure beneficiary designations on retirement accounts and insurance policies are current. Also consider an advance healthcare directive and powers of attorney for finances and healthcare. For complex situations, professional legal help can be appropriate.
How to make this plan actually “stick”
Once you’ve done the nine steps, the key is maintenance: revisit goals, cash flow, and major coverage decisions periodically (and after life changes). The plan isn’t about perfection—it’s about being prepared to make decisions that match your bigger picture.