I’m sure you’re already thinking, “5 years is too long for me to “plan” but in reality it isn’t.  We aren’t addressing what to do when you reach retirement or any other really long term goal.  Think of 5 years as the standard.  Or you can even take baby steps and start off with 1 year.  Either way, a plan is a must!

Check out the following tips on how to create a financial plan you can stick with!

Create A Foundation:  Discover Your Values

What are your financial values?  Do you want to get out or stay out of debt?  Would you like to travel more or start/ramp up a hobby?  Own a home?  Start a business?  Answering and incorporating these into your financial plan will help you set up a foundation which guides your plan through the end.

Develop A Few Concrete Financial Goals

SMART goals apply here.  Specific, Measurable, Achievable, Realistic and Time Specific.

SMART Goals Overview


  • Start off by being specific in your goal. Clearly define what you are going to do. Include the what, why and how.


  • You must be able to measure your goal in order to manage it. I will pay an extra $200 towards my credit card is better than I want to be debt free.


  • Your goal must be attainable, although it should stretch you to reach the goal. You can’t possibly pay down $19,000 in debt when you only earn $15,000 for the year.


  • A realistic goal is one that will stretch you but not impossible. Completely cutting out all entertainment and eating out isn’t realistic for most.  But starting my reducing the amount of money spent in this area is more realistic.


  • A timely goal will give you a clear target to work towards. You may choose a week, a month, a year, just make sure that the time is realistic.

Save $1000-$5000 for an emergency fund. 

This is only to be used in emergencies and may vary depending on your lifestyle and needs.  So it’s OK if you need to save more like $2500.  If you have a larger family and expenses, then $5000 may be a more comfortable number for your situation.

Pay Down Debt, Avoid Digging Deeper In Debt and Save for 1 Month’s Living Expenses

Check out these debt reduction strategies and see which one works for you.  The debt snowball method tends to be the most popular but it may not work or be appropriate for every situation.

Save towards 6 months of living expenses

Once your debt has been paid off, work towards saving 6 months of living expenses.  Most “personal finance experts” recommend a minimum of 3 but given the economic factors, let’s go with 6.

Start Investing In Long Term Goals

This can include retirement, college education, owning a home or anything that warrants a longer term investment of time and money.  One thing to note which goes against Dave Ramsey’s advice in this area, put your retirement ahead of your child’s college fund.  Check out the following compelling reasons from Christian Personal Finance:

  1. You have only one chance to fund your retirement.
  2. You will force your children to set their own priorities.
  3. Success is not guaranteed by a piece of paper.
  4. Your child might not graduate.
  5. Your child may need to support you in your senior years.

Think hard about whether or not it will be a worthy endeavor to save for your child’s college education.

Create a will

Make certain that you create a will so that your affairs are in order upon your passing.  This is a topic no one really wants to visit until it is too late but doing this now will put your mind at ease.

Check out this template from David Bach which should give you more of a visual of what the plan should look like:

(click to enlarge)


Have you created a financial plan?  If not, what has stopped you from creating one?   If you do have one, what are the values and goals that drive your financial plan?


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