Freedom Life Planning

The Ultimate Guide to Financial Planning

Making a Plan

The first step to success is planning for it.

Few people will achieve their goals in life by luck. Now that’s not to say that some people won’t get lucky and win the lottery or land the perfect job right out of university. Even if you were one of the fortunate ones who did, there is still a lot more you can do to achieve your full potential. A financial plan will guide you towards your goals and maximize your potential. In this article, I will help you make that plan.

The strategy applied for making a plan is as follows:

  1. Identify your Goals
  2. Determined your Savings Target to achieve your Goals
  3. Make a Budget and Spend Effectively to achieve your savings target
  4. Invest your savings wisely for your future goals.


1. Identify your Goals

The first step of a plan is identifying your goals. Think hard about these goals, this is the center piece of your financial plan. Your goals could be early retirement, financial freedom, more travelling, a nice home, a family that is financially secure, a fancy car, etc. The list of possibilities is endless. Once you have a strong idea on your goals, write them down.

Once you know your goal, keep that goal in mind as you read through this website. Some articles cater to specific goals, while some can be applied to many different goals.


My goal is to save for a 20% down payment on a $ 300k house in 5 years


2. Determine your Savings Target

Now that your goals are determined, you need to find out what it will take to get there. There are articles on this website that will address specifically this section. The exact amount of your savings plan will differ depending on your specific goals, but all goals require savings to achieve. It is very important that as you move forward, you make every effort to meet this savings target. This will be the key to achieving your goal.

Continuing our example, to buy a new house in 5 years:

  • I will need to save for a down payment of 20% of 300k = $60,000
  • As this is a short-term goal (5 years), we will invest in safe areas only (Bonds, High Interest accounts), we will assume a return of 2%.
  • This calculates to a savings target of $ 951 per month. (More on how to calculate this in future articles)

Is this savings target achievable? We will see in the next step. If it is too aggressive, we will need to return to step 1 and re-adjust our goals (time frame or home price).


3. Make a Budget and Spend Effectively

The next step towards achieving your goals is making a budget. A budget will determine how much spending you can allocate per category based on your savings goals and income level.

A basic budget may look like:

What’s important here is that the money for savings is set aside first from the income. Once you’ve determined this savings target and validated it as possible by making a realistic budget, I recommend taking it off your salary prior to spending your money. Most banks allow you to set this up automatically with online banking.

As you can see in the budget above, I’ve separate Needs from Luxuries. While savings can be found on in both, it is still important to keep them separated when doing this exercise. In future articles as I cover spending effectively, this will become important.

As every country, province or state out there has different taxation rates, I will always be discussing after tax dollars in this articles and most of my spending/savings articles.


4. Invest your savings wisely for your future goals

All right, you’ve made it this far and you are now saving money. The hard part is now behind us. The next steps are to grow this money towards your goal. The more long term your goal is, the more important this step of investing will be. Compounded investment returns really take off beyond 20 years. Which is why we shouldn’t waste time, putting it off until next year to get started.

For those who are less comfortable with investing, I recommend you see an adviser at your bank to start a basic plan.

For those looking to do it yourself, I will be sharing articles on how to do it on this website. Doing it yourself really isn’t that hard if given the right direction at the start. Which is what I will be writing about. I will talk about Bonds, Mutual Fund, Exchange Traded Funds (ETFs), stocks, etc. Different goals will use different investment vehicles to get there. We will explore many of them.

For continuing the example above, I chose a mix of a bond index fund (Mutual Fund) and a high interest savings account. Both of these investments are low reward (only 2%) but they have a low risk. If buying a house in 5 years is our goal, we don’t want to take too much risk.

Please be sure to explore the other articles on the site to cover more details on these topics. Check back in frequently or subscribe to this site below as I will be adding new articles regularly!


1 Comment

  • Jimmy says:

    Nice article. I have bookmarked your website. I worked for NASA before leaving to manage my investments. I got a pretty good system but maybe I need another pair of eyes to double check.


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