Personal financial plan: what goes in it and how to make one
A personal financial plan is not a forty-row spreadsheet. It is the answer to five questions about your money, and it fits on one page.
In short
A personal financial plan has five parts: what you have today (your net worth), what comes in and goes out each month, an emergency fund, a plan for your debts, and goals with an amount and a date. You can make one in an evening: work out your net worth, average your income and spending over the last three months, decide how much goes to the fund and the goals, and set review dates — briefly every month and in full every year.
Search for a financial plan and most of what comes back is for businesses: projections, cash flow forecasts, the money section of a business plan. A personal plan is simpler and more useful. It does not answer to an investor. It answers you: where the money goes, and whether you will get to what matters to you.
The five parts
Net worth
What you have today
Accounts and savings minus debts
Cash flow
What comes in and goes out
A three-month average, not the best month
Emergency fund
For a breakdown or a lost job
One to three months of spending
Debts
In what order and by when
With a date, not "someday"
Goals
An amount and a date for each
And how much to set aside monthly
1. Net worth: the starting point
Add up the money in every account, the cash and the savings, and subtract your debts. That gives one number: your net worth. It can be negative, and that is fine for a start — the plan exists to make it grow. How to work it out and why it is more honest than your salary: how to calculate your net worth.
2. Cash flow: what comes in and goes out
Take your income and spending for the last three months and average them. Not your best month and not a guess: a plan built on a good month breaks in an ordinary one. If you have never tracked your spending, start there — where your money goes shows how to find out in thirty days.
The gap between what comes in and what goes out is the raw material for everything else. If it is close to zero, the plan's first goal is not saving — it is that gap.
3. Emergency fund
The first money you set aside goes here. The target is one to three months of essential spending, more if your income varies. The full calculation is in emergency fund.
4. Debts
List them all: balance, rate, monthly payment. Choose an order — most expensive first or smallest first — and give each one the date it will be paid off. How to spread that over the months: how to clear your debts in a year. If you are unsure whether to save or pay down first: emergency fund or debt.
5. Goals
Every goal has three numbers: the amount, the date and how much to set aside each month. "Save for a car" is a wish. "Ten thousand by September 2028, three hundred a month" is a goal. How to choose goals that get finished: money goals.
A plan on one page
0 → 20 000
Net worth
Today and in two years
300 a month
Emergency fund
Three months of spending by summer
250 a month
Credit card
Paid off by March
200 a month
Trip
Two thousand four hundred by July
That is everything you need: where you are, what to do each month and when to check whether it works. More rows do not make a plan more accurate, only heavier.
How to review it
A plan goes stale the moment life changes: a new job, a move, a child. So it has two rhythms. Every month, fifteen minutes: did spending match the plan, are the goals on schedule — as in the monthly review. Every year, the whole plan from scratch with a new net worth and new goals, as in how to plan your financial year.
What it looks like in the app
In Caudal each part of the plan lives where it is easiest to keep. Net worth is on the main screen. Goals are in Goals: each with its amount, its date and a "set aside this much a month" line that is recalculated after every contribution. Debts with a monthly payment go in Debts, and those payments are counted in the "how many days your money lasts" forecast. The plan on paper says what to do; the app shows whether you are doing it.
Common questions
- How is a personal financial plan different from a budget?
- A budget is the plan for one month: how much to spend and on what. A financial plan is wider and longer: it connects the monthly budget with your net worth, emergency fund, debts and goals for the years ahead. The budget is one of its parts.
- How often should I review my financial plan?
- Briefly every month, to check whether spending and goals are on track, and in full every year or after any big change: a new job, a move, a baby, a large debt.
- Do I need a financial plan if I earn little?
- Even more so. On a small income every mistake costs more, and a plan shows where each dollar goes. It can be short: cash flow, a small emergency fund and one goal.
Try it on your own money
Caudal is an expense tracker in Spanish, English and Russian. Several currencies, goals, debts, a shared household budget. Recording an expense takes three seconds.
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