How to Build Your Own Financial Plan [with templates] (2024)

Imagine waking up in the morning feeling completely free of financial anxiety.

Your bills were automatically being paid, your debts were managed and steadily shrinking, your money was invested in all the right places, and your savings account kept growing. Even better, your family was protected.

This is a glimpse of financial freedom. Because financial freedom is more than just having lots of money. At the heart of monetary freedom is clarity, fulfilment, and liberation from worry.

Getting to this point takes planning, commitment and perseverance. It also requires knowing where to start. In this guide, I’ll walk you through the process of creating your own financial plan. I recommend starting at the top and working through each section, and as you go you’ll start to develop a comprehensive plan for mastering your money.

What you will learn from this guide:

How to evaluate and set the right financial goals
Understand the financial planning process and how to use each of the key elements that professional planners do
What strategies to look for in each stage of your plan
How to incorporate wealth building into your plan
What to look for to protect your family now and into the future
When you might need to speak to a professional and what they might do differently

What is A Financial Plan?

Simply put, a financial plan summarises your financial goals, identifies your current situation, and outlines a process to manage your money to move you towards your goals. Your plan should be written down and then actioned over time. This means it should be a guiding document for your financial life that covers your savings and debts, your cash flow, your investment strategy or property goals, your retirement plan and superannuation, and your future planning such as insurance and estate planning.

Benefits of a Financial Plan

Want to avoid that feeling of knowing you should do something, but not knowing what to do next? A financial plan ultimately will provide clarity about where you are now and what your next step should be.

Aim to create a plan that:

Details your short and long-term goals clearly
Provides an unflinching overview of your current situation, including your challenges
Can be updated over time to continue guiding you through life changes
Help you understand exactly what to do with your money and avoid poor decisions
Points you towards your goals and increases your chances of achieving them
Provides a level of comfort and calm even when life gets uncertain or messy
Gives you financial confidence and motivation

These benefits can be genuinely life-changing when applied to your personal financial plan.

Can I DIY My Financial Plan?

This guide provides a framework for creating a simple and effective financial plan yourself. For the average person, financial planning hinges on wise handling of simple financial systems such as saving, managing debt, and tracking where your money goes. If you have the time and discipline to manage your finances, you can certainly do so in many situations.

However, it is wise to enlist a financial planner once your money is a little more complex, when you reach certain key moments in your life, or if you have certain goals that you need support to achieve. To pull together a holistic financial strategy is difficult if you’re not skilled in understanding finances or spotting financial opportunities. It can also take considerable time and energy to manage it, hold yourself accountable, and keep it up to date.

Another thing you might want to consider is your ability to separate emotions from your financial decision making. One of the key benefits of a financial advisor is objectivity – they can assess financial decisions without emotions or history clouding their analysis.

12 Steps To Create Your Own Financial Plan

1. Analyse Your Current Situation & Budget

First, take an honest look at your current financial situation to identify the gaps between where you are now and where you want to be.

We use a series of questions that you can use to evaluate your personal situation. The higher the difference between your current score (1) and your desired score (5), the bigger the gap in your financial journey (this also shows the areas that need the most attention in your planning).

Gaps Analysis Worksheet

Identify the gaps in your financial preparation and your areas of future focus with this worksheet.

Download Here

Understand Your Current Position

To fully understand your financial situation, start writing down all your assets and liabilities. We recommend taking the time to detail your debts, along with their interest rates and payment plan. Use this information to calculate your net worth.

Example: [Assets (home, car, superannuation, investments, cash savings)] – [Liabilities (debts, loans, credit cards, student loans)] = your net worth

Next is your monthly cash flow and your budget. Before creating your new budget, review your expenses for the previous year and document your spending for necessities, bills and repayments, and other categories. Create your cash flow statement by subtracting all these expenses from what your earnings were for the same period.

Example: $5,000 (monthly income) – $2,800 (monthly expenses) = $2,200 (surplus)

Understanding your surplus is one of the most important parts of this exercise. If you have a surplus, also known as positive cash flow, this will help you reach your goals more quickly. If you’re in the red or just breaking even, use your budget to begin to cut unnecessary spending. If budgeting is new to you, you can get started with our simple budget builder or Plan Your Life budget builder!

