How To Make A Financial Plan [Without An Advisor]

A financial planner is someone that can coach you with your finances and determine what is best for you in your financial position. For some people this is amazing, and for some people, it is not. Here is how you can create a financial plan with an advisor – avoiding any fees. 

A financial planner is just like any coach, they are experienced and help you to think in the right direction. Some people really need this kind of guidance. 

BUT not everyone that is successful has a coach, and not everyone that is a financial success has a financial planner. It can be helpful to work with one for sure, but I’m sure you can get there on your own. You got this!

If you have invested your first dollar and you know how to manage your finances, you can spend your money on your investments instead of on a financial planner. 

How To Make A Smart Financial Plan [Without An Advisor]
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If you prefer to make a financial plan without an advisor, here is what you need to do:

1. Set Your Goals 

Ask yourself this: what do I want to do with my money? 

This can be anything! From starting your own business, to take a year off work and go travel the work, to early retirement. The sky is the limit and you can work towards anything you want!

Set your financial goals and know which direction you want to head with your finances. 

Once you have set your goals, you can determine what is next. When you want to start your own business, the steps you are going to take are very different compared to when you want to retire early. 

If you have never thought about that, no worries. Now is the time to get started!

Where do you see yourself in 3 years, 5 years, 10 years?

What is it that makes your heart sing?

When you have set your goals, you can create a plan to move towards where you want to go in life. Your finances will enable you to get there asap!

One last thing: make a distinction between long-term and short-term goals. The short-term goals are things you could accomplish in let’s say 3-6 months, while long-term goals are things to strive towards for years. 

2. Make A Financial Overview

Now you’ve set your goals, let’s look at the current state of your finances. 

One of the lessons learned from Rich Dad Poor Dad is that you should identify your assets, liabilities, and money flow. 

Assets

Assets are everything that you own, like your house, car, art. It also includes any cash, your checking and savings account, and anything that you’ve saved in a retirement account. 

When you add everything together, you come up with your total assets.

Liabilities

Liabilities are everything that you have outstanding, so all the debt that you have. This includes mortgage, student loans, credit card loans, and more. 

When you have determined your total assets and your total liabilities, add this to determine your net worth.

If you have a negative net worth, no worries that’s very common. Just be mindful you do not tie your net worth with your self-worth

That being said, there are ways to up this number, which mostly comes down to saving more, spending less, build passive income, and increasing your income at your job. To read more, start here:

Money Flow

Once you have figured out your net worth, we can look at your monthly money flow. This is how much you earn every month and how much of that money you’re spending. 

Make a simple Google Spreadsheet with how much money is incoming and outgoing every month. 

What is the status of your financial life?

You are earning more than you are spending? Great, you are on your way to financial stability and working towards your financial goals. 

You are spending more than you are earning? Some changes need to be made. Check your expenses category and see where you need to cut back most. 

You might want to cut the cord and switch to an online provider, check all your subscriptions, or cut your electricity bill in half

It can be hard to start cutting things from your budget, of course. What you NEED to do here is go back to your goals.

Why are you doing this?

It is much easier to say no to going out to eat 3x per week when you’re working towards saving money for your first house. 

Having a goal and a WHY for yourself, you will easily pass on all the things that don’t align with your goals.

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3. Make A Financial Plan

People often hire a financial advisor to help with their financial future. But with the rise of low-cost index funds and robo-advisors, anyone is able to start investing independently. 

Low-Cost Index Funds

The easiest way to start investing is by buying low-cost index funds. These are funds that are spread out over an entire index, continent, or even the entire world economy. 

Since VSTAX is not available in Europe, I personally invest in VWRL. This is a fund that spreads out over 3000 companies, just by buying one share.

You can start investing with small amounts, making it easy for anyone to start investing.

Robo-Advisors

A robo-advisor is an online platform that creates your investment portfolio for you. You sign up, fill in your age, risk preference, current savings for retirement, and what age you would like to retire. 

The robo-advisor determines for you what you will be ideal for you to invest in and how much additional you should invest every month to reach your goals. 

Robo-advisors are similar to financial planners, in the way that they create a specialized plan for your current situation. While a financial planner will cost a ton of money, a robo-advisor can get you something similar for a lot less.

Great companies for this are Swanest and ETFmatic if you’re located in Europe or M1Finance and Acorns if you’re located in the US.

When Do You Need A Financial Advisor?

Most people really don’t need a financial advisor, unless special circumstances apply. When you’re inheriting a big sum of money for example, a financial advisor may come in handy. 

What you need to look for is a financial advisor that charges an hourly or monthly fee, without taking a percentage of your capital. Also look for advisors that don’t earn a commission on the product they recommend you, that’s called fiduciary duty. 

All In All

Wrapping up, a financial advisor is someone who can function as a coach – pointing you in the right direction. 

When you don’t want a financial advisor you can manage your finances yourself by setting financial goals, making a money overview with your net worth and cash flow, and make a financial plan. 

When you do want a financial advisor, look for someone charging an hourly or monthly fee. 

Definitely not everyone needs a financial planner, but for some people a push in the right direction can be invaluable. 

Do you manage your finances yourself? Would you ever make a financial plan with an advisor?

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4 thoughts on “How To Make A Financial Plan [Without An Advisor]”

  1. I think that you should definitely at least talk openly with someone about your finances and future plans.
    If you are in a relationship this is doubly important.
    Most people who are in debt are also in denial and many relationships fail due to money problems or more commonly misaligned finanacials ideas mean people lose money or squander it.

    I think that a money coaching session is essential. It’s a bit like asking for directions if you are going on a long hike in the woods.

    Reply
    • It’s extremely important to talk about money with your partner yes, but that’s not something where a financial advisor would come in necessarily. If you have a good financial basis, you would be able to do it yourself.
      BUT if the financial situation is not where you want it to be or you don’t know where to start, a financial advisor would help tremendously.

      I would put it like this: if I know where I’m going, I don’t need to ask for directions. If I have no idea where I’m going and I would rather not get lost, asking for directions seems a pretty good idea!

      Thanks for sharing your thoughts GFF!

      Reply
  2. You’re right Marjolein,

    A Financial Planner or Advisor will just direct you to take the correct decision while making a smart financial plan so as to eliminate financial risk.

    But if you’re wise enough and know your ideal way of investment, you need not to seek for a guidance at all. The tips you shared about how to invest in a smart way without a planner is quite better.

    Thanks for your advice.

    Reply

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