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DIY Financial Plan – Things to Consider

Regardless of the monetary situation, everyone should have a financial plan. Those without one believe they don’t make enough money to save or that creating a plan is too expensive. These are both false beliefs.

Today, just 78 percent of Americans have a financial plan, which helps them stay on top of monthly expenses and put money in savings. However, 38 percent don’t have a plan, even if they make on-time payments and save a little. Also, while roughly 68 percent of financial planners set money aside for emergencies, only 26 percent of people without a plan have an emergency fund.

With these ten steps, you’ll learn how to create a financial plan that costs nothing yet yields outstanding long-term rewards.

1. Goals 

Set financial goals
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For a financial plan to work, you must first identify your goals. In other words, what do you want your money to do? As you go through this step, write down both short- and long-term objectives, making them as specific as possible. Then, prioritize each goal. This list will keep you motivated.

 2. Cash Flow

Your cash flow is any money you have coming in versus money going out. For income, include your regular salary, as well as any money earned from side projects or temporary work.

As for money going out, you want to include your monthly expenses, as well as those that pop up once or twice a year, such as property taxes. With this, you’ll see if you’re spending more than you can afford and whether you’re able to save. A cash flow record helps measure progress.

3. Net Worth Statement

To have an effective plan, you must understand your financial position as it is today. So, make a list of all assets, including real estate, checking and savings accounts, investment accounts, and even personal property. Then, create a second list of all debt, whether mortgage or rent, car payment, school loan, credit cards, and so on.

Next, deduct all debt from your assets. The number you end up with is your net worth. Hopefully, it’s on the plus side but if not, use this statement as a benchmark to move forward.

4. Debt Management

Debt can cause an array of issues. However, not all debt is bad. For example, having a mortgage that you pay on time each month works in your favor. On the other hand, an excessive amount of or high-interest rate credit cards can wreak havoc on your finances. 

Follow the 28/36 guideline. That means no more than 28 percent of pre-taxed income goes toward debt related to your home, while no more than 36 percent goes toward all of your debt. This step will help you determine when and how to pay each line item down or off completely.

5. Budget

The analysis you did on cash flow will show you what you’re spending, whereas a budget indicates how you spend. For this, you need to include both essential and non-essential expenses. In the essential column, list your mortgage/rent, car payment, insurance, etc. In the non-essential column, list clothing, dining out, entertainment, and so on.

Doing this, you’ll see if your income covers everything in both columns. If not, you’ll need to make adjustments. The goal is to have enough money left over each month to put in savings.

6. Retirement

Plan for retirement
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You’re never too young or too old to save money for retirement. Obviously, the younger you start putting money aside, the more you’ll have to enjoy when you retire. To determine what you’ll need for your “Golden Years,” you’ll need to work backward.

First, anticipate how much money you’ll need to retire comfortably. Then, devise a plan that consists of putting funds into an IRA, 401(k), or another retirement plan. For the do-it-yourself types out there, you now have a few options to create your own retirement plan using accurate software that was once only attainable by professional financial advisors. Retirement planning software such as WealthTrace allows DIY people to link their investment accounts and run retirement projections with many options to change assumptions. Although not as accurate, there are also simpler online tools out there, such as Vanguard’s Nest Egg calculator, which can give you a decent idea of where you stand today. 

7. Portfolios

If you’ve invested money, be sure to review your portfolios from time to time. After all, markets fluctuate. The last thing you want is to discover that a market change, good or bad, has changed your overall asset allocation to one that doesn’t make sense for you. For example, if stocks go up by 30% over two years while bonds are flat, you can bet that your overall portfolio is now weighted too heavily towards stocks.

8. Insurance 

Insurance coverage
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Along with standard insurance for your home, car, and health, other options exist that can protect your money. Depending on your job and net worth, you might purchase a supplemental umbrella policy, or for additional protection, should you ever become disabled, you could buy disability insurance. Overall, make sure you have the right kind of insurance and for the correct amount of coverage.

9. Taxes

Surprisingly, a lot of people are behind the eight-ball on this. In response to the 2017 Tax Jobs and Cuts Act, several credits, deductions, and rates changed. One example, because standard deductions increased substantially, many people no longer needed to itemize. To save on taxes, you could open an IRA or 401(k) account.

10. Estate Plan

If you don’t have an estate plan, create one. However, if you have a plan, don’t forget to update it. Focus on things like who you named as the beneficiary on insurance policies or investment accounts, who you appointed as the guardian of your minor children, and whether or not you want to assign a Power of Attorney or complete an Advanced Healthcare Directive.


You don’t need money to create a financial plan. If you want to live a comfortable life now and when you retire, it’s essential. Although these ten steps will help you get started, you can always work with a professional financial advisor at any time.

Featured Image by Brandi Day from Pixabay