Creating The Ultimate Financial Plan

La Jolla | California

Let’s dive right in. Having a real financial plan is not simply about saving money.

Sure part of the plan is about saving and investing and planning, but there is another layer of benefits hiding under the surface that is potentially more impactful.

HAVING a real financial plan & KNOWING exactly what you are going to do with each dollar that comes in ahead of time is actually quite liberating and does several things for you:

    1. It Relieves Stress- Not simply the stress of not having enough money, sure that is a benefit, but also the stress of knowing what goes where. This is actually very frequent and persistent stressor in many people’s lives that is detrimental on multiple levels both monetarily from making snap judgments, to mentally and emotionally from always feeling under pressure.Every dollar you earn will in the future after building your plan today will be going to predetermined locations that will all over time lead you to the life you want to live, while reducing your stress along the way. This is not analytical or nerdy, it’s simply a systematic way to become the person you want to be while getting happier now due to reduced stress. Simple, smart & effective.


    1. It Reduces Decisions Your brain only has so much processing power on any given day. Once you use it up, you are at risk of starting to make bad decisions. Reducing your decisions by creating a well thought out plan makes execution simple and not draining.The goal here is to plan once and execute often and we can even automate a lot of the execution parts, but more on that later.


    1. It Creates Momentum- The first step is always the hardest, but once you start following a plan like this you are going to see & feel the benefits right away, both in your bank account and in your head.


    1. Allows You To Lead A Rich Life- Please understand when I say this, it’s not simply about being financially rich. I think we all know plenty of people with money who don’t lead happy lives.  A plan like this will give you the freedom and mental space to live a rich life, not simply have more money, although that’s a byproduct.


  1. It Reduces Risk- Managing your personal finances reminds me a lot of a favorite quote of mine “You can learn more about a man on one bad day than you can in 10 years of good. Everyone is a rockstar when the sun is shining, but who you are when things go wrong truly defines your character.” and the same is true for money.

(NOTE: Are you looking for ways to reduce stress and manage your business and life?  Download our free PDF guide titled “The 7 Zen Tools to Manage Your Business & Life” to get started today. Click Here To Download

I believe there are multiple ways to be “rich”.  You can be time rich, money rich, spiritually rich, relationship rich, mentally & emotional rich and so on. Money is just one of these modalities or currencies with which to create wealth.

Everyone is a great with money when they are making a lot of it. A high volume can conceal flaws, but when things go wrong, then how good is your plan? A bulletproof financial plan will protect you when things take a turn for the worst and rest assured, they will. If there is one constant in life, it’s change.

Now, I know you have probably heard a lot of this before and so had I. In fact I am a bit of a fanatic when it comes to consuming information. I have read and implemented numerous financial and savings plans from “experts” throughout the industry, but many fall short in my opinion.

You see they love to tell you what you should be doing, but they don’t address the core psychological reasons that people don’t follow through.

That said, there are a few exceptions to the rule, like Ramit Sethi who is great at not only breaking down the logistics of how to do things, but all dissecting the why behind it.

My situation was this, and it might sound similar to yours:

I was turning 30 and I had left corporate America several years earlier. In the first few years of starting my business, my financial status went south. I plundered my savings, my 401k and even my ROTH IRA (I know, I know).

Oh, and I had debt, lots of it. I was upside down on my car, had mounting credit card debt and was having trouble seeing a way out. I even made pretty good money compared to most, I was making around $100,000/year but had nothing to show for it and things were slipping the wrong direction.

Over the next year read everything I could get my hands on and tried multiple automation and savings plans. I was not an employee, however, so I had random income which made a lot of the standard savings and financial molds not apply to me, so I had to get more creative and started digging deeper and that when I found stuff written by self-made guys who ran businesses like Ramit and others.

Through trial and error, I put together the following plan.

What follows is the exact plan that I created and implemented for myself and the same plan that I have laid out for numerous friends and even girlfriends over the years and the feedback has been that it has worked well for both the financial planning & saving side as well as the mental side of the game.