Read more about budgeting here >

Don't Forget

Make sure your cash flow projection is accurate by knowing exactly how much of each pay check is committed to budget items. Break down monthly, annual or variable expenses into weekly to make sure nothing is missed.

2. Set Your Financial Goals

Setting realistic goals is an important step to stop the slide of time from catching you out. Outline your life goals as best you can in the present moment, looking at short-term goals (1 year), mid-term (1-5 years), and long-term goals (5-15 years). Your finances are deeply connected to your life, so start by thinking about the life you want to build.

Everyone has different life goals. Maybe yours is to retire early, to leave a legacy for your loved ones or to generate passive income by 45. To find your most essential money goals, ask yourself:

What does financial freedom look like for me and my family?
What are my motives for wanting to achieve this goal?
How would my life change if I reached this goal?
What problem am I solving by reaching this goal?

The best way to build success into your goals is by ensuring they are specific and achievable. For example, you could use the SMART methodology (example only):

Specific: My goal is to retire with 2 million at 55 (long-term). I will invest $2000 monthly and max out my superannuation cap, plus $300 monthly into my share portfolio (short term steps).
Measurable: I will review my budget every month to keep me on track. Each year, I will review my progress and balance my investment portfolio as required.
Achievable: I can achieve this goal as it is within my budget, and my investments are structured towards it. This goal doesn’t negatively affect my current lifestyle.
Relevant: This goal is central to my plans for early retirement, which is a top priority.
Time-bound: I aim to achieve my goal in 15 years, when I reach the age of 55.

Read more about setting financial goals here >

3. Saving Strategies For Every Stage

Whether you’re just starting out or have been saving diligently for years, saving money is a dynamic process that requires strategic planning.

Start Small and Grow: No matter your income, dedicating even 10% of your weekly earnings to a high-interest savings account or investment portfolio is a big step towards your future prosperity.
Emergency Fund = Your Safety Net: Life throws curveballs. Medical bills, job loss – so having an emergency fund is vital. Calculate your monthly burn rate (all your expenses) and multiply that number by 3, 6, or 12 months, depending on how long you’d like your emergency funds to last. For example, with $2,800 in monthly expenses, a 12-month emergency fund would be $33,600.
Automated Accounts: Take the pressure off knowing exactly what needs to happen with your money and when with automated transfers into your bills and savings accounts. If you struggle not to dip into your savings, use an account that restricts you from accessing it.
Dream Home or Investment Property: A 20% deposit is the key to your property dream, be it your first home or an investment property. By saving 20%, you’ll secure better loan terms, avoid hefty Lender’s Mortgage Insurance, and build equity faster.
To Save or To Invest:If you’re saving for a big purchase or for your emergency fund, find a good high-interest savings account. If you’re saving for retirement or to build wealth, then it’s best to put that money to work in an investment portfolio.

Saving is a journey, not a destination. It’s all about consistency. As you’re in control of where your money goes, you’ll see it bringing you closer to your goals.

Learn more about saving and budgeting techniques >

4. Create An Investment Strategy

Although it might seem secure, storing cash in your savings account often earns less than the rate of inflation, meaning that your money is actually losing value.

For wealth creation, investing is the single biggest factor. The difference between those with wealth and those without comes down to who has built and held assets or investments, whether property or shares.

It’s ok to start small. You can open a brokerage account yourself with a bit of research. Contributing a set amount at regular intervals (let’s say every pay check) into this ongoing investment portfolio is a simple and effective tactic known as Dollar Cost Averaging. Doing this means you don’t have to track what’s up and what’s down – it balances itself over time, particularly if you’re investing in bundled options such as ETFs or mutual funds.

Remember, all stock, real estate, or other investments have risks, as well as strategies to manage those risks. If you’re unsure, it’s helpful to get investment advice.

