How to Create a Financial Plan Like a Pro

Please refresh on this existing URL and use the following update language: on March 24, 2023: This story was published at an earlier date and has been updated with new information.

Are you ready to take the reins of your finances and your life? If so, you’re going to need a plan. Here’s a guide to help you create a financial plan like a pro in just eight steps.

1. Define Your Financial Goals

The first thing you need to do is decide where you’re headed. What’s your endgame and what do you hope to be able to achieve with your financial plan?

“A financial plan is like building a house. Before putting up any walls or installing countertops, you need to think about what type of house you want,” Steven Gilbert, certified financial planner and founder of financial planning firm Gilbert Wealth, says.

Think in terms of the next year, the next few decades and the rest of your life.

Short term: Is there anything you’re hoping to achieve soon, like building an emergency fund, getting out of credit card debt or saving up for a down payment on a car?

Midterm: What are your plans for the next 10 to 20 years? Perhaps you want to save for a down payment on a house or higher education for a child.

Long term: Think big picture here. Do you want to save for things like retirement, end of life expenses or a vacation home?

“People who have clear goals are more equipped to work through the steps of a comprehensive plan and put in place the strategies that best fit them and their goals,” Gilbert says.

[READ: How the 70/20/10 Budget Rule Works]

2. Audit Your Financial Situation

The next step is to figure out where your finances stand. You’ll need to take stock of your full financial picture, including:

Income: List all of your monthly income sources and amounts.

Savings: Determine how much you have in savings, including traditional and high-yield savings accounts, certificates of deposit and money market accounts.

Investments: Write down the types of investments you have, such as standard brokerage, retirement, education, whole life insurance or child investment accounts. Take note of their current balances and estimated growth trajectories.

Assets: List your assets and their fair market values.

Expenses: Write down all of your monthly expenses, including rent, car payments, bills, subscriptions, entertainment and miscellaneous spending.

Next, find the sum for each category; income, savings, investments, assets and expenses. Then, subtract your monthly expenses from your monthly income to find out how much you can save each month.

3. Maximize Your Disposable Income

Analyze your income and expenses to see if there are any opportunities to save. Consider if each expense is necessary and try to find a way to reduce it if it is.

For example, you could shop around to see if you have the best deal on your car and home insurance, cellphone plan and internet service. You may also be able to cut down on expenses like your entertainment and eating out.

Once you optimize your expenses, look at your income: Maybe there’s a way you could bump it up. Perhaps you’re due for a raise at work or there’s a professional development path you could pursue to increase your earnings.

Or, it might be time to explore the job market and see if you’re receiving competitive compensation. Another option is to look into a side gig, like working as a delivery or rideshare driver, online tutor or freelance writer.

4. Develop a Financial Plan That Works for You

With an understanding of how much disposable income you have each month you can begin to reverse engineer your financial goals. For this step, strategize how you can best use your resources.

For example, let’s say you have $1,000 to save each month and your goals include building an emergency fund to cover three months of expenses, saving for a down payment on a house and putting 15% of your income toward retirement.

[READ: Retirement Accounts You Should Consider.]

Amount you’re able to save per month: $1,000

Emergency fund goal: $15,000

House down payment: $13,000

Retirement: $8,000 per year

Example Strategy No. 1

If your primary goal is to build your emergency fund as quickly as possible, start by putting $500 per month into your emergency savings and $500 toward retirement.

While your retirement savings would be a little shy of your goal and your house down payment would be on the back burner, you could build your emergency fund in fewer than three years (30 months). Then, you could shift to saving $500 for your house down payment and reach your goal in 26 months.

Example Strategy No. 2

If you want to make sure you hit the $8,000 per year retirement goal, you’d need to save $667 each month, which would leave you with $333 to put toward your other goals. If you decided to split the remainder evenly, you’d hit your emergency fund and house down payment goals in about eight years.

The key here is understanding that you have some leeway — you can decide what’s most important and what can wait.

Not sure what you should prioritize?

“The foundation of most financial plans is the same: Get on a budget, get out of debt, save and invest,” Jay Zigmont, Ph.D., CFP and founder of investment advisory firm Childfree Wealth, says.

When it comes to the saving step, Zigmont says, “Start by saving three to six months of your expenses in an emergency fund held in a high-yield savings account. After you are out of debt and have an emergency fund, work on investing.”

In the end, however, saving will come down to what’s most important to you. If you want to prioritize a vacation for next year, bump it up on the list.

It’s important to plan for the future but also to live it up a little as you go. Plus, enjoying some of the rewards of saving can help to keep you motivated.

[READ: 20 Creative Ways to Save Money.]

5. Account for Future Scenarios

Next, think about the future and how it will impact your disposable income. For example, are you pursuing a career path that will increase your income over time?

On the other hand, are you planning to stop working in a few years when you have children?

Or, do you typically get a tax refund each year?

Think about how future scenarios like these will factor into your savings ability and goal timelines. Make adjustments to your financial plan as needed.

6. Commit to a Short-Term Savings Goal

Make a plan for the next 90 days. You don’t have to commit to an intimidating year- or decade-long goal — and probably shouldn’t. Start with baby steps: Decide how much you’ll save for the upcoming three months and which goals you’ll put that money toward.

7. Review Your Progress and Make Adjustments

At the end of the three-month period, review your savings plan. Did you save the amount you planned?

Ask yourself how you’d like to move forward. Do you want to save the same amount for each goal or do you want to make some adjustments?

Once you’ve decided, set your next 90-day goal and follow the plan. Then, rinse and repeat.

8. Adjust as Circumstances Change

At the end of each year, conduct a deeper review of your financial plan. See how much you were able to save throughout the year and check your overall progress. Also, assess your goals to ensure they’re still feasible.

For example, if your monthly expenses have increased or decreased you may need to adjust your emergency savings target. Or, if the market’s changed and housing prices have risen or fallen you may need to update your house down payment goal.

Assess your progress and decide what’s most important for the coming year. Then, start again with your next 90-day goal.

You Don’t Have to Plan Your Finances Alone

If you feel overwhelmed by the idea of building a financial plan, you don’t have to do it alone.

“Financial planning can be a complicated process depending on how complex your life and finances are, especially if you own a business, so you may want to discuss your plan and goals with a professional,” Andrew Rosen, CFP and president of Diversified LLC, says.

Financial advisors can give you all your options and offer personalized guidance on how to most efficiently reach your goals.

More from U.S. News

What Is a Financial Plan?

8 Personal Finance Ratios You Should Be Tracking

15 Steps to Achieve Financial Freedom

How to Create a Financial Plan Like a Pro originally appeared on

Update 03/27/23: This story was published at an earlier date and has been updated with new information.

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