You Need a Financial Plan
You need a financial plan. A financial plan is a comprehensive, personalized roadmap that outlines your current financial situation, future goals, and the actionable steps required to achieve them. It guides your management of income, expenses, debt, and investments, helping to secure your financial future and reduce stress.
This differs from a spending plan, which is simply a monthly plan for where money will go for that respective month. A spending plan ensures inflow matches outflow and zeros out through zero-based budgeting. Every dollar gets a job. This is only one small part of the financial plan. The financial plan is more comprehensive and has more moving parts. Each part intentionally serves the short-term and long-term goals of an individual.
What a Bad Financial Plan Looks Like
No plan is also a financial plan. It is simply unsuccessful. Most people operate with a bad financial plan without realizing it. The characteristics reveal themselves quickly. You have no plan or a very limited plan. Confusion sets in over where money has disappeared. Uncontrolled spending leads to failure in tracking expenses carefully. Debt accumulates through reckless use of credit. Emergency funds of at least one thousand dollars remain out of reach. Financial planning extends only one to three months into the future. You live in a constant state of shock over finances.
Picture a typical month under a bad plan. Income arrives. Then it vanishes. You wonder where it went. The month ends with more questions than answers.
What a Good Financial Plan Looks Like
A successful financial plan stands in stark contrast. You have clarity on primary and secondary income streams. You know your six numbers: annual income, expenses, and net difference; what you own, what you owe, and the net difference between them. The knowledge of these numbers alone separates those who succeed financially from those who struggle.
A good plan prioritizes giving to God first. This rejects the secular wisdom of paying yourself first. God owns everything. The earth is the Lord's and the fullness thereof, the world and those who dwell therein (Psalm 24:1). When we give first, we acknowledge His ownership and trust His provision.
Your plan focuses on clear, realistic, and personal goals for saving, investing, and debt repayment. Remember SMART goals: Specific, Measurable, Achievable, Relevant, and Time-bound. Each dollar receives a specific assignment. Your spending consistently amounts to less than you make. Under a good plan, income arrives, giving happens first, savings receive their portion, spending stays controlled, and you invest the remainder. You end the month knowing exactly where every dollar went.
The Journey to Financial Freedom
Financial freedom is the destination. The journey follows a sequence of steps. Different organizations have mapped this journey, and while the details vary, the principles remain consistent. Scripture provides the foundation: Steady plodding brings prosperity (Proverbs 21:5). Financial success rarely happens overnight. It requires patience, discipline, and a clear path forward.
Here are several proven roadmaps to consider:
Crown Financial's Seven Destinations
Crown Financial organizes the journey into seven destinations. Each builds upon the previous one.
GET WELL:
Destination 1: Build Emergency Savings
Track spending and create your spending plan using available tools. Save one thousand dollars for emergencies. Start giving regularly to the Lord. These three steps form the foundation. You must know where money goes, have a cushion for unexpected expenses, and honor God with your finances from the beginning.
Destination 2: Pay Off Credit Card Debt (Proverbs 22:7)
The borrower is servant to the lender. Credit card debt enslaves. Pay off all credit cards using the debt snowball method. Increase savings to one month's living expenses. Increase giving to the Lord through your time, talents, and money. Look for creative ways to increase income. Debt payoff requires both reducing expenses and increasing income.
Destination 3: Pay Off Other Consumer Debt (Romans 13:8)
After credit cards come auto loans, furniture loans, and student loans. Owe nothing to anyone except to love one another. Pay off all consumer debt. Increase savings to three months of living expenses. Continue increasing giving to the Lord's work.
DO WELL:
Destination 4: Adjust Your Plan (Jeremiah 29:11)
God declares through Jeremiah, For I know the plans I have for you, plans to prosper you and not to harm you, plans to give you hope and a future. Once consumer debt is gone, adjust your spending plan accordingly. Start saving for major purchases. Begin saving for retirement through proper vehicles and strategies. Increase savings to six months of living expenses. Retake your financial assessment and revisit your goals. This destination allows you to shift from defense to offense.
Destination 5: Save for the Future (Proverbs 21:20)
The wise man saves for the future, but the foolish man spends whatever he gets. Continue saving for major purchases and retirement. Build savings up to twelve months of living expenses. Create education funds for each child. Increase giving to the Lord's work. This destination provides security and allows for generous giving.
Destination 6: Invest Wisely (Ecclesiastes 11:2)
Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land. Buy an affordable home. Begin prepaying the home mortgage. Diversify investments across different vehicles and strategies. Continue increasing giving to the Lord's work. Wisdom in investing protects against future uncertainties.