Take these factors into account:

Your risk tolerance: Can you handle a 30% drop in your stock portfolio? If not, you might want to stick to low-yield bonds or blue-chip stocks over high-growth assets. Our investment philosophy is designed to reduce risk through diversification.
Your cash liquidity preferences: If you need to have more liquid assets or cash available, consider using a bucket method or simply having separate cash savings. With a bucket method, you put aside a group of stocks that are designed to be sold if needed; these can be turned into cash relatively quickly.
Your time window: How long will you allow your investments to grow? Your timeline will help you determine your risk tolerance and your stock choices. Riskier investments are often more suitable for those with more time to recover from a loss.
Your diversification: Property and shares both have their own appeal, however a diversified portfolio that isn’t dependent on one asset type or industry is the ideal outcome to reach your investment goals.

Learn more about investing in property vs shares >

5. Optimise Your Superannuation

The fifth component to creating a robust financial plan is to understand and optimise your superannuation fund. Superannuation plays a pivotal role in securing your financial future, so don’t underestimate the importance of making sure it is performing well.

Super funds can differ in the returns they deliver, their service fees, and as a consequence, your ultimate retirement fund balance. Make sure you know what to look for in your superfund.

First, review your existing Super Fund. If you have money in multiple funds, it is a good idea to consolidate. However before you exit a fund, it’s important to check if you have insurance you’d like to keep within that superfund.
Make additional pre-tax contributions as much as possible. The current superannuation cap per year is $27,500, which many Australians do not reach. The earlier you invest and the more you contribute, the greater the potential for your money to grow over time.
If suitable, you can make spousal contributions if your spouse earns less than $40k per annum. This means you can claim an 18% tax offset on those contributions.
Check if you are able to adjust your investment options with your fund. If you’re younger, switching to more of a high-growth strategy might be a good option.
If you’re interested in self-managing your superfund, check out our article on knowing if it’s the right choice for you.

It can be valuable to estimate how much superannuation you might enter retirement with using the MoneySmart Superannuation Calculator.

Lean more about superannuation >

6. Deal with Your Debt

Not all debt is bad and it can be hugely beneficial to grow wealth. However, debt is often mismanaged or ignored, and it can turn into a monster.

Debt management can be used in one or two ways:

Use debt purposefully as an investment, with the expectation of earning a higher return elsewhere for profit.
Manage and pay off bad debts (debts that don’t earn money) to free up cash flow and use that money more productively.

If you have a credit card debt or a car loan, review your interest rates and balances. Prioritise paying debt with the highest interest first, as it is costing you the most. Check out the debt avalanche or debt snowball methods for some ideas.

Using debt to grow wealth can be a complex strategy, so we recommend consulting with a financial planner. Additionally, if you feel the amount of debt in front of you is insurmountable, it can be helpful to speak to a financial counsellor.

Learn more about how to pay off debts >

7. Planning For Taxes

Whether your tax is simple or complicated, tax season should never surprise you. Getting a good accountant will obviously make your life a lot easier in this regard, but an effective tax strategy is about preparation.

Tax planning simply involves making decisions and setting up your finances throughout the year to maximise your tax position. Of course, tax planning is always within the law; we are not talking about tax avoidance.

This could be everything from recording your tax-deductible expenses, to purchasing business equipment at the right time, to making tax-effective investments, or understanding your deductions or depreciation on investment property.

Tax planning and research allows you to understand the implications of tax ahead of time, and act accordingly.

Learn more about tax planning >

8. Construct Your Retirement Plan

No matter your stage of life, ask yourself, ‘how much do I need to retire to live the lifestyle I want to have?’ This is a great first step in incorporating your retirement planning into your finances from now on.

If you are approaching retirement age, consider your current retirement savings. Know exactly how much you have, and Review AFSA’s retirement standard to calculate how long your funds will last and your lifestyle level. Use your budget to know your current living expenses and assume around 80% of that amount for retirement living.

If you’re younger, and haven’t thought about retirement yet, it might simply involve ensuring that your super is optimised. However, if you’re looking forward to an early retirement or something like lots of travel, it’s wise to work towards that now.

Debts such as a mortgage, or unplanned expenses such as medical bills, can eat into your retirement funds. Many of our clients want to pay off their mortgage before reaching retirement. You might need to build this goal into your retirement plan, or aim to have additional funds saved to continue paying your debts.

