Personal Financial Planning Example To Help You Build Your Own

In the past, building a comprehensive personal financial plan was difficult.  However, this financial planning example illustrates how easy it is when you follow the steps detailed below.  

I detail one of the biggest mistakes people make when implementing their financial plan and other helpful tips.

Below is a step-by-step way to create a financial plan using a real situation.  You can take these same steps to build your OWN financial plan.

Also, at the end, I provide multiple videos of real FitBUX Members and how they built their plans.  Be sure to watch them so you can see how to use this information for yourself!

Personal Financial Planning Example: The Situation

In this personal financial planning example, we'll use a FitBUX Member's real-life situation.  His name is Conor.

Going through these steps allowed Conor to avoid financial ruin. He'll be able to save millions more by following his plan. 

Conor's situation is detailed below and is the information we'll be using throughout this financial planning example:

  • Just finished his DPT (Doctor of Physical Therapy) making $75k per year.
  • $100k in student loan debt
  • Engaged and his Fiance is also a PT making $72k per year with no debt
  • Getting married in 1 year
  • Wants to buy a house in 3 years
  • They would like to have 3 children
  • His Fiance wants the ability to choose to stay at home once she has children. 

The Mistake Most People Immediately Make On Their Financial Plan

Financial services are segmented. This means there are good people trying to help you but their knowledge is limited.  Therefore, they might be able to get you a product but they can't help you decide how it fits in your overall financial plan.

In this financial planning example, I illustrate this problem using Conor's story. However, this happens to all of us everyday when it comes to our money and costs $100,000s over our lifetimes.

The Loan Servicer

Conor's servicer recommended that he go onto Revised Pay As You Earn (REPAYE) for his student loans.

Conor didn't realize they had to tell him that by law.  In short, what a servicer tells you is not a recommendation but a requirement they must tell you.  

The Financial Planner

Instead of going to an expert student loan planner, Conor went to a traditional financial planner.  

His financial planner told him he didn't know anything about loans. 

Ironically, he recommended REPAYE.  His reasoning was that it gave Conor the lowest monthly payment.  Therefore, the low monthly payment would allow him to save for his house.

Conor then asked the financial planner how much home he'd be able to afford.  The planner recommended a mortgage broker for Conor to speak with because he didn't know anything about mortgages.  

Then once Conor and the mortgage broker spoke to then come back to him so he could finish his financial plan.

The mortgage broker Conor meet with told him that he qualified for a $650,000 mortgage.  Conor didn't realize this is how much he qualified for, not how much he could afford.

Armed with this information, Conor went back to the financial planner and paid $2,100 for a financial plan.  The plan had him going onto REPAYE and buying a house with a $650,000 mortgage.

What Would Happen With This Plan Is Frightening

Conor came to FitBUX and our new financial planning technology to simulate the plan the advisor gave him.  

Had he followed his financial planner's advice, he would have found himself in financial ruin in 15-20 years at age 45-50.  

The only way for him to "survive" would be for both him and his fiance to continue working for life.  They would be stuck in the rat race.

Below is a financial planning example showing how Conor used FitBUX's technology and a call with his FitBUX Coach to develop a plan that worked.  You can take these same exact steps!

Step 1: Setting Up Your Financial Plan

There are three distinct steps to financial planning: Setting it up, simulating and reviewing it, and implementing it.  The first step is broken down into five components:

  1. Goal Setting

  2. My Day-To-Day Money

  3. My Future Goal Money

  4. Money To Manage Risk

  5. Emergency Fund

Goal Setting

Write down all your major life events goals such as getting married, paying off debt, etc... 

List them from short-term to long-term because short-term goals are were you are going to be focusing most of your attention.

In our financial planning example of Conor, he is getting married in a year then buying a house in three years.

Therefore, his top goal is saving for his wedding. Once he accomplishes that, he can move onto saving for a house.

Financial Planning Example Goals & Life Events

My Day-To-Day Money

Next is the part of financial planning most are familiar with, budgeting.  However, most people budget incorrectly.

You must organize your budget in a way that removes the chaos from your financial plan.  

At FitBUX we organize our money into three categories.  The first is our day-to-day money which consists of your income and expenses.

Day-to-day money is all about immediate needs.

Financial Planning Example Income & Expenses

Your Future Goal Money

The second category we organize our money into is our future goal money.

Think about future goal money as money being used to take care of your future self.  This means saving for short-term goals, investments, and paying off debt.  

All these things don't happen over night and take time.  Day-to-day money is about immediate needs.  Future goal money is about your future needs.

In our personal financial planning example, Conor was going to save for the wedding.  Then he would save for the next goal of buying a house.  

