The One-Page Financial Plan summary

Think back 20 years: would you ever have predicted that free apps like Skype or WhatsApp would cause your phone bills to plummet? The future is unpredictable. Your financial plan, and the goals that support it, should be flexible enough to cope with this unpredictability.

The first step in developing your goals is accepting that it’s not always possible to predict the future. You can think of financial planning like planning your vacation. Even though you set some goals, like places to see or things to do, you should leave some room for the unexpected. For example, you can’t enjoy a bike ride and a picnic if there’s a storm outside. Why not alter your plan and visit a museum instead?

Your values and goals serve as your guide no matter where you want to be financially. However, before you can actually make any decisions about where to take action, you first have to understand your current situation.

Having a clear understanding of your assets and liabilities will help you take the necessary steps to reach your goals.

In essence, budgeting is about taking a good look at how you spend money and making adjustments in order to achieve your financial goals. To budget well, it’s crucial that you understand where you’re spending and whether your spending is in line with your goals and your values.

Many of us think that budgeting and tracking expenses is tedious and boring, more like a punishment for those who lack discipline than a tool of the financially successful. In reality, financial success is only really possible if you budget well, tracking how you spend your money, measuring that against your goals and values and adjusting accordingly.

Contrary to popular wisdom, rules of thumb like saving such-and-such a percentage of your income each month aren’t all that useful in achieving your financial goals. In the same way that your financial plan is personal, your savings plan should be too. The goal should be to save as much as you possibly can – an amount that will depend on your unique situation.

Once you’ve determined how much you can save, you can make life a lot simpler by automating the process. Let’s say you can afford to save $300 a month. By automating the transaction, you get to spend less time thinking about whether to spend or save. You might eventually forget about it altogether, and be pleasantly surprised that your savings have grown years later.

There are innumerable businesses, initiatives and institutions that promise a return on investment if you fork out some money. So how should you know where to invest? Should you follow the advice of your friends, family or authoritative-sounding finance people on CNBC?

You could, but then you’d be speculating and not really investing, i.e., making investment decisions with your gut rather than your head. To make the best investments, you need to look at investment as a science.