How to Live the Dream! (Hint: A Financial Plan May Help)


compassLast year’s GFC (Global Financial Crisis) and its associated fallout has given many of us pause over the last twelve months. Reduced working hours have made many who kept their jobs question their work/life priorities. Those who lost jobs — or more — may have changed careers and life goals completely. And many of those who remained personally unscathed still began to question where they’re headed.

What would you like to do in the future? Perhaps you’d like to wind back to work three days a week rather than five, stop work to have a family in the next few years, take time off to travel and do volunteer work overseas, or fund a second business venture in twelve months’ time.

How can you make whatever you’re dreaming of doing a reality? If you haven’t already given these questions some thought, now might be a good time to start. One thing’s certain, though: Your answers are going to involve money in some capacity. Maybe your choices will affect your earning capacity, require savings, or necessitate rationalization in some other area of your life. When it comes to achieving your life goals, money matters.

The F Word

It’s time to face up to the finances. You may need cash to get where you’re going. Alternatively, the way you want to live tomorrow may dictate your earning options today. How can we unravel these mysteries? With a financial plan.

The first thing you’ll need is a budget. No one’s going to hold a gun to your head to ensure you follow it to the letter. But a budget of your current expenses and earnings will help you work out where you are now.

Those with their own businesses probably already have their business’s financial data stored in a system like one of the ones we’ve reviewed here (Outright, CreativePro Office, and PayCycle, among others). Those who haven’t set up a personal budget yet can use one of the many free online tools available. My bank’s website offers an online personal budgeting tool; yours probably does too.

A budget simply gives you an idea of where your money is spent. You don’t need to track your savings against it if you don’t feel you need to. But it will give you a context from which to set out a bigger financial plan.

As well as your budget, you’ll need to list the other assets and liabilities you have: credit cards, loans, property or possessions of value. This will help to complete a you-are-here picture of your current financial position.

Getting from A to Z

So now you know where you are — let’s call that point A — and you know where you want to get to (point Z). Great! The problem is filling in the gaps between A and Z — creating a sufficiently detailed roadmap so that you know whether or not you’re staying on track over time. It’ll also need to be flexible enough to allow for life’s little hiccups, as well as the bigger hurdles. There are a number of factors you’ll need to consider in developing your plan.

  • Earning capacity. How long will you be able to work? If you want to work part time, have a family, or take a career break, for example, you’ll have to adjust your long-term income projections accordingly, which may affect longer-term goals. In any case, it’s best to be conservative — but realistic — about your earning capacity. Winding up with more money than you planned on is never a bad thing!
  • Savings. Reaching your goals may necessitate some extra savings on your part. Use your budget to work out where you can reduce spending if need be, and build the savings goal back into your budget so that your savings expectation is met each month just like every other bill.
  • Tax. Accurately planning to ensure you can meet your tax payments over time can be difficult. Rough estimates based on your projected earnings may be easier, and they may be all you need for your planning. See Meryl’s post on DIY taxes if you’re yet to get a hold on your tax management.
  • Major goals. Goals, expenses, expenditures. Call them what you will: these are the big things you’re working towards in your life. If you’re the kind of person who can say that they want to buy a house in five years, good for you: that’ll be easy to put into your plan, and it should be comparatively easy to work out if — or how — it’s achievable within the context of your current income and expenses. If you’re the kind of person who’d like to buy a house but hasn’t started saving seriously yet, creating a plan might help you work out when you’ll be able to do it, and what you can do to reduce that timeframe if you want to. If you’re the kind of person who thinks they may want to buy a house one day, factoring that into your plan (for example, by beginning to save for your deposit now and roughly projecting a purchase timeframe) probably isn’t a bad idea. Remember that the idea of setting goals isn’t to create pressure or lock you into a certain expectation. If you get three years down the track and decide you don’t want to buy a house, great: you’ll have a wad of cash sitting there that you can spend in other ways that suit your needs and lifestyle at that time.

Need a Hand?

If you feel confident, you may well be able to create your own plan. But the larger the timeframe you’re trying to plan for, and the more factors you’re trying to consider in your planning (for instance, taxes, inflation, partner’s income, fluctuating revenues from different businesses, children’s education, etc.), the greater may be your need for external help.

If you have an accountant, you may be able to seek advice from them. A licensed financial planner will likely also be able to help — try to obtain independent advice, preferably from a planner who’s not earning commissions through the products they recommend to you.

Another alternative is the do-it-yourself-with-help option offered by online planning services like Financial Planning Toolkit or the SEC-registered SimpliFi. This latter, free option breaks the financial planning process into a series of steps, and provides help for financial planning novices — its target userbase —  through virtual assistant Sophie.

SimpliFi has recently released an additional service, called Personal Planning Plus, to U.S. users. This service is now being released to institutional customers, and will integrate with their online systems to provide their clients with a complete online planning and tracking package. Touted as the only tool of its kind, it will basically help users traverse all the steps between A and Z, and help you stay on target in the intervening period. If you’re in the U.S., Personal Planning Plus may be available to you through your financial institution.

I’ve used a financial planner in the past, and it helped me achieve the medium-term goals I had at the time. These days, my financial plan is much simpler: pay off my mortgage a.s.a.p.

How about you? Do you have a financial plan?



I just checked out SimpliFi and spent 20 minutes filling in some figures. It helps to be able to put tangible numbers on the goals that are floating out at some point in your future, like “save $500 for 36 months for ______ in 2012.”


the article is nice and informative. unfortunately, i can not boast by the fact i have financial plan. maybe i will use someone’s… lol!



Enjoyed reading the article.

Having started our venture, , not so long ago, the art of financial planning etc is in principle a good idea…but, there is always a but, if you are dependent on your customers paying you on time, it becomes a whole different ball game..

Ronald Pena

This article is really useful. It shows the importance of goal setting. In 1979, the graduates of the MBA program were asked, “Have you set clear, written goals for your future and made plans to accomplish them?” It turned out that only 3% of the graduates had written goals and plans. Thirteen percent had goals, but not in writing. Fully 84 percent had no specific goals at all.

Ten years later, in 1989, the researchers interviewed the members of that same class again. They found that the 13% who had goals that were not in writing were earning twice as much as the 84% of students who had no goals at all. And most surprisingly, they found that the 3% of graduates who had clear, written goals when they left Harvard were earning, on average, 10 times as much as the other 97% of graduates all together. The only difference between the groups was the clarity of the goals they had for themselves when they graduated.

Yes, you read that correctly. The 3% who had clear, written goals earned ten times as much as the 97% who didn’t have clear, written goals. Almost all successful people have goals, and outstanding high achievers have clearly defined written goals. That said, how come so few people actually write out their goals?


Helpful. A lot of people really don’t know where to start. This market is a shocker in itself, much worse if you just don’t know how to get it going for yourself (again or ever). Thanks!

Jacob Funnell

Great article…this is important for anybody wanting a degree of success someday. Especially for us procrastinators! Thanks for the solid post.

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