Developing a personal financial plan

Author: Steven posted in Personal finance tagged with financial plan, Investing 101

Vision without action is a daydream. Action without vision is a nightmare. This Japanese proverb is one of my favorites and when it comes to investing in the stock market, coming up with a personal financial plan is one of the most important steps.
By developing a personal financial plan you can realistically save for retirement, set money aside for the unplanned, accumulate money for special expenses such as a new car, and simply put, invest more intelligently. Developing a financial plan is necessary because saving does not come naturally. It requires thought and if we want to meet our financial goals we need to plan for it.

But how exactly is a personal financial plan created?

You might think it is a very complex process but in reality it is quite straightforward and can be summarized in four steps:

  1. Evaluate your financial health which is done by preparing a personal balance sheet and a personal income statement. This will allow you to know your net worth and see exactly how much you are earning and where the money is going (spending pattern).
  2. Define your financial goals. You need to save money towards such goals. How much you will have to save will depend on the goal you would like to reach. This step  is the cornerstone of your overall personal financial plan. The financial goals must be realistic, meaning that you must be able to save enough money to reach them (step 1 will help you determine how much you can afford to save).
  3. Develop an action plan to meet your financial goal. Your overall spending must be aligned with your budget.
  4. As mentioned in the Japanese proverb, action, action action! Execute the action plan defined in step 3.


Once you have gone through the four steps mentioned above, make sure to regularly review the progress of your action plan and if needed, revise the plan and make any necessary adjustments. Recall that no plans are fixed for life. It is normal to change a plan because priorities and goals might change. Although the overall personal financial plan development process is straightforward, it still requires sacrifices because saving is not as exiting as spending. But in the long run, such sacrifices are worth the rewards.

In the weeks to come we will be creating dedicated articles to show you exactly how to work through the above steps so stay tuned! If you haven’t already done so, sign up to our newsletter to always be informed on our latest articles.

Share this article :

  • reply

    Regular review of the process I think is key.

    • reply

      Absolutely Michelle. Reviewing the process on a regular basis is surely key. The overall progress of the action plan must also be monitored closely in order to stick to the cash budget. If done effectively, the financial goals will be met in a timely fashion.

Leave a comment

Your email address will not be published.

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.