9 Steps to Creating a Reliable Personal Financial Plan Software and templates included

9 Steps to Creating a Reliable Personal Financial Plan (Software and Templates included)

Do you enjoy living from paycheck to paycheck and owing debts that you’re not sure how to pay? Or do you enjoy being unable to account for how your salary or earnings were spent? If you don’t, then you need a working financial plan. In simpler words, if you need a way to control your money such that it is put into good use rather than squandered knowingly or unknowingly, then you need to create a personal financial plan.

What is a Financial Plan?

A financial plan is a documented analysis of your finances that reflects your earnings, liabilities, assets, and investments. In simpler words, a financial plan is a document that should give you a full picture of your current financial situation, your short and long-term money goals as well as the strategies you want to use to achieve those goals. A good financial plan will include information about all elements of your finances including your cash flow, savings, debts, investments, insurance, etc.

Here are three quotes to consider if you think personal financial planning is a waste of your time:

“By failing to prepare, you are preparing to fail.” ― Benjamin Franklin

“A goal without a plan is just a wish.” ― Antoine de Saint-Exupéry

“I believe that the biggest mistake that most people make when it comes to their retirement is they do not plan for it. They take the same route as Alice in the story from “Alice in Wonderland,” in which the cat tells Alice that surely she will get somewhere as long as she walks long enough. It may not be exactly where you wanted to get to, but you certainly get somewhere.”

Mark Singer

If you found this article while asking questions like: “where or how to start personal financial planning”, or “where to go for financial planning”, then this article is for you. In this article, I’ll be sharing how you can create a reliable personal financial plan in 9 steps as well as some software, apps, templates, and worksheets that can help with your financial planning.

But you need to remember that a financial plan can only work when you can discipline yourself to use its component documents to review and revise your finances regularly – usually every 3 or 6 months. Don’t forget that.

How to create a personal financial plan that works in 2022 (9 Steps)

9 Steps to Creating a Reliable Personal Financial Plan pinterest list

STEP 1: Evaluate your Current Financial Situation

Before you can start creating a solid financial plan, you need to understand your current financial situation thoroughly. This mainly involves knowing your net worth (which represents a common true measure of your total wealth) or if you have no money saved or no net worth, knowing how much you owe.

Formula: Net worth = Total Value of your Assets (what you own) – Liabilities (what you owe)

To calculate your net worth, you will need to develop a list of your current assets and liabilities. Your assets are things you own like real estate, savings, the money in your savings or checking account, and even your vehicles or invested assets like stocks, pensions, and bonds. Your liabilities, on the other hand, include all the things you owe such as your bills, mortgages, student loans, medical debt, credit card debt, debt owed to friends and family, and more.

Depending on how many assets you own or how much you owe, your net worth can be positive or negative.

How to Evaluate Your Current Financial Situation:

  • Identify and calculate the total value of your assets
  • Determine your total liabilities.
  • Calculate your net worth at Assets – Liabilities. (You can use any of the templates provided at the end of this article to record this)
  • It doesn’t matter how much you own or owe, you’re calculating your net worth now as a foundation for creating the financial plan that is suitable for your financial situation.

STEP 2: Evaluate your Personal Finance Pillars (Streams of Income)

If one of your definite financial goals is to build wealth or even to simply have financial security. You should know that you need multiple streams of income to achieve that. Therefore, an important part of building your financial plan is to understand your current income streams and future income streams.

Your streams of income can be regarded as the pillars of your financial plan because without your sources of income, how are you sure you can reach your financial goals? Your streams of income are not something you can treat casually, you need to be intentional about monitoring each income stream and how much they bring to your monthly or annual income (after taxes). You also need to look out for how to increase your income streams if they’re currently unable to meet your financial goals based on how much you earn.

Here’s what to do:

  • Evaluate your current streams of income and how much they bring in monthly and annually.
  • Evaluate your future streams of income and create a strategy to start earning these incomes asap.
  • Closely monitor your streams of income such that you don’t lose one that will impact your financial life negatively.

STEP 3: Set SMART Financial Goals

Financial goals are one of the most important ingredients of your financial plans. I like Annuity.org’s definition of financial goals, where they define financial goals as specific and measurable milestones that bring you closer to your ideal future as you actively strive to reach them. Your financial goals are the specific monetary amounts you are committed to obtaining that will allow you to realize your vision for your life.

There are three major types of financial goals: short-term (varies between less than 6 months, less than a year, or less than 3 years), mid-term or intermediate goals (varies between 1 year, 1-3 years, 3-10 years) and long-term (more than 5-10 years). This is how you’re going to categorize and prioritize your financial goals.