However, his FitBUX Coach showed him how saving for the wedding then paying his student loans off aggressively made more since.  Therefore, his new goal was to pay them off before buying a new house.

In addition, our technology was able to illustrate to Conor that he couldn't afford a $650k mortgage. Instead, he should target a $400k mortgage or less!

Money To Manage Risk

The third category to budget your money into is one of the most overlooked parts of building a personal financial plan. However, its one of the most important.

This part of the budget focuses on protecting yourself, i.e. risk management.  

As I mentioned above, your future goals take time to achieve.  What if you don't have time because of disability, death, health care expenses, etc...?

This category of you budget is money for insurance premiums.  The purpose is to protect your financial plan.

At this point, you should know how much is left over after your day-to-day expenses, asset allocations, debt payments, and insurance premiums. We call this left over amount "Vacation/Fun Money".

In our financial planning example, after completing these steps, Conor had $371 in Vacation/Fun Money left over each month which was good for him.

Financial Planning Example Vacation Money

Your Emergency Fund

The last part of step one is to set your most important financial goal: your emergency fund.  

Now that you know your day-to-day expenses and debt payments, setting up the emergency fund should be easy. All you have to do is decide how many months of expenses you want in your bank account and you are ready to move onto step 2!

If you need help with this, our technology will provide a customized recommendation on how much of an emergency fund you need!

Step 2: Simulate The Financial Plan

This is were the majority of financial plans fail.  

The key here is to evaluate if your financial plan allows you to meet both your long-term and short-term goals.  If your plan does, then all you have to do is implement your plan.

If it doesn't, you have to go back to step 1 and change where you are putting your money and/or prioritize your goals.

In our financial planning example, Conor would have failed in the long-term because the financial planner he paid skipped this step.  

By using step 1 to set up his plan and simulating the plan using FitBUX's technology, Conor was able to:

  • See exactly how he could pay off his student loans in 3 years;

  • Save for a wedding and get married;

  • Buy a house;

  • Have 3 kids, and

  • His wife would have ability to stay at home if she wanted to! 

If they followed this plan, by retirement, they'd have between $2.9 and $3.6 million dollars!

Step 3: Implement Your Financial Plan

There are two keys to implementing your financial plan:

  • Making it easy to implement; and

  • Avoiding the mistake many people 

Making It Easy To Implement

Most people look at absolute dollar amounts which makes life very stressful.  For example, they stress about overspending on restaurants because they over spent by a few dollars one month.  This is wrong!

Instead, look at what percentage of your money went where and compare that to the percentage that your plan was supposed to be.  

In our financial planning example, Connor is going to put 25% of his total income to student loans each month/year.

All Conor has to do is link his financial accounts to FitBUX and update his transactions.  Then at the end of the month, all he has to do is see if he put 25% to loans. 

This makes your financial life easy two ways:

  1. When you get a pay increase you'll automatically know how much to increase the amount going towards each goal. I.e. If Conor gets a raise, he simply multiplies his new income by 25%, adjust his payments, and moves on with this life.  Its instant accountability and reduces stress.

  2. If you get a tax return or a bonus you know exactly what you are going to do with it. For example, if Conor got a $1,000 bonus, then he knows $250 is going straight to his student loans.  The other amount he can spend however he'd like and not stress about it.

Avoiding The Mistake Most People Make

The biggest mistake people make is life style creep.  Tracking what percentage of your money is going where helps you avoid this.

In our Financial planning example, Conor had about 30% of his total income going to the 2nd category i.e. future goal money.  He had about 50% going to the 1st category, i.e. day-to-day money.

Over time, your biggest financial goal is to switch that.  For example, 50% of your money should be going to future goal money and 30% to day-to-day money.  

Doing so would mean you are investing in assets at a very rapid pace.  This will accelerate how quickly you achieve financial freedom.

You should be able to do this overtime as your income increases.  However, most don't do this.

Instead, as there income increases life style creep happens and they keep putting 50% towards day-to-day expenses.

This is why we see people who started contributing $100 to a Roth IRA ten years ago and today they still are contributing $100.  They were focused on absolute dollar amounts. They should've been focusing on what percentage of their total income is going where.

Last Word

The financial planning example above illustrates how to make financial planning easy and what mistakes to avoid.

If you'd like help be sure to become a FitBUX member and use our new financial planning technology.  You can do all the steps above and sleep easy at night knowing you are going in the right direction.

Video Financial Planning Examples

Connor's Financial Planning Example

Buying A House With Student Loans Financial Planning & Budgeting Example

By Joseph Reinke, CFA

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

Learn More About Joseph

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