Is it perfect? Probably not, I am sure there are some scholars that will read this and pick apart the math or percentages along the line, but remember, a good plan that is executed is 1000 times better than a perfect plan that sits on the shelf, so let’s get started.

Financial Plan Basics-

You Build & Implement the plan in three phases…

Phase 1. Compiling & Understanding Your Numbers

Phase 2. Creating the Financial Flow

Phase 3. Automation & Implementation


Phase 1- Compiling & Understanding Your Numbers

The first phase of the plan revolves around getting a real snapshot of where you are truly at and where you want to go. It’s important you be super honest with yourself here. Lying or fudging numbers to yourself really serves no purpose, so take a deep breath and start it.

Step 1- Create a list of debts to the penny of what you owe in debts
-If you have debt, anything other than a mortgage, we are probably going to want to tackle that at some point. I am sure there are people who will tell you why debt is a good thing, but I have yet to truly find many of those situations outside of corporate finance, so let’s assume we will be getting rid of debts. It is not only good in fiscally, but it’s very good mentally.

Step 2- Create a list of your monthly overhead
-This will be used to determine monthly allocation of funds. Again, being honest here will be key. If you know you spend 200 on clothes a month, put it in there. We are not going to get into habit breaking for any of your old bad habits in this post so simply be honest about your spending or the plan will not work. Now after you go back and look at a previous month to see where you money does go and your recurring monthly expenses, you may see things that you don’t need and want to remove them. By all means do that.

Step 3- Create your financial planning goals
– Determine what your savings/investment % is going to be starting today (I recommend at a bare minimum of 10%). The real formula for financial safetly and growth looks like this from a high level.

50%- Tax & any Tithing (giving that you do on a cosistent basis)
25%- Investments (Insurance, cash, equities, retirement)
25%- Living

If you can keep you costs to live at 25% and divide the other up properly, you are going to do several things. You will not get into tax trouble, you will not get into debt and you will plan very well for the future.

Here is the rub, most people live on something like 75% of their income. Even when they start making more, they just scale it up, so in the beginning if you are stickign to this plan, you may need to cut back on things or simply earn more money, but we have to find a way to get these percentages right, as this is the sweet spot of security and planning. Anything less is simply putting you at risk, it makes you “fragile” to changes in the environment like job, economy, stock market…etc.

If you need 100k just in living expenses every year, then ultimately we need to find a way to get you to 400k in income for your lifestyle to be truly sustainable. We will talk in other areas of the blog about ways to create additional income, but for now set this as a goal. So now you have your % goals, the key is regardless how yours is split up right now, you need to start. Even if your savings starts at 10% its a good place to start and build the habit.
– Determine your target numbers for your emergency fund, debt-free, self-sufficiency, Lifestyle Freedom(stress free), Absolute Freedom.

Emergency Fund- Pick a number that is somewhere in the 3-6 months of living expenses range. This will give you not only a buffer against things going wrong financially without having to tap into your savings. It also provides a mental layer of security as well. Very few people in their lives will actually ever fully fund an emergency fund, so if you do, you are likely in the 1% of the world who has. It’s worth it.

Debt Free- This is typically the first milestone that people will hit and it’s a really good one, not only for financial and live security, but again for that mental security and stress reduction as well. You see, when you have debt, you are “fragile” as Nicholas NAsim Taleb talkes about in his book Antifragile. You are much more affected by sudden changes to your environment. We want to protect ourselves against such happenings by strengthing our financial stability.

Self Sufficiency- This is usually the first very large number we are going after. I calculate it like this. What is the minimum amount of money you would need each year to get by without having to work. That is your self sufficiency yearly number. To get the big number we will assume a return of 5% (conservative) on your investments.

So if your number is 50,000/year. Your self sufficiency number would then be 1,000,000 in savings/investments. 1,000,000*.05=50,000. Now, a couple things to note here. You can probably get more than a 5% return a lot of times, but being conservative is always the way to go here. Also, if you are truly honest with your self on what you woudl need to just get by, many could do it on a less than 50k if there was not debt involved. Remember, this is just a you can get by without working number, its self sufficiency from your investments, it is not saying you will never work again once you hit that number or you will not be able to save more, it’s just a milestone, so calculate out that number, odds are, its a lot less than you thinik.

