Let's face it, no one cares nearly as much about your financial position and outlook as you do. For that reason (if you're concerned with making progress in this area), it's vitally important that you treat your personal finances in the same way that you would anything else of great significance in life. You need a well devised and continually adapted plan of action.

Everyone is different, and so it probably comes as no surprise that any financial plan will be totally unique from the next in line. Whatever your personal aspirations, be it escaping from debts, saving for that holiday, building a business, investing in property or even simply the desire to live a life with greater financial freedom – taking the time to improve your money management and knowledge around financial planning will provide you with the necessary tools to succeed.

Despite our unique differences, goals and aspirations for the future, surely all of us share common ground in that we each see value in creating and maintaining a strong financial foundation. For good reason, too.

Once that foundation is built and the wheels of your financial plan are in motion, you're on a journey to an improved future full of choice and bereft of the pressures synonymous with financial hardship. The decisive factor in success or failure, as is the case in the vast majority of long-term endeavours in life, is the quality of the planning, goal setting and contingency beforehand.

With that said, let's cut through the noise and break this down into bitesize chunks – where to begin?

What is a personal financial plan?

Put simply, a financial plan is a organised strategy implemented to help you achieve your money goals. If you scratch beneath the surface, it goes a little beyond that too.

A financial plan provides a structured blueprint of regular actions that can be quantified and measured on a periodic basis in ‘checkpoint' format. This means your plan holds you accountable. Subsequently, (if followed to the letter) you are guaranteed to achieve your desired outcome by the conclusion of your agreed timescale.

Sounds good, right?

Let's get to work.

As mentioned previously within the introduction to this guide, everyone has vastly different financial goals and aspirations. Therefore, their respective starting points and journey to the end destination will also vary dramatically.

We've constructed this 3-step guide with everyone in mind, because no matter the scale of your plans (conservative or extravagant) or where you are beginning your journey from (a modest or more advantageous position), your mindset and structuring of your personal financial plan must be exactly the same.

Step 1: Get your ducks in a row

Our first step is simple and provides the initial discovery and backing from which you can formulate your next steps.

Before you can begin to look to the future and commence planning specific goals, you need to establish a current state of play within your personal finances. If you've been smart with your money and liability exposure until now, meaning you're one of the relative minority with zero debt and positive cash flow, you can skim-read this part - although do pay moderate attention as there are some useful aspects and exercises to take note of too!

Alternatively, if like a lot of people out there, your personal finance ‘school report card' isn't showing straight A's at this point in time, then it's important to point out that firstly, you're not alone.

Secondly, that's absolutely fine, and acknowledging this is a crucial part of the process. Besides, the holy grail of building a personal financial plan isn't reserved solely for those in more fortunate positions. Rather, there's some housekeeping required on your part before moving forward with the highly anticipated goal setting, which everyone is entitled to sooner or later.

Evaluate your money situation

That's right, you guessed it. You need to create a document which itemises, lists and quantifies every regular source of income and expense that you have personally each month. Every last one. Even the 99p direct debit to Apple for your iCloud subscription. Please ensure you're being extremely diligent when carrying out this step, any discrepancies or guessing could potentially be costly later on down the line. You want the most accurate picture possible.

Once you have populated this document to the fullest extent, you should have a clear picture of your monthly incomings and outgoings.

Clarify and consolidate all debt

It's impossible to build an accurate and compelling personal financial plan without understanding the true extent, depth and breadth of your ongoing personal debt. Debts can be incredibly draining, both fiscally and psychologically, so let's gain some clarity on them by removing the guesswork. Use a proportion of your time and energy on collating all sources of debt – loans, overdraft, credit cards, finance agreements and anything else.

Once you have a crystal-clear assessment of your total debt exposure, you can work to consolidate this as far as possible. There are many fantastic resources out there on debt consolidation specifically, namely this one by NationalDebtline.org. Please use them to your advantage. Focus hard on this tactic and put the time in to achieve the best result possible. Whilst you're still “getting your ducks in a row”, the aim is building the most robust financial foundation you can. A thorough debt MOT (audit and consolidation) is a critical part of the process.

