• Career & Money

How to Create a Financial Plan Without Paying for an Advisor

5 min

If you want to reach financial independence, then creating a financial plan is non-negotiable. A financial plan paints a picture of where you’re currently at financially and where you want to go.

Creating a financial plan can feel overwhelming, which is why many people choose to work with a financial advisor. And while a financial advisor can serve as a helpful guide, not everyone needs to hire one. 

This article will explain how to make a financial plan, even if you don’t want to pay for an advisor.

What is a financial plan?

A financial plan is a document that explains your short-term and long-term money goals. It should be customized to fit your family situation, preferences, and risk tolerance.

Because it’s so individualized, there’s no standard template to follow. But a good financial plan should accomplish three things:

  • Outline where you currently are financially

  • Capture your financial goals and desired lifestyle

  • Include a plan for how you’ll reach those goals


 A comprehensive financial plan will reduce your stress when it comes to money. It ensures that you’re making the most of your current assets and are on track to achieve your desired lifestyle in the future.

And research backs this up -- according to Schwab’s 2021 Modern Wealth Survey, individuals with a financial plan feel more confident about reaching their financial goals. They are also more likely to have an emergency fund, pay their bills on time, and get rid of debt.


7 steps to DIY your financial plan

If you’ve ever wondered if it’s possible to create a financial plan without paying for an advisor, the answer is definitely yes. Here are seven steps to DIY your financial plan.

1. Outline your financial goals

Research repeatedly shows that people who write down their goals are more successful than those who don’t. Setting goals helps you prioritize and keeps you focused on the “why” behind your actions.

Budgeting, reducing your expenses, and saving money can feel tedious, and it’s easy to throw in the towel. Having a goal you’re passionate about can make it easier to stay on track and do the hard work necessary to achieve it.

Here are the three different financial goals you should set:

  • Short-term goals: These goals can be achieved in five years or less. For instance, paying off your student loan debt or starting your own business are reasonable short-term goals.
  • Medium-term goals: These goals can be achieved in five to ten years. Buying a house or having children could be a medium-term goal.
  • Long-term goals: These are goals you’ll achieve in 10 years or more. Paying off your mortgage or retiring from your job are long-term goals.

 As you’re setting goals, don’t be afraid to be ambitious -- you want a combination of achievable goals and goals that excite and motivate you.


2. Calculate your current net worth

Before you can take steps to start reaching your goals, you need to know where you’re currently at. To understand this, you’ll need to calculate your current net worth.

Here’s the formula for calculating your net worth:

Assets - Liabilities = Net Worth

An asset is anything of value that can be turned into cash. For instance, your assets could include things like:


  • Your savings

  • Any investments you have

  • The equity in your home

  • Collectibles, jewelry, or antiques

  • Income-producing property


 A liability is something that you owe, and it includes things like:

  • Credit card debt

  • Student loan debt

  • Mortgages

  • Personal loans


3. Save an emergency fund

A critical part of your financial plan is how you will deal with emergencies. Financial emergencies will come up, and the best way to deal with them is by having an emergency fund.

An emergency fund is cash you’ve set aside to cover things like a job loss, medical bills, or unexpected home repairs. Having an emergency fund is one of the best ways to reduce stress and avoid falling into the debt trap.

Many people turn to high-interest credit cards to cover financial emergencies. This puts them in a cycle of paying their cards down, only to rack them back up again.

Most people recommend a three to six-month emergency fund, but the exact amount will depend on your situation. To estimate your emergency fund, start by writing down your necessary expenses.

That includes things like:


  • Mortgage or rent payments

  • Food

  • Health care

  • Utilities

  • Debt payments


 You don’t need to account for things like eating out or entertainment. Those are items you’d cut from your budget if an emergency happened.

Once you’ve come up with the minimum amount of money you need to get by each month, you’ll decide how many months of savings you need. For instance, if you have an inconsistent monthly income, you may want to save for more than six months.

But don’t throw in the towel if saving a six-month emergency fund doesn’t feel doable. Something is better than nothing, so start by saving a $1,000 emergency fund. Once you reach that goal, you can continue to build on your savings over time. 


4. Come up with a debt management plan

If you have any kind of debt, your financial plan should outline how you’ll tackle it. But not all debt is equal -- some debt can help you increase your net worth or improve your life in some way. For instance, investing in education or real estate are examples of good debt.

Debt is usually considered bad when it doesn’t go up in value or improve your life somehow. For instance, auto loans are typically considered bad debt because cars are depreciating assets.

High-interest credit cards can also be problematic because it weighs heavily on your credit score. And if you regularly pay interest charges, that’s money that could be going toward other expenses.

Start by coming up with a plan to pay any high-interest credit card debt first. From there, you can begin to tackle things like auto loans, student loans, and eventually, your mortgage.


5. Come up with an investment strategy

If you feel intimidated at the thought of investing your money, don’t be. Investing is not just for wealthy people, and you don’t have to wait until you have a family to get started.

In fact, getting in the habit of investing when you’re young and single puts you at a considerable advantage. Starting early in life allows you to take advantage of compound interest, which creates a snowball effect as your savings begins to grow.

Plus, when you have time on your side, you’ll be more resilient to market changes which allow you to take more calculated risks. Here are the different investment strategies you can put in place:


  • Employer-sponsored retirement plans: The easiest way to get started is by putting money into an employer-sponsored 401(k) or 403(b) plan. The IRS allows you to contribute up to $19,500 annually.

  • Traditional or Roth IRA: If you open a traditional or Roth IRA, you can contribute up to $6,000 per year. A Roth IRA funds the account with after-tax money, so you won’t have to pay taxes on any future withdrawals.

  • 529 college savings plan: If you have kids, you may want to consider opening a 529 college savings plan. This tax-advantaged investment account lets you save for future education expenses, like college. 


6. Make sure you have adequate insurance coverage

Insurance coverage is an often overlooked part of financial planning. Your emergency fund will only get you so far, and adequate insurance coverage is the best way to ensure you’re protected.


Here are the main types of insurance you should look for:

  • Health insurance: Everyday medical expenses like annual doctor visits and prescriptions can be costly without health insurance. But one hospital bill could end up costing tens of thousands of dollars. If your employer doesn’t offer health insurance, you can apply on the Health Insurance Marketplace.  

  • Life insurance: If you’re married and have kids, you probably need to buy life insurance. Life insurance will ensure your family is taken care of if you unexpectedly die.

  • Disability insurance (or disability income insurance as we like to call it): One in four people will have to stop working before they retire due to health complications. That’s why purchasing disability income insurance is so critical. And plans through Asteya are incredibly affordable, starting as low as $6 per month.

7. Review the plan annually

Once you’ve come up with your financial plan, it’s essential to review it every year. Your life will continue to change and evolve, so your financial plan should do the same.

When you review the plan, take some time to evaluate your progress and celebrate your wins. If you’re falling short in certain areas, this will give you a chance to re-evaluate the plan and make changes.

And you should always review the plan after a significant life change, like a job change, inheritance, or significant change in income.

The bottom line

A financial advisor can be an excellent resource, but not everyone needs to work with one. But everyone needs a financial plan, and you can come up with one on your own. The important thing is to get started, and you can always hire an advisor down the road when your financial situation is more complex.

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