The Second Large milestone is

Lifestyle Freedom-  I consider lifestyle freedom an amount of money where you can live a great lifestyle soley off of your savings. You can live where you want, take trips with your family, give to the causes you want to give to, send your kids to the schools or tutors you want…etc.

The key to this milestone and the next is not as much about reduction in stress as it is really anchoring in exactly what you will be doing when you get there. Sure, you can anchor in some things you want to have as well, but I guarantee that is not going to create the long term happienss you are looking for, but I agree, it’s fun. So on top of what you want to HAVE when you get there, tie it to specific things you want to do, like pay for an annual trip with your family somewhere tropical, send you kinds to a specific school, live and work on your own ranch…etc. The more and more I tackle goal setting I realize that you shoudl setup long term goals that will “create” who you are, so even if you miss a material goal, you still end up being the person and living the life that you want. Try to forecast what the annual cost woudl be for them so not simply a flat cost, but if its something you might finance, whats the yearly cost…etc as we work towards the yearly total first and then get to the annual from there.

So once you layout a a few of these items and tie them to specific events/items in the future, you will have that yearly numbers and then we work backwards to get to the big number again.

So if the annual number is 200,000 then take 200,000*20(5% return) and you get 4,000,000. Again, probably a bit less than you think considering most people can live a pretty solid life on 75-150k depending on children and what country/state you live in.

Finally we have…

Absolute Financial Freedom-

Now its time to stretch your goals a bit. What BIG items would you like to accomplish/experience/have in your life. Use the same protocol as above and really take some time to make sure these are actually things you want and also apply the filter of

Ok, now you have a baseline to get started, you have your where you stand now numbers and you have where you want to numbers. Remember, what woudl the yearly cost be, as opposed to the full amount. If you want to buy a set of cabins on a lake to run a bed and breakfast, what is the mortgage on that as opposed to how much is the lump sum. Think about:

What do you want your legacy to look like? What will people remember you for?

What do you want to work on even when you are not getting paid?

What experiences do you want to share with your family while you are still here?

Who do you want to help? Individually and groups?

How does spirituality(or lack there of) play a role in your ideal life?

These are some good questions to get the wheels spinning a bit for you. So now list them out and get to the Absolute financial freedom number.

So if you need 450,000 a year to live that ultimate life then 450,000*20 = 9,000,000.

These are just examples, you may not need 450,000 to live a pretty rad life, so run the numbers and see where you fall. Ok, your numbers are set, keep these numbers as you will want to review from time to time and you can also use them when you tackle goal setting because this is pretty much just an 30,000 foot view of proper goal setting, so check out other posts on the blog for more in-depth goal setting tips.

(NOTE: Are you an Entrepreneur?  We can help. Download our free PDF guide titled “The 7 Zen Tools to Manage Your Business & Life” to get started today.   Click Here To Download

Creating The FLOW-

This part is really pretty simple once you map it out and really all you are doing is automating it the flow you mapped out.

The psychology behind it is simple. If you only have one apple, you are happy. If you have two apples and then someone takes one away to put it in storage for a rainy day, now you experience loss which makes it harder to save for that rainy day.

I am by no means the first person to talk about this or layout a plan for it’s automation, but it works due to the simple psychological experiment described above. So, by automating your finances, you are essentially removing the experience of receiving two apples and then losing half, because you will only ever “receive” 1 apple and be happy with your one apple and also be saving for the rainy day. It’s a simple tweak to create a habit that will produce more happiness and help you reach your financial goals at the same time.

Now of course the ultimate goal is to show you how to how make more than 2 apples, but first things first, create the bucket, then make it rain. Haveing a system like this in place even before you start to make a lot of money makes sense so you do not fall victim to the same mistakes that many people do who increase their wealth (especially rapidly).

