Make Your DIY Financial Plan Today

Dear Rich Lifer,

When it comes to managing money, most Americans want to go it alone.

The pushback against financial advisors usually revolves around cost and high fees. But even when financial advice comes free, most people still don’t want it.  

There are certainly times when seeking out professional advice can be money well spent.  

For instance, if you’re young and a parent passes away unexpectedly and you inherit a large sum of money, a financial advisor could help you build a plan to invest the money so it lasts for decades.

But in reality, it’s not necessary to manage your finances successfully. 

And since most people are taking the DIY approach to their finances, we figured we should show you how to build your own financial plan without a financial planner.

Here are the steps you need to take to create your own personal financial plan from scratch.

Financial Plans Should Accomplish Three Things

First off, let’s looks at what a financial planner actually does:

  1. Capture your current state,
  2. Capture your future desired state,
  3. Map out how to get from your current state to your future desired state.

Financial plans are never set in stone. If circumstances change and your future state is no longer the same as what you originally wrote down, that’s okay.

We’ll talk about how often you should review your financial plan a bit later. The point is your financial plan is a living document that you own and should be reviewing and updating on a regular basis.

So, how do you map out each of these three steps in your plan?

Step 1: Capture Your Current State

To get a holistic view of your finances, we recommend you focus on three areas: your assets, liabilities, and cash flow.


Assets are what you own, including things like vehicles, homes, collectibles, precious metals, and of course cash in your bank accounts and retirement accounts. Take inventory of all these things and assign a value to each.


Liabilities include any debts you owe, your mortgage, car loans, student loans, credit card balances. Write all these down so you can subtract your total liabilities from your total assets, this will give you your net worth.

Cash flow

Cash flow is important to calculate because you need to know how much money is coming in every month versus going out. There are a few different ways you can calculate cash flow, here’s what we recommend…  

Go through your old bank and credit card statements and download them into a .CSV file then open them in a spreadsheet. Go through each debit and credit and total them up for the month. If you like, you can even categorize your spending. This will give you a snapshot of your monthly income and expenses. The difference between these two numbers is your cash flow.

An easier way to do this is to download an app like Mint or Personal Capital and sync your bank accounts with the app. The apps are secure and will automatically categorize your expenses for you and tell you your cash flow.

Either way, you should be aiming to see a positive cash flow. If you’re spending more than you’re making each month, you’ll quickly start to run out of money and have to resort to selling your other assets to free up cash.


Step 2: Capture your Future Desired State

Once you’ve captured your current state, it’s now time to write down your future desired state(s). What are some financial goals you’d like to accomplish?

Do you want to… 

Buy a vacation home?

Save for a trip to Europe?

Retire early?

Send your grand kids to college?

Think about all the short and long-term goals you have in mind. It’s best to put a timeline on each of these goals and assign a dollar amount.

How much do you need for a down payment on a vacation property? When would you like to buy?

Once you have a number in mind and a timeline attached to that number, you can work backwards to figure out how much you’ll need to save to reach your goal.

Do this exercise for every goal on your list.

Step 3: Map Out How You’re Going to Get There

After you finish writing down your financial goals, it’s time to figure out how exactly you’ll achieve each goal.

If we take the vacation property as an example – how much of a down payment do you need? Let’s say $30,000 — how quickly can you save $30,000? This will give you an idea of how realistic your goal is. After running some numbers, you may realize you can’t save $30,000 in three years.

Since your goal is under five years, you also probably don’t want to put your savings into the volatile stock market. You could stash your savings in a CD, but interest is so low it’s probably not worth it. 

Instead, you could increase your time horizon. To save $30,000 in five years, it would only cost you $500 a month versus around $833 you’d have to save if you were to accomplish this goal in three years.

Can you save $500 a month? Look at your monthly cash flow and expenses.

Step 4: Review Your Plan

Now that you have a plan for how you’re going to reach your future desired state(s), you should review your progress at least once a year, if not quarterly.

It’s important to review your new current state. Has anything changed? Are you spending less or more? Did your investments make more than you thought this year?

In reviewing your plan, you may notice that you’re ahead of schedule. A goal you thought would take five years to accomplish, can now be done in four years.

The opposite can also be true. Maybe you got laid off and it took six months before you could find a new job. How does that dip in income affect your goals and their timelines?

Whatever the reality is, don’t panic. If things are not going as planned, it’s okay. The most important thing here is that you have a plan and you can recognize when your finances are headed in the wrong direction.

Without a plan, you’d have no clue whether you are close to reaching your future desired state or not. Plans help make your dreams a reality. 

Follow these four steps and you’ll have a plan as good as what any financial advisor will give you.

To a Richer Life,

The Rich Life Roadmap Team 

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