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Financial Planning Basics

Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” These are simple words but are very relevant in most aspects of our lives… even in our finances.

Instead of sharing what my New Year’s resolutions are (which may just bore you), I thought of sharing one of the most “consistent” items in my yearly To Do list – having my financial plan in place.

It’s on my list yearly not because I am failing on this aspect, each year, long before, I became a financial advisor, I have always set aside a time at least once a year to review my finances see where I am at, write down what I want (how much) to have and make a budget that I can follow.  It is when I became a financial advisor that I’ve realized that what I have been doing which I thought back then was a simple recording is already a part of financial planning.

For the past couple of years that I have been in this business, I’ve met families with different financial situations, I’ve come to realize how important it is for everyone to have a financial plan.

A survey indicated that 83% of people with a written financial plan feel better about their finances after just one year. And improving the financial aspect of one’s life did not jut bring financial benefits but also brought emotional and health associated benefits to the people who took part on this survey. It is because improving an area of our life has a natural carry-over effect on its other areas. This means there’s emotional and mental health benefits behind having a complete financial plan.

A lot of people will say financial planning is just for wealthy people, I say “NO”. Financial planning is for everyone, it is your roadmap for your financial future. I always believe that a good part of one’s success comes with having a plan and this is especially applicable when it comes to your finances. Having a plan in place can help you build wealth and pay off debt while helping you ensure that you don’t neglect and sacrifice the essentials including proper insurance to protect your family, your children’s education savings and your retirement security. 

A good financial planning for me should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life.

So, if you are someone new to financial planning, I am hoping that you will find this article helpful in starting your own personal financial plan.  I have been using 5 simple guidelines in making my financial plan which I think you may find useful in starting your own personal financial plan:


No one wakes up in the morning and ask how his finances are doing, most of us will just look at our bank account and see if we have enough to pay the bills that our due. However, if you want to come up with a good financial plan, it is important that you assess your current financial situation.  It is by paying attention to your finances that you will be able to determine what needs to be improved or what must be taken out in order for you to have a better financial situation.

What are the components that you need to look at to see where you stand financially to figure out what to do next?

Start with this questions:

  • How much much income do you have coming in? Has it been increasing or it has always been constant?
  • What are your expenses? Which one are fixed expenses and which one are variable? Which one changes month to month?
  • What’s your debt like? How much debt do you have? What are the interest rates on your debts?
  • Do you have money in your savings account? How much do you have? How much do you have in retirement savings? Do you have investment account? How much do you put aside for it?

That’s how you can figure out where you stand financially. If ever you find out that you’re not doing too well, don’t be too upset, the good news is you are now taking steps to improve your financial situation so you can bounce back.


Financial goals are savings, investment or spending targets you hope to achieve over a set period of time. Establishing theses goals is the next important step to start a good financial plan, answering the question “WHAT?” is a good starting point.

What it is that you want to achieve when it comes to your finances?

It will be easier to achieve financial success if you will work on something more specific.  The stage of life that you currently in will be the biggest influence when you set your goals. For example, if you are a person with growing family, going from renting to owning your first home may be a part of your long-term goals.

Other examples of financial goals include:

  • Saving for your children’s college education
  • Getting out of debt
  • Investing on retirement fund
  • Paying off the car
  • Building an emergency fund
  • Having insurance to cover for unexpected events
  • Having multiple income streams
  • Starting a business


You may not be aware of it, but most of us have a budget, you have one.  In a typical household, money comes in and comes out – most people will call it cash flow but this is actually sort of a budget already because you try to manage your expenses based on the money that comes in. You just need to turn this income-spend game into a notch higher, you just need to write it down. It is by having a spending and savings plan that you are able to start taking control of your financial future. 

There are plenty of sophisticated financial-planning software applications that you can use to automate your budget tracking and savings progress but you can always start with a pen and piece of paper (that’s how I started years ago).

First step, write down all your financial obligations, including your annual, semi annual and everyday bills such as rent or mortgage, utilities, car payments, insurance premiums as well as the flexible expenses such as food and clothing. Don’t forget to also include your personal spending money. 

Financial experts recommend the 90/10 spending and savings plan, they recommend that you set aside a minimum of 10 percent of your take-home pay to savings and the remaining 90 will be for your bills and spending. Others suggests that 80/20 rule budgeting is more ideal,  I say for a start, the amount of money that you can set aside for your savings will depend on your current financial situation and your goals, you can start with 10% savings and increase the amount that you set aside until you find the comfortable amount, then change it again according to the ideal amount based on the goals that you’ve set.   

After setting aside the savings part, distribute the remaining portion of your income among the financial obligations on your list. First assign set dollar amounts to your fixed bills, then distribute the remaining funds to flexible and optional spending areas based on your personal priorities.


A plan to deal with unplanned expenses or financial emergencies is an important part of financial planning. Setting up a safety net is one essential way to protect yourself and your family.

It is recommended to have at least 3 months’ expenses in your emergency fund.  This may not be easy for everyone, but in order to get yourself started and to determine how much you need to have in your emergency fund, think of the most common kind of unexpected expenses you’ve had in the past and how much they cost, this can be your initial goal. One great way to start is to set a goal that’s reasonable, once you hit that first milestone set another goal and keep building from there.  Before you know it, you save six months to 1 year of expenses saved, then you should be fine. By having this amount set aside as your emergency fund, you won’t be easily disrupted by “emergencies” or a sudden loss of income.

Next thing you need is toe ensure to insure. You work hard to earn money and to build a good financial condition for your family, the last thing that you want to happen is an unforeseen occurrence that will wipe you and your family’s finances out. This is why insurance is an important part of your financial plan. Your insurance is your protection, it will be your back-up plan that will protect your assets in the event a life circumstance happens which will require a large amount of money to resolve.   Your insurance coverage should include not just your auto, home or rental, business, health and life.  You will also need to protect the most important – your income.  You cannot predict accidents or critical illness which can put you or the bread winner of the family off to work, you need to ensure that the bread winner of the family has insurance that can protect the majority of his income should he become critically ill or disable.


Once you have your financial plan in place and churning along, it’s important to review your plan frequently and make any necessary changes should any change in your goals or lifestyle change.

It could be an additional child in the family, moving into a bigger home, change in income or maybe your insurance needs change.  When you often review your financial situation and plan, it will be easier for you to deal with unplanned life occurrences, recover from financial set backs and accomplish your financial goals.

There you are, a financial plan shouldn’t be complicated. It should actually make you worry less, because having a plan will let you see where your financial status stands today and will help you plan how to get to where you want to go.

The steps that I have on this article are the personal considerations that I take in making my personal financial plan.



My family and close friends knew how passionate I am when it comes to writing. I find joy and unexplainable satisfaction in writing. I am able to say what I am thinking or how I feel best when I say it through a letter, a poem and now blog. Through the years, blogging has opened different doors for me. It provided me a space to share my journey and my life lessons, the failures and triumphs that I went through in transitioning to a new life outside my comfort zone and it allowed me to reach out to people outside my circle.

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Cup of Tyh

Thanks for stopping by, as I make this space to be my superwoman wannabe diary, I want to share my life experiences as a mom, an immigrant, a financial advisor, a mortgage specialist and my life in general.

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