A written financial plan makes you 2.5x more likely to achieve...

12 views Jan 08, 2025 ~4 min read

A written financial plan makes you 2.5x more likely to achieve financial freedom

But only 1/3 of households have one

Financial plans aren't just for the 1%

Here's how you create your own (for free):

                            2
                        
Creating a financial plan is a no brainer  

But many don't do it for 2 reasons  
1) Cost 
2) They don't know how   

I am going to help you breakdown both those barriers  

Here's what you need to do 👇

                            3
                        
1. Calculate your net worth  

You do this by subtracting your liabilities (what you owe) from your assets (what you own)  

This is something you want to do at least yearly to track and ensure you are making progress

                            4
                        
Don't get discouraged by the number it is at today  

It's all about making progress in the future  

Also, if you want, you can use software to keep track of this for you   

Some of my favorites are: personal capital, mint, and Kubera

                            5
                        
2. List out all the goals you are planning for  

Some common one’s I see: 
- spend $x on travel 
- save for kids college (get specific here though: public  in state vs public out of state vs private)
- retire at x age and spend $x amount in today's dollars 
- wedding  

Lay out all your goals so you can come up with a plan on how to get there 

Spend time with your spouse getting aligned on these

                            6
                        
3. Come up with a cash flow plan  

I am a big believer in reverse budgeting  

Here's how you can try this yourself  

Let’s say you make $25,000 a month  

Figure out what your fixed costs are, what your needs are, etc.   

Then subtract that number from your income

                            7
                        
If your estimated expenses are $14,000, that means you will have a $6,000 surplus   

Your next step is to figure out where that should go  (hint: look at your goals)  

Then the key is to automate this all & let it manage itself  

And make sure bonuses are factored in for goals!

                            8
                        
One part we haven't talked about yet is debt   

Part of your cash flow plan should be prioritizing how to pay off any high interest debt you have  

Do not just pay the minimum payment on those credit cards  

That is just throwing away money

                            9
                        
4. Figure out your total monthly spend & compare that to your emergency fund  

If you spend $14k & feel comfortable with a 6 month emergency fund, then you need $84k saved  

Compare that to what you have to see if you need to save more  

Could be good to save some into this monthly

                            10
                        
5. Review your insurances  

Do you need more life insurance? 

Did you get a new job and no longer have disability insurance?  

Is now a time to get more coverage on home, auto, etc?  

Do you need to get umbrella insurance?  

Review this yearly & make sure you are properly covered

                            11
                        
6. Review all your investments  

Do you believe in your investment strategy still?  

 Did you make bad investments that is finally time to get out of?   

Do you need to up your 401(k) percentage?

Do you need to switch from Roth to traditional?

This is a good idea to do every year  

You need to make sure you are still investing the right way and in the right places

                            12
                        
But be careful to not just make changes every year based on what did well last year  

This is a huge mistake I see people make  

Rarely does that asset class come up on top again  

Be smart  

Make long term investment decisions  

And consider rebalancing your investment accounts

                            13
                        
7. Review/ Get Your Estate Planning Done  

I can not reiterate this one enough  

You need to make sure you have your estate planning documents done  

And you need to make sure you are updating them as you move, get new assets, have more children, etc.   

Make sure it is up to date!

                            14
                        
There’s more you could do, but this is a good majority of what needs to be done!  

It does not need to be made difficult

                            15
                        
If you still need more reasons to create your own, here are some staggering statistics   

54% with a plan feel very confident about accomplishing their goals vs 17% for those who don't plan   

Over 30% of people with a plan invest above 10% of their income vs 10% without a plan

                            16
                        
That's a wrap!  If you enjoyed this thread:  

1. Follow me: @TKopelman for more of these 

2. RT the top tweet to share this thread with your audience

A written financial plan makes you 2.5x more likely to achieve...

Actions

What You Can Do

Actions

What You Can Do

More in Finance & Crypto

More from @TKopelman