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Personal financial planning: A step-by-step guide

At a glance:

  • What is a financial action plan?

  • How to create a simple financial action plan

  • A sample financial action plan

  • Help for writing a financial action plan

  • Keep it simple

  • Practical ideas you can start with today

When you think of doing financial planning, do you picture yourself in an office, with a professional planner on the other side of the table, and hashing out a complicated set of documents with a lot of big numbers and goals that are hard to imagine you could ever achieve?

In truth, financial planning often does involve professionals, and it often does lead to a set of documents with big numbers and a list of goals.

But it need not be this involved. It can also be quite simple, as we will see.

What is a financial action plan?

A financial action plan is a plan that directs how you will manage your money in order to make progress toward your goals.

Simply knowing what you want will not get you there: you need a real plan to make it happen.

And it should be written down, with clear goals and actionable steps that can be measured in some way. When a plan is written with concrete, measurable steps, you can gauge whether or not it has succeeded.

Another benefit is that the concrete, actionable steps take the hunches and the guesswork out of your planning.

It's all about your goals in life

At its core, financial planning simply means setting a number of goals and writing steps to achieve them with your money. You can start with just a few and make a living, breathing, flexible plan for yourself. Indeed, your plan can be as simple as writing down three to five goals and some steps for achieving them.

Professionally written financial plans typically encompass all areas of a person's life: debt management, investing, retirement planning, estate planning, financial forecasting, insurance, risk management, assets and liabilities and net worth, and a plan for periodic review. Each item includes a set of steps for making it happen. Thus, it is not the same thing as a budget; it covers more than just how you will spend your money. Indeed, some personal financial plans are over 100 pages long. But every one is as individual as the person it is written for.

It's a starting point for bigger things

As you succeed at your own plan over time and refine and update it, you can expand it to include more complex goals, like a retirement plan and investments. For these, the services of a professional planner may be desirable.

How to create a simple financial action plan

No two financial action plans are the same. They differ based on how complex your needs are and how much of your life plans you want to cover. Traditionally, financial plans have a certain structure:

  • Setting goals and gathering financial data. This includes your income, insurance, any investments, your benefits at work, and of course, your life's goals.

  • Assessing your financial status. This is where calculations and financial statements come into play. For example, a net worth statement will add up your assets and subtract your liabilities to give you your financial status.

  • Developing the actual plan. This step is how your plan will be carried out. It will include recommended savings and investments and other means of generating wealth.

  • Carrying out the plan. Here, you will actually do the saving and investing; or a professional will do it for you.

  • Monitoring the plan. Your plan must be reviewed periodically to make sure it is on track. If necessary, it can (and usually will be) revised.

Though this may look intimidating, it's not a requirement. A financial action plan can be as simple as listing each goal and then listing a means of achieving each one:

  • Setting goals. Write down the things you want to achieve.

  • Developing the plan. Set a simple task list.

  • Carrying out the plan. Do the tasks and mark them as done when they are done.

  • Monitoring the plan. Set a reminder on a calendar or an app to see how you are doing.

A note about writing goals: it's not enough to say something like "I want to have some extra spending money." Goals like this fail because they are not specific; to really work, they should specify three things:

  • What the goal is

  • How much money is needed for it

  • When the goal is to be achieved

In our example, we should say, "I want to save an extra $40 at the end of every month to spend on what I want." That is not only specific, but it can be measured at the end of every month. Of course, it should also be realistic and attainable.

A sample financial action plan

Keep in mind that the financial goals you set should specify what the goals are, how much money is needed for them, and when the goals are to be achieved. They should also be realistic for you, and they should be measurable in some way. Then you can proceed to write a list of tasks to do to make sure that you are making progress toward your goals.

Here is a sample financial action plan:

  • Goal: Save $40 at the end of every month to spend on what I want.
    Task 1: Make a budget.
    Task 2: Look for less-expensive alternatives to existing expenses. For example, eat out 2 fewer times per week and save $10.
    Task 3: Divert the amount of money saved into a separate place.

