Broker Check

How to Create Your Own Financial Plan (Part 1)

August 05, 2020

As we enter August, many parents will be deciding what to do with their children for the new school year. Most towns will help make that decision on whether it is in person, virtual learning, or a combination of both. For those with toddlers or infants not yet in formal schooling, mom and dad will have to decide if daycare during a pandemic is okay with them or if some other option is best.

For us, Emmy will be starting daycare at the end of the month and we could not be more excited for her. She is extremely social and loves interacting with other kids, so this is the right decision for our family. Whatever you decide, have confidence that it is the right decision because in this scenario, the only opinion that matters is yours. You are doing great, mom and dad, keep it up.

This is how happy Emmy got when we told her she will be making 9 new friends soon.



I wish I could tell you that my Emmy update had something to do with the topic of this blog post, but it literally has nothing to do with it. So, I digress. 

As most of you know, I’m a firm believer in having a formal financial plan in place. It does not have to be anything fancy, but as our good friend Benjamin Franklin once said, “If you fail to plan, you are planning to fail.”


Step 1: Take Inventory

The first thing you need do when creating your own financial plan is to take inventory of all your assets and their approximate value. When I say assets, I’m referring to the following:

  • Checking accounts
  • Savings accounts
  • Investment accounts
  • Retirement accounts (401k, 403b, IRA, Roth IRA, SEP, etc.)
  • Real Estate Value
  • Car Value
  • Collectibles


Next, make a list of all outstanding debt with their approximate balance: 

  • Unpaid balance on credit cards
  • Mortgage balances
  • Student Loans
  • Personal Loans
  • Auto Loans


Next, subtract your Total Debt Value from your Total Asset Value. The resulting number is your NET WORTH. I personally track my net worth every month with the goal being for it to increase.    

Do not be alarmed if this number is NEGATIVE. This often happens when younger individuals take on student loan debt and have not had the chance pay it off or have not earned a significant income thus far. Now I should mention, if it is negative because you over borrowed, such as racking up large credit card bills, then that is a problem that needs to be addressed IMMEDIATELY.        

Gariano Wealth Management has a client portal where you can link all of your assets and debt, and it automatically keeps a running Net Worth Total for you. This is a feature all of our clients have access to and if you’d like to take it for a spin, just let me know.


Step 2: Analyze cash flow

The best way to increase your net worth is by making more money than you spend. When you have positive monthly cash flow, meaning more income than expenses for the month, you can take the remaining dollars and decrease your debt or add it to your savings/investments. But, how do you know if you have money left over? 

It’s time to make a rough budget. Don’t roll your eyes at me, please. It really isn’t hard and shouldn’t take you more than a couple of minutes.

Take a look at your previous 2 pay stubs, which should be one-month worth of income if you get paid on the 15th and 30th of every month.  Assuming taxes and retirement contributions have already been taken out, the amount that says “Net Pay” on each of those 2 pay stubs is what will be hitting your bank account. Great job. You just calculated your monthly net income. If you get paid every 2 weeks instead of just on the 15th and 30th, then 2 months out of the year you’ll have an extra paycheck that I suggest adding right to savings or using it to pay down debt. If you happen to receive a bonus once a year, then you will have an extra step of taking that bonus and dividing it by 12, assuming taxes were already withheld. Add that to your monthly net income. This will give you a better indication of how much your “monthly bonus” will be and what that means for your cash flow.

Next, make a list of all monthly expenses. The more accurate you are with your expenses, the more accurate the outcome and results will be.

Subtract your monthly expenses from your monthly net income. This is your monthly CASH FLOW. Is it negative? I suggest you reduce your expenses or make more money. Is it positive? Great job, now its time to find a place to put that extra cash flow.

To be continued…


Have a question? Shoot me an email I’m here to help!


Fun Fact: There is only 1 letter in the alphabet that does not appear in any US state name. Can you guess which letter?


Hint: It's Q.