Are you ready to make-over your financial future? The first step is to create a personal financial plan.
I know, it sounds kind of scary, but I’m going to walk you through writing a 5 year financial plan.
I used to do these long-complicated life plans that included every single aspect of my financial life. I quickly realized that it was overkill. When your financial plans are too complicated you lose focus and quite frankly, they just don’t happen.
Now my personal financial plan is super simple. I focus on these 5 areas:
- Personal Net Worth
- Debt Reduction
- Emergency Savings
- Retirement Savings
- Short-Term Savings goals
Every year, I sit down and calculate my current value in each area and then set goals as to where I want to be in 1 year, 5 years, 10 years and 30 years. For the emergency fund and short-term savings, I spread-out my goals over a 12 month time period.
If you want to learn how to create a personal financial plan you are welcome to download my Free PDF Personal Financial Plan Template. This download has a simple financial plan sample that you can use to write your own plan.
If you still aren’t sold on creating a financial plan, check out this post – 6 Advantages of Personal Financial Planning.
Personal Financial Plan Example
Here is a sample of what I do for each of the 5 areas mentioned above:
This personal financial plan example is for my emergency fund and shows how I set up my goals.
I’m currently underfunded and only have $9,500 in my emergency fund. My goal is to be at $15,000 by the end of the year. The difference is $5,500 which means I need to save $1,374 per quarter to hit my end of year goal.
I go through the same process for my net worth goals, debt reduction, retirement and whatever short-term goals I’m working on.
My personal financial plan template makes it easy for me to quickly visualize the changes I’ll need to incorporate into my budget to hit my goals.
Calculating Your Personal Net Worth
Your personal net worth is calculated by adding up all of your assets and then subtracting your liabilities. It should look similar to this (but with numbers):
To calculate your net worth, write down all of your current assets. I include anything that is valued at over $3,000. I don’t stress about the small things in my home.
For example, I personally don’t include computers, jewelry, guns, camera’s and other medium priced items when I create a personal financial plan. It isn’t worth the time.
The important thing is to make sure that you correctly value your assets. Just because you love your car doesn’t mean that it is in excellent condition on Kelly Bluebook. Be realistic. Your goal is to get an accurate value of your net worth, not an inflated valuation based on the original price of an item.
Once you have determined your net worth it is time to set some personal financial goals.
If you have a negative net worth, I would focus on debt reduction to get the most bang for your buck.
If you have a positive net worth, then review your assets to see where you have holes. For example, if you have a lean emergency fund, you may want to prioritize your emergency fund this year and then next year focus on retirement planning and short-term saving goals.
If you have already calculated your net worth, you should have your total debt easily available.
Hopefully, this number won’t shock you too much.
Even if it is a low number, I highly recommend focusing on debt reduction. The sooner you have debt out of your life the happier you are going to be.
If you need help reducing your debt check out these posts:
- How to start your debt reduction journey
- How we paid off $293,000 of debt in five years
- How to pay off debt with no money
Money Saving Goals
I break my saving goals down into the following three areas:
- Emergency fund
- Retirement saving
- Short-term goals.
My top priority in my financial plan is always my emergency fund. I like to keep 3-6 months in my emergency fund account at all times. Once that is funded then I begin working on my retirement and then begin funding my short-term goals.
For example, my husband and I have three paid for vehicles, but all of them have over 200,000 miles. It is just a matter of time until one of them needs to be replaced, so this is my number one short-term savings goal right now.
Related Post: Why it pays to run your cars into the ground
Keep your personal financial plan template simple:
I love personal finance and have literally hundreds of spreadsheets on my computer detailing every aspect of our financial life. They are great, but I always find myself coming back to the basic when I’m creating my 5-year personal financial plan and goals each year.
As much as I want to include every minor variable that may happen in my life, it doesn’t work. By focusing my financial planning on these five areas, I’ve found that I can focus my energy on specific financial goals that I know will have a huge impact on my ability to generate additional wealth.
Take a few minutes and download my Personal Financial Plan Example. If you don’t have time to fill it out now, set a reminder on your phone or Pin this link. It is totally dorky, but trust me, this really is worthy of setting a phone reminder for.
Once you fill out the personal financial plan template, pin it up in your office or on your fridge to remind you of your goals.
Creating a personal financial plan really can be life changing!
Use my financial plan example forms to jump start your financial goals. It is amazing how quickly you can begin to save money and get out of debt when you have created a workable plan with actionable steps.
I’ve always budget, tried to save money and get out of debt. It wasn’t until I created my own financial plan and started actively setting goals that I really started getting traction with my money.
Don’t make the same mistake I did – create a financial plan today!
I should mention that all of this is tied to the fact that you have to create a budget. You can make all the goals in the world, but unless you are including your financial goals in your budget and actively working towards them every month you won’t succeed.
If you need help with your budgeting I highly recommend this book. It is seriously my favorite budgeting book.
I’ve also written those budget related posts that may help:
- How The Two Unbreakable Rules of Budgeting Will Change Your Life
- How Budget if you have an Irregular Income
- How to Set Up A Percentage Based Budget
PS. If you are struggling to control your spending check out my new class – How to Find and Eliminate Spending Leaks In Your Budget.
Join the Intentional Living Revolution
I love to help my readers transform their lives.
Join for weekly updates on Personal Finance, Parenting & The Fun Things in Life.