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How to Create A Proper Financial Plan

Planning your own funds can be a challenging, let’s be realistic; it is an exhausting assignment, however it is a totally important one.

According to a survey conducted by the Certified Financial Planner Board of Standards, 52% of people with a financial plan feel more confident about managing money, savings and investments. Interestingly, 48% of people with financial plans describe themselves as living comfortably. That may not sound exciting to you, but living comfortably and feeling confident about money are life goals.

To have a good financial plan, you might need to consult a certified financial planner. Howbeit, the following could serve as simple baby steps to achieving a good financial plan.

  1. Assess your present Financial Situation

This can be done by calculating your net-worth which simply means the value of everything you own(assets), minus the value of everything you owe(liabilities).

Assets include cash in your current and savings accounts, the value of your property and business if you were to sell now, your pension fund, investment funds and expensive items (₦100,000 and above) like art pieces, jewellery, etc.

Liabilities include loans, the balance on your mortgage and credit card, bills you owe, etc.

Once you’ve put together a list of your assets and liabilities, subtract your Total Liabilities from Total Assets and this equals your Net Worth.The most important thing about your Net Worth is the direction of its trend, if it’s always going up then you’re on the right path.

Also, in evaluating your current financial situation, you need to understand your cashflow and your savings rate.

2. Develop SMART Financial goals

Every financial goal you set should be a SMART goal: Specific, Measurable, Achievable, Relevant, and Time-Framed. The three figures (Net Worth, Cash Flow & Savings rate) we discussed in the previous post comes in handy here. You can either set financial goals based on those figures, or use them as a guide to determine how achievable the SMART financial goals you’ll set are.

You can also define your financial goals using these three categories:

Short Term: Less than one year
Mid-Term: One to five years
Long Term: More than five year

3. Determine your Strategy 

This can be done by increasing your learning potential which increases your earning potential,  cutting down your expenses, also saving and investing.

These are best done by understanding the level you are in your earning and spending chart.

4. Review your Plan

This gives a sense of urgency and motivation; also it gives room for adjustment. To achieve this, you need to find an accountability partner and schedule a regular financial meeting with him or her.

Once you and your accountability partner have decided on the criteria, you should write out these terms and have each other both sign it, think of it as your commitment contract. This idea of a commitment contract was first proposed by Dean Karlan, a Professor of Behavioral Economics at Yale University. He conducted a study where he found that people were significantly more successful if they signed a contract obliging them to achieve their goals.

In conclusion, hopefully by now you should know how to create your own financial plan, you understand why you should review it regularly and have also learnt some effective techniques to help you review your plan regularly.




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