How to create a Basic Financial Plan in five steps

How to Create a Basic Financial Plan in 5 Steps
The Five Steps To Financial Planning

My blog of June 2, really got it going, I received so many emails form my acquaintances and others concerning my blog “On the Bus” that I decided my blog this week would be on how to prepare a basic Financial Plan, not a budget.

In a Financial Plan you need to plan where you want to be, how you plan to be there, and when.

It is important that you do not let the word Financial Plan intimidate you into not getting ready to formulate your financial plan. Without a Financial Plan it is like going on a journey without a GPS in your car, or like Seneca said “If you do not know what habour you seek, any wind is a good wind.” Don’t let yourself be caught in someone else’s wind know what you want and set your plan to attain your goals.

This is how you begin:

Personal Financial Plan Step 1 – Assess Where You Are Now Financially
A Cash Flow Analysis, aka “budget” or “spending plan”, lists your income and expenses by month. Subtract your expenses from your income to obtain your net cash flow. If it’s positive, plan what to do with the excess. If it’s negative or you break even, either find ways to increase your income or cut your expenses (or both, for even better results.)

Next prepare a Net Worth Statement> Add up what you own and subtract what you owe. This will give you your Net Worth. Start with your bigger assets like your home, car, and bank balance and then subtract your total mortgage, the balance on your car loan, or credit card balance.

Personal Financial Plan Step 2 – Determine Where You Want To Be Financially
 Set specific, measurable one-year, three-year, and five-year
 Goals, as well as longer-term goals.
 Establish an emergency fund.
 Pay off credit card debt.
 Contribute to your employer’s retirement plan if there is one. If not, set up a retirement plan and contribute to it regularly.
 Pay off the mortgage.
 Achieve financial independence by a certain age.
Be sure your investments are diversified.
 Minimize your taxable income.
 Other personal financial goals
 Establish children’s college funds

Personal Financial Plan Step 3 – Design a Plan to Reach Your Goals
 Build a liquid emergency fund
 Pay off credit card debt
 Pay off other debt
 Start investing or continue to invest according to your risk tolerance
 Set up an education fund for your children and contribute to it monthly
 Draw up a will
 Set up a retirement plan

Personal Financial Plan Step 4 – Implement the Plan
 Start tracking your income and expenses using a budget form, spreadsheet software like Excel, or a computer program like MS Money.
 Research investments that fit your risk tolerance and begin investing on a regular basis. You can do this online, through your bank or broker. You’ll pay more using a broker but there are several low-cost online brokers with good reputations that you could use instead of a full-service broker

Personal Financial Plan Step 5 – Monitor the Plan
 Use your spending plan to track your progress on your goals monthly or at least quarterly.
 Update your Net Worth Statement at least quarterly, but preferably monthly.
 Make adjustments in spending as necessary if you are deviating from your plan.

Try not to let the above process deter you from creating the plan. It is much easier than it looks and once you get started you will be very comfortable doing it.
If your results are not what you expected keep working on it and remember this is just where you are right now and the new plan you have just created is where you want to be. The new plan will require some care and attention. Monitor it weekly stay focused and always remember where you want to be financially.
Please let me know how you are doing.
If you require the Financial Planning forms email me at:

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at

13 thoughts on “How to create a Basic Financial Plan in five steps

  1. I’m so glad you invited me to your blog site. I was drawn in by the newest theme, “How to Create a Financial Plan” and now I’m hooked. You make it so easy to understand. I’m printing them off and I’m going to read them “on the bus”. Can’t wait until the next one.

    I will be sharing this site with everyone I know.

    1. Wendy, I know that you would see the benefit of the blogs and that you would get the best out of them. I am glad that you will study them but always remembe I am here for any questions and advise.
      Thanks for sharing your comments and pass the blog addess to your friends.

  2. Mama Tessa- Marie,
    I want to thank you for helping me with my financial plan. Ever since you FORCED me to pay myself first…lol, through my savings account, it has done wonders in times of emergency. I never find myself choosing between, paying a bill or fixing my car. It feels great.

    I broke my glasses in half yesterday and had to buy a replacement pair. I had to find $170 out of pocket and thanks to my newly acquired credit card I was able to manuver without getting a headache,and with pay day tomorrow, I intend to pay it off instantaneously while still having funds in my saving account. Thanks again.

  3. Great Job Zola, it just takes a little planning and the rewards are always amazing. I know you can do it and tht you will be a very wealthy lady in the future. Thanks for your comments glad I could help.

  4. Hi Tessa Marie i do really appreciate the sessions with you and your blog has been even more expository as usual,i just would like to know if establishing a strict financial plan does not really make me an enemy of the system because of the whole credit rating thing.I am a very prudent person but i grew up in a society and home where that word never made sense and we were extremely superstitious about financial issues thankfully i brought my prudent mentality to canada and i really do not want that to be an issue between me and the system here.I am starting a fresh life in a new system i really want a solid financial planning foundation.

    Wondering in an interactive sense what you would say to this person,not mine opinion anyway.”Why do i save to be rich in my old age when i only have one life to live and most canadian seniors are catered for anyway and there is so much i want to do at my youth,i cant afford it but i really have to have those experiences.”

    1. Hi Aifuwa: Whoa, Who ever told your friend that Canadian seniors are catered for? No they are not, does your friend know what the average amount one receives from Canada Pension and old age Pension? The monthly total is closer to $1,200 – $1,300 monthly. That can only cover shelter, food, and very little else. What about a new coat, new shoes a special diet if your health needs it, then can you go away for a week in the Winter, buying a gift for a grand child, these are just a few reasons why you should save for your old age. Aifuwa with proper planning you or your friend can still take advantage of your youth and and enjoy doing the things you feel that are important, but you need to have some goals and plan the ways to reach them. While enjoying the present it is also wise to take a look at the older people you see everyday on the buses in the stores and around your neighbourhood learn from their mistakes and if you are lucky asked them what they did or did not do right, you would be supprise to hear the answers. Plan your future wisely and also plan your present spending wiser.

  5. I have really taken this to heart. Weather it be for my own finances or when I am educating my own clients this really helps things get to the next level. Whenever I set goals and checklists in place it seems to keep things in focus and in the forefront.
    Great work Tessa-Marie! Keep it up.

    1. Hi Stephen, Thanks for t he feedback, I know you will be the next millionaire I talk to, because you are always on your toes with your finances and your client’s it has been an absolute pleasure watching you grow to one of the best Small Business Advisor’s I know. Share the blog with your clients and friends and keep up the great work you are doing.

  6. Great post! After a serious search I choose to go with a fairly new type of an advisor. I am not wealthy but I understand the value of consulting with the people that help you build you wealth in a fair way. People’s Financial Advisor ( are Fee-Only certified planners and registered with the SEC. They offer a free financial assessment (everyone should at least do that) and a full financial plan for $99. The entire interaction is on-line; I had an interview on their website and after several days got a full report that talked to me in plain English about my situation. It’s worth every dollar I paid for it.

    1. Great Irina, That is exactly what everyone should do I am so happy to hear that you found some great financial advise. The cost is not high considering what you got from the Advisor. Keep it up and make sure to follow up every year and more often if you have a life changing experience. Good Luck.

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