FINISH WELL:
Destination 7: Leave a Legacy (Matthew 25:23)
Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master's happiness! Pay off the home mortgage completely. Finalize children's education funds. Confirm your estate plan is in order. Re-evaluate investments. Maximize generosity. Evaluate your Kingdom impact for the next generation. This destination represents true financial freedom, where God fully uses your time, talent, and resources to fulfill His purposes for your life.
Crown Financial provides a free financial planning workbook, a spending plan worksheet, and many more resources.
Dave Ramsey's 7 Baby Steps
Dave Ramsey's approach through The Total Money Makeover follows a similar progression with slight variations.
Baby Step 1: Save one thousand dollars for your starter emergency fund.
Baby Step 2: Pay off all debt except the house using the debt snowball.
Baby Step 3: Save three to six months of expenses in a fully funded emergency fund.
Baby Step 4: Invest fifteen percent of household income in retirement.
Baby Step 5: Save for your children's college fund.
Baby Step 6: Pay off your home early.
Baby Step 7: Build wealth and give.
Ramsey emphasizes the psychological wins of the debt snowball over the mathematical efficiency of paying highest interest first. Behavior matters more than math in personal finance.
The Money Guy Show's Financial Order of Operations
Step 1: Save a deductible-level emergency fund. Including all insurances.
Step 2: Capture the full employer match on retirement accounts.
Step 3: Pay off high-interest debt.
Step 4: Build emergency reserves.
Step 5: Max out Roth IRA and HSA contributions.
Step 6: Max out retirement contributions in employer plans.
Step 7: Build wealth by reaching 25% saving.
Step 8: Save for long-term financial goals (college, vacations, real estate)
Step 9: Prepay low-interest debt including the mortgage.
Their system balances the guaranteed return of debt payoff against the potential returns of investing. The approach recognizes that some debt carries low enough interest rates that investing produces better long-term results.
Clark Howard's 10-Step Investment Guide
Consumer advocate Clark Howard offers a straightforward approach in his 10-step guide to saving and investing. His core philosophy remains simple: save more and spend less.
Step 1: Enroll in your employer's retirement plan. If your company offers a 401(k), this simple action sets the financial foundation for the rest of your life.
Step 2: Contribute enough to capture the full company match. The most common match is fifty cents for every dollar you contribute, up to six percent of your annual salary. This is free money.
Step 3: Choose a target retirement fund within your 401(k). Pick the year closest to when you expect to retire. The fund manager adjusts your investments automatically as you age, shifting from stocks to bonds over time. Howard calls this the easy button of investing.
Step 4: Increase contributions by one cent per dollar earned every six months. You will not miss this additional one percent, yet you will steadily increase the amount saved for your future.
Step 5: Build toward the ten percent savings benchmark. If you start investing in your twenties, Howard recommends saving a dime for every dollar you make to have comfort in retirement. Starting in your thirties requires more than ten percent, and your forties require even more.
Step 6: Stay on the path. Your biggest enemy becomes the temptation to wander from the plan through emotional decisions or chasing trends.
Step 7: Keep costs low. Howard favors low-cost investment houses like Vanguard, Fidelity, T. Rowe Price, and Charles Schwab for target retirement funds.
Step 8: Avoid investment complexity. For most people, putting all investable dollars into a target date retirement fund inside a 401(k) is an excellent choice. Investing does not need to be complicated.
Step 9: Live below your means. Track where your money goes using his CLARK Method: Calculate your income, List your expenses, Analyze your budget categories, Record everything, and Knock out debt while building savings.
Step 10: Resist the urge to speculate. Stay away from penny stocks, unheard-of cryptocurrencies, and get-rich-quick schemes. The well-worn path to wealth involves spending less than you make and consistently putting money into the stock market every paycheck.
Howard's approach emphasizes simplicity, low costs, and consumer protection. He guides people to avoid getting ripped off while building wealth through basic, time-tested principles.
J.L. Collins' Simple Path to Wealth
J.L. Collins presents the most direct approach to wealth in The Simple Path to Wealth and through his widely-read blog. He distills financial independence into nine core principles that require little further explanation to make them work.
Step 1: Avoid fiscally irresponsible people. Never marry one or otherwise give him access to your money.
Step 2: Avoid money managers. Your money belongs to you and no one will care for it better than you.
Step 3: Avoid debt. Nothing is worth paying interest to own.
Step 4: Save a portion of every dollar you get.
Step 5: The greater the percent of your income you save and invest, the sooner you will have a large cushion of money. Try fifty percent. With no debt, this becomes perfectly doable.
Step 6: Put this money in the Vanguard Total Stock Market Index Fund (VTSAX). Keep adding to it.
Step 7: Realize the market and the value of your shares will sometimes drop dramatically. People all around you will panic. They will be screaming to sell. Ignore this. Even better: buy more shares.
Step 8: When you can live off the dividends VTSAX provides, you are financially free.
Step 9: The less you need, the more free you are.