The number of months or years you want to set for your short, mid, or long-term goals is not set so you can choose based on your discretion. For me, I use this formula: less than a year for short-term goals, 1-5 years for mid-term goals, and more than 5 years for long-term goals. Of course, if you are not sure how to go about this, how about categorizing your goals according to time such as:

  • In the next three months
  • In the next 6 months
  • In the next 6months to 1 year
  • 1 year – 3 years

Even though this is not how we’re taught to set our financial goals, you don’t need to set your financial goals based on anyone’s format. It’s your personal document and you have the right to review and revise it how you like.

When setting your financial goals, you can’t be vague about them. You need to set SMART (specific, measurable, achievable, relevant, and time-bound) financial goals.

Also, the most reliable financial goals are based on your core values and objectives, that is, the things that are most important to you in life. Therefore, to create financial goals that are important to you, visualize your ideal life and then write down financial goals that align with this picture. Let me give you some examples of core values that can guide a person’s financial goals:

  • Financial Freedom
  • Build Massive Wealth
  • Societal or familial recognition
  • Give back to society or those who helped you in the past.

If you want to further make your core values stronger, you can add a bunch of reasons that make your core value tangible. For example:

CORE VALUE: Financial Freedom

Why? : (1) Because I want to be able to buy what I want to buy when I want or need it instead of worrying about every penny (2) Because I want to sponsor my sibling(s) to Uni or college, etc.

Writing down and properly stating your financial goals is important because solid financial goals give you clarity and direction for making the right financial decisions. What do I mean? Let’s say, you want to quit your job but don’t really have any other source of income that can replace it, a look at your financial plan, financial goals, and core values should be enough to let you know if this is the right decision for you.

How to set SMART financial goals:

  • Write down the core values of your financial goals. This includes the main reasons why you wake up every morning to go to that job that you don’t really like, etc. Your core values can be anything from: searching for financial security, traveling, building massive wealth for your future generations, recognition in society, or giving back to society.
  • Now, write down your short, mid, and long-term financial goals related to those core values.

Financial Goal Setting Example:

Core Value: I want to travel and explore the world without getting stranded.

  • Short-term: I want to save approximately $84 every month for traveling next year.
  • Mid-term: I want to save up to $1000 for traveling next year.
  • Long-term: I want to save up to $100,000 as my traveling budget after retirement.

If you’re interested in learning more about setting SMART financial goals, click the link to read an article I wrote about it.

STEP 4: Create a Budget

Meeting your financial goals is impossible if you don’t have a budget that you carefully update weekly or monthly.

Your budget allows you to sit down before the beginning of a month to decide where and how you plan to spend, invest or save your money.

To create a good budget, you need to separate your essentials/ needs (utilities, groceries, rent/mortgage, debt repayment, bank account fees, prescriptions. etc) from your casual wants (subscriptions, dining out, memberships, entertainment, etc). With your budget, you can set a spending limit on all your expenses and work hard to stay below that spending limit. You can also determine the unimportant costs that you can give up such as your cable TV fees, working out at home instead of at the gym, etc.

A good budgeting rule to follow is the 50/30/20 rule. Depending on who you are: 50% of your income to needs, 30% to wants, and 20% to savings, investments, and/or debt repayments. Of course, you can also change this to needs – 50%, wants – 20%, and savings/debt repayment/investment – 30%.

STEP 5: Create an Expense Log/report

Even with a budget, it is very easy to develop bad spending habits where you casually create a budget but never stick to its spending limits. That’s why you need to create an expense log or report. Your expense log or report should be closely linked to your budget if not on the same page.

For example, on my personal budget worksheet, I have a column for my monthly budget and another for my expense log (actual amount spent). However, this is a monthly report and you need a book / daily expense log to outline your daily expenses so you don’t leave out any expenses. This way, it is easier for you to sit down at the end of the month and add together how much you actually spent on different categories of your budget.

When you do this expense log, you would probably find discrepancies between your budget and how much you actually spent faster. Such that, when making your budget for the next month or spending money in the next month, you can keep your expenses spent last month in mind.

You should also try to keep a record of your finances which includes your bills, account statements, mortgages, tax returns, receipts, contracts, etc.

STEP 6: Create an emergency fund

Life is funny and it can throw curve balls at you any time and you must be prepared financially for those curveballs. That’s why you need emergency savings or funds which is money put aside for rainy days (unexpected challenges like an illness, a family member’s illness, theft, an accident, etc).