Explore ways to boost your income

Continuing with the theme of preparation and foundation-building, the final step we'd recommend is to add to your existing income. Surprisingly, 54% of households pay their bills, debts and their provision of disposable cash living paycheque to paycheque, from a single source of income.

We believe, given the rise in living costs, inflation and such, that it is advantageous beyond words for people who are building personal financial plans to (at the very least) explore options and (at best) conduct serious research into adding another stream of income. It reduces financial exposure, room for error and the need for contingency planning later down the line. On the flipside, it provides options, increases your capacity for investment and reduces the reliance on individual income sources and keeps you firmly on track – a win/win.

Step 2: Starting with the end in mind

With Step 1 completed, you've carried out some much-needed housekeeping which provides true clarity on the current state of play. Secondly, you've built a fantastic, robust foundation and in doing so, stabilised your personal finances. In combination, this provides a highly effective foundation for kicking on and looking to the future – the exciting part where the visualisation and planning begins.

As with any high-quality, dependable plan in business, health, education, sport and life in general, your personal financial plan demands that you are absolutely sure, committed and focused on the end goal.

Where are you trying to get to with your personal finances?

What is the point?

Where do you want to be?

Critically, this specific goal you are setting for yourself must be quantifiable (meaning it must be measurable numerically) and also time bound. With these parameters in mind, be realistic with your goal setting. Choose an exact goal that you would be extremely happy with, one that you'd take enormous pride in working towards, one that drastically improves upon your current situation – but keep in mind that it must be actionable and achievable.

A practical example of a brilliant personal finance goal: “To save £20,000 by the end of March 2027, to put towards my investment portfolio”.

Or:

“To add £400 to my total recurring personal monthly income by 1st January 2025”.

Step 3: The breakdown

The goal (and the gauntlet too!) is now set. It's time to use that achievement to your advantage, capitalise on your excitement and bring the energy required to work into the granular detail of your chosen financial goal.

Beginning this process with the end in mind, the task here is to break down your end goal into equal, shorter-term objectives or checkpoints. These carefully planned checkpoints will provide you with periodic benchmarks to thoroughly quality-check your progress against, allowing you to accurately answer the question “am I on plan?” at any stage you decide. That question can be asked in relation to weekly, monthly, quarterly and annual results, providing a continual bird's-eye view of your progress versus where you should be in terms of results at that given point in time.

Once you have your short-term checkpoints agreed and clearly laid out, it's crucial that each of those are individually populated with what we will call your ‘activity plan'. In short, an activity plan is detailed day-by-day plan which encompasses the exact input/activity you require from yourself to nail your short-term checkpoints. This, for us, is the most important part of your entire personal financial plan. It provides the know-how, the blueprint and the confidence (as we'll come onto shortly) behind everything else.

Your activity plan serves two main purposes. The first is to remove all decision making from your mind, allowing you to focus on exactly what is required of you that day and nothing more. We know the activity listed within the plan is an efficient use of time, as it's these small steps that build towards your short-term goals. Secondly, it's there for the sake of continuity – creating bitesize, easily achievable inputs that (upon completion each time) make you feel good, provide motivation and demonstrate that you can achieve what you set out to.

We have lift off.

That's it! You are now equipped with the requisite process and skills to make a drastic and impactful change to your personal finance journey. As your plan has been built on your own terms, only you have the power to make this a success through application, discipline and a good measure of resilience along the way.

As with any new venture, there will be times when it may feel like your luck is down and you might even experience a few outcomes go against you – this is why your plan is so important as it provides direction and assurance to fall back on. Stick to your activity plan and keep putting one foot in front of the other. The key is fulfilling small, meaningful, consistent actions no matter the weather.