When there is no system or habit, you will automatically default to your normal behaviours, good or bad. When you are talking about increased income, you often see peopel who make more money but still feel like they are “never getting ahead.” What most likely happened is that their spending and savings habits are still the same now as they were before.

If they found ways to spend and use all their money at a lower income level they will do the same at a higher income level as well, many times elveraging themselves to the hilt and making poor financial decisions. I know, because I did it and it took me years to dig myself out of the financial hole I created in my mid-twenties.

Back to the flow of the money.

Based on the percentages set out above, you will have 4 main buckets and it is of note you will need to adopt a slightly new perception of your paychecks or money inflows. They are not all yours. Sure, some of it is yours as you will see below, but a large portion is not, so start wrapping your head around that.

Here is how it works…

Tax & Tithing- This money is not yours, you do not own it, you will not be touching this apple.

Savings & Investments- This money is also not yours, sorry, you do not own this either.

Living- This is your apple. You get to hold this one.

So our money flow will basically create a master account that all your initial income will flow into. From there the specific %’ will automatically be separated and sent to the various accounts.

Now I can hear the cries from the crowd already, well 25% is not enough to live on.

Well, ok, I get that. My stance on that is, make it work because that’s the proven number that works so either cut your expenses to get there or find ways to make more money. I was in the same boat and have had to do both of these things at various times in my life.

A Quick Psychology Discussion-

What is really interesting here is what surfaces when you suggest to people to cut their expenses down to 25%. You will get responses like, well I cannot live here, or drive this sort of car. A good question to ask at this point is why is that triggering that sort of response. Do you really NEED those things or are they a want. If they are a want, than you might need to dig a bit deeper and ask what part of your ego needs that car and would be emparessed by driving a Ford for awhile until your income rose. Find a way to get rid of that ego attachment to your status and you will likely be mch more inclined to make a sound financial decision.

It’s not about not having expensive toys or living an amazing life, it is simply about realizing how and what you need to do to make it LAST! How many people do you know who have had to “downsize” or give up their house or car at one point or in many cases file bankruptcy and start over. Well, this plan will basically set you up so you will not have to “downsize” because you have built a stable foundation.

If you choose to downsize in the future, it will probably be because you realize the lifestyle did not bring you the satisfaction you thought it would and you make the conscious choice to live a simpler life. Do you see how it is teh attachment or “need” to have the lifestyle that will ultimatly set you up for failure? When you do not “need it” you will make better decisions. It’s the same in a negotiation, who usually wins? Exactly, the person who does not need to win, they are good with either outcome. So creating a bulletproof financial system is not simply about money, its also about mindset.

Now I am not telling you that you do not deserve those things, what I am saying is that to obtain them in a fiscally sound manner, you may need to make more money. I am not telling you, that you are worth less as a person because you cannot drive a Porsche or Lexus, simply that if that car payment puts your financial numbers out of wack then it’s probably not a good move.

It’s like an investment, if it adds too much risk to a portfolio, then a seasoned investor will not make that investment, until it falls within their tolerated risk amounts. Basically, it’s a business decision, and thats why we are building the system that will make the decisions FOR you, so emotions and in many cases moods do not negatively affect your plans.

I am much like Ramit in my philosophy in that cutting out latte’s and things that you enjoy is not a good plan to create wealth OR happiness. Better to create a solid system to do the work for you and simply find ways to make more income (double edged sword here of course, if it takes additional time).

I think it is of note to mention however that I think this exercise in looking at reduction is good one for many people from a happiness standpoint as it may force you to simplify your life which often strips away the things that you once thought you needed but now may realize don’t actually bring you any joy.

When I downsized from life with a long term girlfriend to life alone, I got rid of half of my things. When I decided to buy my boat i get rid of half of my things again and another half once i realized that the prvious half was still 2x more than I could literally fit on a boat, ha. So now I am down to approximatly 1/8 of my previous posessions and most of what I own fits either into my truck or my 6X8 storage unit. I have no less notable joy in my life, in fact it’s a much freeer feeling. I am not suggesting that everyone go sell their life, just that things have a funny way of owning us over time, so be cognizant of that, but I don’t think we want to go down that rabbit hole here so that’s all I will say.