Don’t live life from paycheck to paycheck where you get stranded at any emergency and have to call friends and family to borrow funds. Make sure you have backup funds for rainy days.

STEP 7: Create mini-financial plans for various aspects of your life

Depending on your unique situation and life, you may need to make tangible financial plans for the other aspects of your financial life. Some of those mini-financial plans with links to guides that could help are:

  1. A Debt Repayment Plan to pay off your debts based on your financial situation. Here are a few links to articles that can help but try to do your research to choose the plan that works best for you.
  1. An Investment Plan: If you’re interested in building wealth or even just putting together assets for your retirement, you need to get serious about your investing. Investing is a long-term activity and you need to invest time, effort, and capital to train yourself to make profitable investments and then carefully choose the right long-term investments.
  1. A family financial plan: If you’re married or have a significant other, you also need to have a joint financial plan to plan for and make reasonable financial decisions together for your family and children.
  1. Insurance Plan
  2. Tax management plan
  1. Retirement financial plan

STEP 8: Start Estate Planning

Estate planning is something few people consider or think about but it’s very important. To do estate planning, you need to list out your assets, create a will and make it accessible to the people who need it. Here are a few guides that can help:

STEP 9: Review and Revise your Financial Plan Periodically

You’re not done with your financial plan just because you’ve written it today. You need to review it periodically (every 3-6 months). One reason is to keep your head on your goals and another is to update it as things change in your life.

Questions to ask when you review your financial plan

  1. Do I have a new income stream? Or did I lose an income stream?
  2. How close to or further away did I get from achieving my goals?
  3. Did I spend with my core values in mind during this period or not?
  4. During this period, what steps did I take that brought me closer to my goals? And what steps did I take that brought me further from my goals?
  5. What money mistakes did I make? And why did I make them?
  6. Are my financial goals still valid and realistic or do I need to tweak them?
  7. Am I meeting my financial goals or not? If not, what do I need to do to meet them?
  8. Am I saving enough to meet the standards of my retirement plans?
  9. Am I making the right investments or not (based on investment profits)?

Don’t just do this review mentally, use a journal or book to answer these questions and review your past entries years ago.

Key components of your successful financial plan (with templates and worksheets)

To make a working financial plan that is actionable, here is a list of things that are essential to your financial plan depending on your financial situation and your financial life stage.

1. Your financial Goals paired with your core values ****

2. A monthly budget plan ****

3. Expenses log/report ****

  • You can combine this with your budget plan to make accounting easier (the way I do). How? Your expense log would be the Actual Amount Spent column in your budget worksheet. Since your budget is a monthly account, I would advise you to keep your receipts for all payments carefully or better yet, write down all you spent at the end of the day in a little notebook or printed expense log.
  • You can also get an expense tracker app
  • Or a Printable expense tracker

4. Your Multiple Streams of Income (listed) ****

  • This is nothing. Just a list of your current income streams and maybe income streams you’re interested in for the future.

5. An emergency fund account and account statement ****

6. A Debt Repayment Plan that you stick to **

7. Your Savings and Investment Plan ***

8. Your Insurance plan ***

9. Your retirement Plan ***

10. Your Family Financial Plan **

11. Tax Management Plan **

All the components are highly important, however, the components with **** are the most applicable to everyone while the ** components are subjective to your life situation.

Personal Financial Plan Templates and Worksheets

Smartsheets one page financial plan Template

Financial Planning Software and Apps

Apps that you can use for your financial planning, saving, investment, budgeting, expense tracking, etc.

Find out more about some of these apps and software here:

Financial Plan FAQs (Frequently Asked Questions) Answered

1. When to start financial planning?

Now is the time, don’t wait till tomorrow or next tomorrow. Do it now. Today. Set aside 2-3 hours, find the templates that suit you, or create one that suits you and start your personal financial planning today. It’s very important for your financial happiness and stability today, tomorrow, and in the future.

2. Financial Plan vs Budget

Without a budget, your financial plan is just a piece of paper. Even though your budget and financial plan go hand-in-hand, they’re not the same document. Your financial plan is used every 3 months or 6 months to track your progress while your budget is used to record your income and expenses on a weekly or monthly basis. However, the closer you stick to your budget, the more progress you make on your financial goals and plans.


Moshope Ajiboye is a freelance writer, blogger, and small business owner. She is passionate about writing, financial freedom, learning, and becoming a better person. You can find her on Twitter and Instagram with the same handle: @ajiboyemoshope. She also has a Youtube channel called Pursue Better Me.

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