Design Your Personal Financial Plan

Updated on May 25, 2018
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Christine earned her law degree in 1996, worked in estate law and banking, and has Professional Financial Planner (PFP) certification.

The Power to Choose

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We all work hard at our jobs carrying a heavier workload and juggling more hours than ever before. Money comes in slowly and goes out too quickly. Sometimes we feel like we’re running in place . . . and that’s if we’re lucky! If we’re not so lucky than we’re scouring our network to try to line up a job, a second income, something in our area of expertise, or anything we can think of to pay the bills. For many people it is not an easy time.

If you find yourself overworked, looking for work, or just stuck, now is the time to educate yourself to become better equipped for the next step.Take the time now to build your plan and you’ll be ready to launch fast and furious when the next step becomes clear.

A net worth statement is a SNAPSHOT of where you are now, financially. Use your net worth statement as a benchmark to record your progress.

Design Your Net Worth Statement

A net worth statement is simply a snapshot of where you are now financially and it's easy to put together. The idea is to have a record of comparison so you can keep track of the progress you’ve made towards your goals. Careful planning will allow you to look back on each months net worth statement and reflect upon your growth.

Remember: it doesn’t really matter what the net worth statement says now; what matters is where you are going. Grit your teeth if necessary, take your net worth snapshot, and use it as a benchmark for your next step.

On a sheet of paper (or a spreadsheet), list your financial assets and add them up. Then list your financial liabilities (debts) and add those up.

Subtract your liabilities from your assets at the bottom. This “bottom line” figure is your financial net worth or the “starting line” for your journey. If the number is positive, it means you have more financial assets than debts: yay! If you are young, have a lower income, or excess debts, the bottom line might be negative.

Keep this in mind: one year from now, that number can be drastically higher than it is now, and in two years, higher than you can imagine! This is a starting point, not an ending point.

Here’s a sample of how you may wish to arrange your net worth statement:

Sample Net Worth Statement
Sample Net Worth Statement

Calculate Your Net Worth: Video Lesson

"How Am I Doing?" - Budget and Cash Flow

Okay, so you’ve completed a net worth statement, and you know your financial net worth (your assets minus your liabilities). Now what?

You can increase your net worth by one of three options: 1) increase your assets; 2) decrease your liabilities; or 3) both. How do you do that? Use the power of cash flow. If you’ve ever looked at your bank account and asked yourself, “Where is it all going?” you will find this step especially illuminating.

If a net worth statement is a snapshot at one moment, a cash flow statement is a running report of where your money is coming from and going to over a period of time. It’s an ongoing measurement of income, minus expenses.

Start with your income. Assemble one year of pay-stubs if you can, as well as any money coming in from other sources. Include your rental and dividend income, if applicable. Then move on to your expenses. List a full year of expenses, then divide the total by 12 months. This will allow you to account for any occasional or unpredictable income, such as commission or quarterly income, as well as annual expenses, such as property insurance, etc.

Monthly Cash Flow Statement Sample

Finally, put all of the collected numbers together to create your monthly cash flow statement. Here’s an example:

My Monthly Cash Flow Statement

INCOME:

Employment income (NET, after taxes)
Commissions and other sporadic income
Dividend and other regular income
Other: ____________________________

TOTAL INCOME: $______________

EXPENSES:

Groceries
Rent/mortgage
Debt payments
Personal items
Vacations
Restaurant outings
Charitable giving
Savings
Investment
Miscellaneous
EVERYTHING you spend!

TOTAL EXPENSES: $______________

Your total expenses MUST equal your total income! If it doesn't, you know you've missed something.

You will likely have spent some money out of pocket without recording it. This cash will likely be unaccounted for in the “Expenses” column. To keep things organized, add this cash to the “Miscellaneous” or “Cash” column.

High miscellaneous expenses suggest that you are not fully aware of all your spending. Work to track your expenses as closely as you can.

All the money you bring in is being spent or invested. This exercise will help to shed some light on where your money is going. Why is this important?

It doesn’t matter where you are now; what matters is where you are going.

"How Will I Get There?

Now comes the important step - the part that will propel you out of debt, laser-focus your spending habits, and catapult you into higher assets and a multiplying net worth.

Review each of your categories. Think back to your net worth statement. Remember: to increase your net worth you must decrease your liabilities and/or increase your assets. You must also be aware. Your cash flow statement is the key!

Increase income: Could you take a part time job? Consider a home business? Sell some things on weekends at a craft fair?

Decrease expenses: Consider preparing more meals at home, packing lunches, and cutting back on luxury items.

If things are really tough, get drastic. Sell things you’re not using, take in a boarder, move to a less expensive home, share a rental with family or roommates, pay off some of your rent in work equity, or sell your car. Get creative.

Your cash expenses, in particular, should be cut as much as possible. This money is disappearing with no tangible result. Reduce cash to a minimum and see how the change contributes to increasing your net worth.

The Power is in the Cash Flow Statement

Don’t lose hope. The more honest you are with yourself and your family, the more you’ll look back on this time with pride rather than regret.

You are taking steps now that will pay off for years to come..

You are building equity that will pay off in the future.

What about you?

Have you ever done a personal net worth statement or cash flow statement?

See results

Consider it a Game


Sometimes you’ll be ahead, and sometimes you’ll fall behind. Just like all things in life, it’s a process. Capitalize on this process to increase your understanding, improve your outcomes and become more successful.

It’s been said that there are three purposes of work:

1) To learn to use our full range of talents;
2) to learn to serve others, against our natural selfishness; and
3) to provide value.

Perhaps making money can be viewed in the same light. Earning money is about learning to exercise our talents and to serve others by providing valuable goods and services, supporting our families and our loved ones, and improving our quality of life.

Use these tools to turbo-charge your wealth plan, and experience peace of mind faster than you thought possible.

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