Wow, ok that was a bit of a tangent, but i think understanding those psychological aspects of implementing a plan will help you recognize the normal resistance that you will face implenting, let’s start to Automate.

Automation & Implementation-

Back to the actual automation of the financial flow, there are a few ways to to this.

    • If you have a bookkeeper who has access to your accounts, you can have the reconcile your accounts monthly and send the appropriate percentages to your specific accounts monthly. Simple, you live out of your living account and the other two will grow and be used on their own independtly. It may cost you some money, but I would contend that the money you will save and make by implementing this will be many times over what you would spend on a bookeeper.


    • Do it automatically with accounts. This is probably the route most people will take and it’s a good one, but does require some setup, here is the gist of how it works with my recommended bank of choice for the automation
      • Open a the following accounts with ALLY Bank:
        • Main Disbursement Account
        • Tax & Tithing Account
        • Investment Account
    • Whenever you get money, you will now deposit that money into the Main Dispersement account as opposed to your personal checking account.


  • At a set time every month, you create a Recurring Transfer from that Main Dispersement Account of:
      • 50% to the Tax & Tithing Account


      • 25% to the Investment Account


      • 25% to your personal checking account (for living expenses)


That is the general plan for how the money will move, but I have a few additional notes for you:

Note #1-  If you are an entrepreneur, which presumably, if you are on this site, many of you are, then you may not knwo the exact amoutn of money you will be depositing each month or sometimes even when. You may need a bit more self control as you might have to deposit the whole check into your main dispersement account and then manually schedule the transfers. The best is completely automated as it removes you from teh equation, but even in this scenario, you know the exact amount you will need to transfer so just do it right away and don’t tell yourself “I will do it later” because something will always come up that you will need that money for.If you need you living expense money even quicker than the transfer times allow, simply have your paycheck dispersed 75% to the dispersement account and 25% to your checkign account on your direct deposit.

Note #2- If you need you living expense money even quicker than the transfer times allow, simply have your paycheck dispersed 75% to the dispersement account and 25% to your checkign account on your direct deposit.

The goal is to have $0 left.

Note #3- The goal is to have $0 left in the main dispersment account every month, so you will need to have a plan for overages, meaning what do you do if you make MORE or less money than you guestimate your monthly to be.

  • More- Layout the percentages before hand of what you will do with the shortages/overages over X dollar amount. It is simplest to maintain the same percentages because you still owe tax on it, but some may choose to invest more as their living expenses are already taken care of, so just decide this before hand.
  • Less- What do you do in the above example if you make less than the 5k that you plan on every month, lets say 3k? My recommendation is that you split the 3k as you normally would because again, you still owe tax on the 3k, that does not change so if you simply put more to living expense then you might create a tax liability for yourself, so instead stick to the percentages. If you stick to the percentages and cannot live on whats left, then pull that money out of your “emergency fund” for that month and then replensih it with “investment” dollars in the months going forward till the emergency fund is whole again.

That’s the plan.

Now you know exactly where every dollar you earn is going. You have more than enough information to create a bulletproof financial plan that will setup you up financially for years to come and reduce your stress levels almost

You have more than enough information to create a bulletproof financial plan that will setup you up financially for years to come and reduce your stress levels almost immediately. It is actually really impressive how quickly you can feel good about your finances by simply implementing a plan, even if you are not where you want to be yet, at least you have a path to follow that you know will get you where you want to go and that will immediately put your mind at ease, try it.

If you have any questions, leave them in the comments below and I will answer.

If you want to access to all of my personal tools, documents and spreadsheets that I use to manage my own finances along with additional information on what to do with the money AFTER it’s divided up into your various accounts like your tax and investment accounts, paying off debt and the like, then stay tuned and be sure to subscribe, I will be releasing all of this in the near future.


Talk soon,


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