Collins expands these principles in his path for college graduates. Spend the decade after graduation working hard to build your career and professional reputation. During that same decade, live like the college student you just were. Avoid the trap of an expanding lifestyle. Save and invest at least fifty percent of your income. Fund any 401k plan offered by your employer. Fund your IRA. Do this for ten years and you will be financially independent.
Financial independence means when four percent of your assets can cover your expenses. Put another way, FI equals twenty-five times your annual expenses. If you live on twenty thousand dollars per year, you reach FI with five hundred thousand dollars. If you live like Mike Tyson once did at four hundred thousand dollars per month, you need one hundred twenty million dollars. Being FI is every bit as much about controlling your needs as building your assets.
During the accumulation phase, celebrate market drops. Each dollar you invest buys more shares when prices fall. As long as you are working, VTSAX serves all your investing needs. The ups and downs of the market matter not at all. Pay them no mind. Just keep adding to the pot.
Once you reach financial independence, decide if you are still having fun and want to continue your career, or if you wish to try something new. If you keep working, invest one hundred percent of your earnings since you now live on your investments. This will dramatically accelerate the growth of your assets. Now, should you choose, is the time to begin expanding your lifestyle. Just keep it at four percent of your holdings. This is also the time to think about giving generously.
Collins strips wealth building to its essence. His approach rejects the complexity pushed by the financial industry. You do not need financial advisors charging fees to pick stocks or time the market. You need discipline to live below your means and patience to let compound growth work over decades. The stock market has built wealth reliably for centuries. Buy the entire market through an index fund, hold through crashes and volatility, and let time do the work.
Choosing Your Path
These roadmaps share common ground. All emphasize starting with emergency savings. All require eliminating consumer debt. All prioritize retirement savings. All eventually aim for mortgage payoff and generous giving. The differences lie in sequencing and emphasis.
Crown Financial grounds everything in biblical stewardship. Ramsey focuses on behavior change and intensity. Money Guy Show optimizes for clear order and structure. Clark Howard champions spending less than you make. J.L. Collins emphasize simplicity and freedom.
Pick the roadmap that resonates with your values and situation. A Christian will naturally gravitate toward Crown's biblical framework. Someone drowning in debt needs Ramsey's aggressive approach. A high-income earner might prefer Money Guy's optimization. A naturally frugal person will appreciate Clark Howard's methods. Someone starting from scratch, re-starting, or seeking financial freedom may find J.L. Collins' simple path to be, well, just that: simple.
The critical point is this: you need a plan. Any of these plans, followed consistently, will lead to financial success. No plan, or a constantly changing plan, guarantees failure. For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? (Luke 14:28). Jesus taught the importance of planning. Financial planning honors God by stewarding His resources well.
Your Seven Numbers
Regardless of which roadmap you choose, you must know your six numbers. These numbers form the foundation of any financial plan.
Numbers 1-3: Cash Flow Numbers
Your annual income, your annual expenses, and the net difference between them. Positive net difference means you spend less than you earn. Negative means you live beyond your means. Most people know their income roughly. Few track expenses carefully. Even fewer can tell you the exact difference.
Numbers 4-6: Cash Position Numbers
What you own (assets), what you owe (liabilities), and the net difference (net worth). Your house, car, and retirement accounts are assets. Your mortgage, car loans, and credit card balances are liabilities. Net worth reveals your true financial position. A high income with high debt looks impressive but provides little security. A modest income with no debt and growing assets builds wealth steadily.
Number 7: Cash Needed in Retirement
At some point, you're going to retire. And if your strategy is to depend on Social Security, your financial plan will not end well, at least, not according to several financial advisors and the latest facts from the 2025 OASDI Trustees Report . Calculate this number by taking your current yearly expenses and multiplying it by 25. That should give you an estimate of what you need based on current expenses. You'll likely panic when you see the number. You'll also probably think, "who can do this? this is impossible." But please, do not do what most people do after they see the big number: they do nothing. Saving something is better than nothing. Saving aggressively and cutting spending now will be less painful than being forced into a lifestyle later on down the road.
Calculate these numbers today. Write them down. Review them quarterly. They will guide every financial decision you make.
The Truth That Sets You Free
Jesus said, You will know the truth, and the truth will make you free (John 8:32). This applies to finances as directly as anything else. The truth about your financial situation, once known, frees you to make wise decisions. Ignorance keeps you trapped in cycles of confusion and stress. Knowledge, combined with action, leads to freedom.
Your financial plan starts today. Calculate your seven numbers. Choose a roadmap. Take the first step. Commit your work to the Lord, and your plans will be established (Proverbs 16:3). God honors faithful stewardship. Begin the journey toward financial freedom, where you can fully serve His purposes with the resources He has entrusted to you.