  • Goal: Save up $1000 for a different car by 10 months from now.
    Task 1: Make a budget.
    Task 2: Cut out unnecessary expenses; perhaps $100 per month.
    Task 3: Take on a part-time or temporary job to raise the needed money.
    Task 4: Divert the amount of money saved into a separate place.

  • Goal: Pay off a $1000 balance on a credit card in 12 months.
    Task 1: Determine the amount that must be paid each month (online calculators can help with this).
    Task 2: Set aside that amount each month by cutting out unnecessary expenses.
    Task 3: Take on a part-time or temporary job to raise the needed money.

  • Goal: Create an emergency fund of $5,000 in 24 months.
    Task 1: Reduce the phone bill, cable bill, eating out bill, and other bills by $208 per month.
    Task 2: Divert the amount of money saved into a separate account, such as a savings account.

The owner of this plan should monitor it at the end of every month to make sure it is on track.

These examples are simple, but they are the kinds that millions of people struggle with. As long as you make your goals specific enough to be measurable and you set specific actions down in writing, you have a working financial plan.

Southern states are worse at managing their money. (Graphic: David Foster/Cashay)
Southern states are worse at managing their money. (Graphic: David Foster/Cashay)

As the time frame of your plan goes on, you will want to review and revise it, based on how well you are sticking to it. If you are not sticking to it, perhaps you were unrealistic, or perhaps there were interruptions that prevented you from reaching your goals. In that case, you can revise your plan and continue with it.

Consider using the example above as a template. If you wish, you can and should embellish it to include how you will measure your progress. You can even add a reward at the end.

Help for writing a financial action plan

If you want to write a plan but feel you need help, there is abundant help out there just waiting to be tapped. Because so many people need or want help with their financial lives, a whole industry of professionals, associations, software, and even cell-phone apps exists just for you.

Financial planning software

There is a wealth of financial planning software out there, and the available programs grow and change every year. Most of them are more complex than just setting and tracking your goals — they take in your bank account and other information and create budgets and forecasts for you. But they do include some action plan aspects to them. Look to see more of them in the future as entrepreneurs start filling demand for financial planning among the non-wealthy.

More to the point, there are hundreds of apps (i.e., programs) that are simple to work with. Some of them limit themselves to goal-setting and monitoring. A search for phrases like "goal setting apps" or "financial planning apps" can bring up several that you can use on a cell phone, tablet, or computer. Some are free to use; some will even pester you if you fall off the wagon.

Financial institutions

Many people are not aware that their banks or credit unions have financial planners available on site. These planners are trained to help you set financial goals and stick with them. Many of them charge for their services, though. It pays to call and find out.


Got an employee assistance program (EAP) at work? There may be a counselor or two who can help you draw up a plan. Many of them are familiar with goal-setting and tracking; some are actual financial planners who would not charge you. Beyond helping you set up an action plan, they can act as an accountability figure to help you stay on track — and revise your plan when you need to.

Professional sources of help

Of course, there are professional financial planners who are well-versed in financial action plans. Many of them work at large companies; others work in their own offices because they are self-employed. Still others may be available at your bank or credit union.

There are professional financial planning services for low-income people as well. For example, the Financial Planning Association, which promotes financial planning services, has a pro bono program in partnership with the Foundation for Financial Planning.

Keep it simple

Despite the commercials that show happy upper-middle class couples walking on the breezy ocean beach because their financial planner has made it possible for them to own a second home there, most of us are not this fortunate. We get up in the morning with a set of worries that we go to bed with that night.

Solving your problems may take time, but one thing you can do is get started on an action plan. It will put them into perspective, and just knowing you have a plan written down will give you back some of the needed enthusiasm that had been seeping out of you for years before.

If you have not yet done so, take some time now to get started on your plan.

Practical ideas you can start with today

  • Write down three to five important goals for yourself.

  • Write down a set of tasks to do to fulfill these goals.

  • Plan a reward to give yourself when you have completed each goal.

This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.

Read more information and tips in our Budgeting section

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