No Personal Finance Plan? 7 Simple Steps to Making One

By Sara


Last Updated: February 21, 2023


Having a plan in every area of your life can help you reach your goals - this is especially true with a personal finance plan. Creating a financial plan can help you reach financial goals like:

  • Paying off debt
  • Saving an emergency fund 
  • Buying a house 

If you want to create a personal financial plan, follow these seven steps to help you get started. 



7 Steps to Making a Personal Finance Plan

Step 1 - Access your current financial situation. 

When creating a personal financial plan, getting a snapshot of your current finances is the first place to start.

It is important to list the following: 

  • Your current assets and liabilities 
  • Your net worth 
  • Your income and expenses

These three areas will allow you to see where you stand financially. The goal is to have more assets than liabilities, have a positive net with (less debt), and bring in more money than you spend.

If one or all three of these things are where you want them to be, then those areas should be prioritized in your personal financial plan. 


Step 2 - Set financial goals.

Once you have accessed your current financial situation, setting your financial goals is next.

To do this, focus on the following: 

  • Identifying short-term, mid-term, and long-term financial goals 
  • Make a SMART goal 
  • Prioritize goals and decide what to focus on first 

When identifying your goals, look at the areas in your current financial situation that need improvement. For example, if you are spending more than you earn, make a goal to cut down your expenses.

If you have a negative net worth, make a goal to pay off your debt. If you don’t own any assets, make a goal to save up to purchase a home or car. 

Once you’ve identified a few goals that can be completed in the short-term, mid-term, and long-term, write a SMART goal. A SMART goal is a specific, measurable, achievable, relevant, and time-bound.

A SMART goal can help you decide on which goal to focus on first and how to actually achieve that goal. 

Want to know more about SMART goals? Read this next: SMART Financial Goals: What They Are & 5 Ways You Can Get Started


Step 3 - Create a budget. 

Once you’ve created SMART financial goals, create a budget to help you reach these goals. When creating a budget, focus on the following:

  • Different types of expenses 
  • Creating a realistic budget that aligns with your financial goals. 

When creating a budget, make sure to list all of your expenses from fixed variable to periodic. Then, make a plan on how you will handle these different types of expenses. If you have never tracked your spending, do this before creating a budget. 

When you create a budget, make sure you are being realistic. While the goal is to save money to help you reach your financial goals, if you limit your budget too much, you may not stick to that budget. 


Step 4 - Manage your debt. 

After you create a budget, focus on managing your debt. Paying off your debt may be one of your financial goals, but if it is not, it should still be part of your personal financial plan. 

Paying off debt gives you more freedom to use your money to reach other goals. It can also reduce any stress you may have. 

Make a plan to pay off your debt and use the same SMART goal method to make this plan. 


Step 5 - Invest for the future.

As you work towards your financial goals, it’s important to invest for the future in your personal financial plan. In addition, investing is important for many long-term financial goals, such as traveling and retirement. 

There are different types of investments that you can choose from: 

  • Stocks 
  • Bonds
  • Mutual Funds 

Make sure you have a diversified investment portfolio, as each type of investment has its own risk profile. 

Making a plan to invest for your future self is crucial in a personal financial plan. 


Step 6 - Protect your assets.

Making plans for your financial plan may seem redundant, but it’s important to make a plan to protect your assets. As you are reaching your financial goals like purchasing a house or car and even starting a family, you want to ensure you can keep these assets through: 

Insurance can help you protect your assets like: 

  • Health
  • Auto
  • Home 
  • Life 

Insurance will make sure these assets are protected from any issues. 

An emergency fund can allow you to pay for an emergency without getting into debt. Having three to six months of expenses in a high-yield savings account is ideal. 

Being a victim of identity theft and fraud can cause you to lose certain assets or limit your ability to get new assets. Always be aware of your credit score and catch any suspicious activity. 


Step 7 - Revisit and update your personal finance plan.

Any plans we make in life, along with a personal financial plan, can change at any moment. Life changes may cause you to update your financial plan. Even if you don’t have any life changes, it’s important to revisit your financial plan to ensure you are:

  • Still reaching your financial goals 
  • Building wealth through investments and assets
  • Understanding your new current financial situation

This step is crucial in a personal financial plan because it will give you an idea of what you’ve done well and what you need to improve upon to reach the goals you’ve set for yourself. Of course, your goals will also change; this is a chance to set new goals. 

Photo by Karolina Grabowska


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