Categories: Financial Planning

Writing a Financial Plan

Everyone should have a written financial plan.  A written financial plan is a document that assists you to focus on what you want to achieve when it comes to your personal finances.  A written financial plan is a living document that should be amended as time goes on.

A written financial plan is a useful tool for everyone.  It does not matter if you are a new college graduate (Age 21-28) entering the workforce, a Millennial or Gen-Xer (Age 29-49) who is in mid-career, or a young Baby Boomer (Age 50-65) who might be retired or getting ready to retire soon.  The nice thing about writing a financial plan is that it is your custom plan.  You get to design and write it to meet your financial situation and aspirations.

Having a written financial plan allows you to see the big picture.  It is a way to track short-term goals and make lifestyle adjustments as need be.  A written financial plan enables you to track how those short-term adjustments impact your progress as you work towards reaching long-term goals that might not be realized for many decades.

A written financial plan is not just for looking at how your money is invested in your asset allocation.  While asset allocation is extremely important, it is only part of a financial plan.  If you are interested in learning more about asset allocation, I have written a 4-part series on that topic.  A good place to start is by reading 100 Percent Invested in Stocks and the subsequent posts that follow how my asset allocation has evolved during my investing career.

A written financial plan can have many different categories.  Start with where you are in life and where you want your written financial plan to take you in the future.  Below are some categories and examples to consider:


New Graduate:

  • Pay off student loans (the party is over, here are the damages)
  • Establish an emergency fund (3-6 months of expenses in cash)
  • Contribute to 401K (at least enough to get the employer match)


  • Pay off mortgage (pay it off in 15 vs 30 years)
  • Help children with education (establish a 529 college savings plan)
  • Pay off consumer debt (credit cards, car loans, payday loans)
  • Increase 401K contributions (increase by 1-2% per year)

Young Baby Boomer:

  • Down-size house (the kids are gone, hopefully, they will not come back)
  • Contribute the maximum to retirement accounts (time is no longer on your side)
  • Establish a target-date for retirement (5-10 years)


New Graduate:

  • Select a career field that pays well (think STEM, if you can)
  • Get a job (spend more time on indeed.com)
  • Become an expert in your field (read, read, read)
  • Finding side opportunities to earn extra income (always be earning)


  • Advance into management (you now have  the experience to lead others)
  • Become a partner (lawyers, doctors, accountants, other professionals)
  • Buy a business (if you have the entrepreneurial drive)

Young Baby Boomer:

  • Advance to a C-title (if you are already a VP)
  • Become a consultant (if you have industry expertise)
  • Sell the business or your stake in the concern if you are a partner (cash in your chips)


New Graduate:

  • 25% housing (don’t exceed this amount)
  • 15% savings (it sounds ambitious, but you can do it)
  • 10% transportation (think Honda Civic or Toyota Corolla)
  • 20% towards debt (pay it down ASAP)
  • 30% living expenses (live below your means)


  • 20% housing (stick with the starter house)
  • 35% savings (these are your primary savings years)
  • 10% transportation (mini-van for kids)
  • 35% living expenses (keep an eye on lifestyle creep)

Young Baby Boomer:

  • 10% housing (this is for maintenance)
  • 60% savings (you can see the light at the end of the tunnel)
  • 5% transportation (mid-sized model)
  • 25% living expenses (spend some money on the grandchildren)


New Graduate:

  • Apartment insurance (you don’t have much, protect it)
  • health insurance (it is as cheap as it is going to get)
  • short-term disability insurance (if you have a physical job)


  • Home owner’s insurance (get enough coverage)
  • Family health insurance (it is no longer cheap)
  • term-life insurance (protect your loved ones)

Young Baby Boomer:

  • Have a lawyer write your will (don’t create a mess for your heirs)
  • Create an estate plan (get professional advice if you are not comfortable)
  • Be sure to have health insurance (Medicare kicks in at age 65)
  • Keep some cash liquid (keep the first 2-5 years of retirement expenses in cash)

The above categories are just a few to consider adding to your written financial plan.  As mentioned earlier, you can customize this plan to your unique situation and goals.  Some other options to consider might be plans for continuing education, how volatile your career is during changing economic conditions, family planning, as well as your need to take on market risks due to other income sources such as pensions.


When writing your financial plan, remember to write it in pencil and not in ink.  In other words, the one thing that I have found in life that remains consistent is change.  Over the course of my life, I have watched people change, work situations change, and economies change.  In my own life, I have changed careers, goals, and interests.  This is not a ridged manifesto that must be followed to the letter.  It is just a guide for you to set goals, track progress, and change direction when needed or desired.  Allow yourself to be flexible and enjoy this process.

Do you have a written financial plan?

If you do, what other categories do you have concluded?

How often have you had to make amendments to your financial plan?

thefinancialjourneyman :Deciding to be free: My Journey toward financial independence

View Comments (7)

  • The post isn't long but there is lots of meat in there. It could easily be divided into 3 short posts targeting the 3 age groups.

    I've made lots of plans over the years. They never seem to last very long. They're typically just spreadsheets, without any text spelling out the details, and would be nonsense to anybody else reading them.

    Now I've got to go check my budget against your spending allocation advice.
    Great post.

  • "When writing your financial plan, remember to write it in pencil and not in ink."

    Yep! A financial plan is ALWAYS a work-in-progress. In reality we don't know what tomorrow brings, let alone next year, or the next 10 years, or the next 50!

    • Thanks for the comment Brad.

      Yes, I like to review our plan at least once per year.

      It helps with identifying where we are and what we want to accomplish next.

  • Great idea... I like the focus on both current and longer-term (future state) goals that can come through a financial plan.

  • Documenting your goals is so important. It's step one to effective personal finance management.

    • Thanks for the comment Jason.

      Your written financial plan can change as your goals change.

      It is useful to track progress and to guide you where you are headed next.