If you need help, a retirement advisor can help you get a clear picture of what your retirement will look like, and help create the life you want to live post-work.

Learn more about creating a personalised retirement plan >

9. Protect Yourself

You want your financial plan to include protection for you and your family in case of financial setbacks. For example, if you have an accident and can’t work for two years, this part of your plan jumps into action, in tandem with your emergency fund cash reserve.

Briefly there are several main types of personal protection that we look at with our clients.

Income Protection
Income protection insurance is designed to replace your income for a specified period of time, in the event that you cannot work due to an injury or disability. This is valuable if you are self-employed, have dependents, or have debt that will need to be covered.

Total & Permanent Disability (TPD) Insurance
Where Income protection provides regular payments, TPD insurance is a lump-sum payout if you become permanently disabled. This permanent disability could be defined as within your own occupation, or more commonly, in any occupation.

Trauma Insurance
Trauma insurance is, like TPD, a lump sum payment. However, Trauma insurance is also called ‘recovery insurance’ or ‘critical illness’, because it is useful to help pay medical costs or cover living expenses while you are recovering.

Life Insurance
Life insurance isn’t to protect you, but your family in the event of your death. If you are the primary breadwinner, losing you is not only a heart-breaking personal loss, but potentially a devastating financial blow. Life insurance provides those you leave behind with financial security.

How much cover do you need? Be aware not to over-insure or have excessive cover that may not provide additional value.

10. Look for Wealth-Building Opportunities

Another important component, and one that our financial advisers build into each plan we complete, is how your plan will improve your wealth over time. Adding opportunities into your financial situation can make a powerful difference to your finances over your lifetime.

These opportunities might be challenging to research and activate. Many complex financial structuring or planning requires the assistance of finance professionals.

Wealth-building opportunities might include:

Using the equity in your home to purchase an investment property, or start building an investment portfolio using debt-recycling
Purchasing assets that will increase in value over the short or long term
Utilising trusts to assist with your family’s financial needs into the future, such as planning for wealth transfer, allocating money to education, or protecting assets
Utilising surplus cash flow to fast-track your mortgage repayments, or increase and diversify your investment portfolio.
Creating cash flow with additional income streams

Read our Top 10 ways to increase your wealth >

11. Implement Your Plan

By now, we’ve worked through the essential steps of creating a personal financial plan. You have a holistic view of your situation, while working towards your time-based priorities.

Implementing your plan might look like:

Detailing your new payment plans for savings and debts
Automating all your bank transfers & keeping a record
Setting a timeline to have your insurance policies updated or in force
Actioning any superannuation changes

Discipline is the key to success after creating your financial plan; concrete and actionable steps will help you stay on track and achieve your goals. I recommend writing down the actions you need to take and ticking them off once they are accomplished.

12. Review Regularly

After setting up your financial plan and seeing it in motion, it’s crucial to regularly assess and adjust it according to any changes in your life or goals.

Monthly, set a regular time to review:

Your bank statements and your budget balance sheet
Your savings and cash flow analysis

Annually, a more thorough review should look at:

Your progress towards your goals
Balancing your investment portfolio
Your savings and debts and check if you are on target
Your insurance policies and make any changes
A look at your net worth
Your tax actions for the year
Additional steps you might need to add, such as estate planning

Think about any changes in risk tolerance, marriage, or having children that may be coming up, which may change your goals or priorities.

Don’t put off reviewing your finances, because it really is like a checkup for your financial health. A regular financial review will strengthen your confidence and continue to grow your financial acumen.

– – – – – –

If building your own financial plan feels like a huge undertaking, or you don’t have time to devote to it, that’s ok. Many Australians struggle to find the time to research and implement big financial changes in their lives.

In our financial advice firm, your advisor does the hard work of creating and implementing a completely personalised strategy, and keeping you accountable with regular reviews. Not sure if you’re ready to go the professional route? Learn how much money you need to have to make a financial planner worthwhile.

If you’re interested in our financial planning services, book a free consultation.