Create your Personal Financial System

• Create a first version of your comfortable plan, secure plan, and wealthy plan. Feel free to check off the items that you’ve already completed.
• Create a first version of a budget. An example set of categories is below. Remember the goal is to zero it out and allocate every dollar.
• Set an income allocation % target. This can be before or after tax. You can do this either forward or backward. One approach is to take your income, subtract your annualized monthly expenses, and see what you have available to save or invest. If you live well within your means this is fine.
• If you find that number is insufficient, you can do the reverse - start with your income, set an allocation % target, and see how much you have left to live on. This will likely require some behavior change on your part.
• If you use the latter approach, and you are already saving/investing, set a goal to increase your allocation by 1-2% in the following quarter. Make the necessary lifestyle adjustments. Repeat each quarter after until you reach your allocation target %.
• If you aren’t currently saving anything, set a goal of 1-2%. Create an account just for this purpose. Make the first transfer. If you’re a W2 employee, change your direct deposit to transfer 1% of your check to that new account. Increase the percentage by 1-2% each quarter until you achieve your target allocation %.

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