Personal Financial Plan: How to Turn Dreams into Reality

A financial plan is not just about spending less or endlessly saving, but about getting more value from your money. Here’s how a personal financial plan can help you go on vacation, renovate your home, or buy a new car.

Step 1. Where to Start?

First, turn your dreams and abstract desires into concrete goals, then realistically assess their cost. For example, your family is expecting a child, and you’re considering a new family car. At this stage, it’s just a dream. How do you turn it into a goal?

• Determine the most important features for the car: fuel efficiency, trunk size, interior space, etc.
• Research available models and choose a few suitable options.
• Analyze dealership offers. Trade-in programs or preferential loans can significantly reduce costs.

Suppose you find that you’re short of the required amount to buy your dream car, which you’ll need in six months when the baby arrives. This is no longer just a dream but a specific goal: save the necessary amount within six months to buy the car. Do the same for your other dreams — turn them into concrete goals.

Step 2. Prioritize Goals by Urgency and Importance

It’s natural to want everything at once. For example, besides the car, you dream of an apartment with a separate room for the child, a home theater in the living room, and a summer vacation at the sea. When you prioritize, you may realize that the vacation is better postponed until autumn when trips are cheaper. The child’s room may not be needed until they are three, giving you time to save for the mortgage down payment. And the home theater may not be essential at all.

This process gives you a list of goals with priorities, deadlines, and required amounts.

Step 3. Assess Your Budget

Analyze income and expenses to calculate how much you can save each month. Then determine how much you need to set aside to reach your goal by the planned date. Divide the total amount by the number of months until the target date.

Compare these numbers to see if your savings capacity is sufficient.

Step 4. Consider Different Financing Options

It’s likely that your available funds won’t cover all important goals. In that case, consider alternatives such as loans or credits. Before taking a loan, carefully review all terms: interest rates, servicing costs, and required insurances.

Distribute your income so that you can cover both current expenses and your goals (savings or loan repayment). Economists recommend limiting loan payments to no more than 30% of your income.

Also, consider other ways to reach your goals faster, such as overtime work or expense optimization. Adjust your plan accordingly, including future loan payments, additional income, and reduced expenses.

Step 5. Let Your Money Grow

If there’s still time before reaching your goal, it’s better to save using suitable financial instruments. Choose them based on returns, risks, and timeframes. The key is not to leave money idle, as inflation reduces the real value of your savings.

Invested funds generate additional income, which should also be reflected in your financial plan.

Simple Rules

• Formulate financial goals clearly and honestly, in monetary terms with specific deadlines.
• Prioritize goals to avoid ending up with trivial items but lacking essentials.
• Find optimal ways to achieve them — consider all options, even those that seem unrealistic at first.
• Track income and expenses to stay aware of your financial state.
• Before adding a purchase to your plan, think a few days whether it’s truly necessary.

And the Most Important — Follow the Plan

Creating a personal financial plan is only half the work. The hardest part is sticking to it. Daily temptations abound, but impulsive purchases only delay your dreams.

Stick to the plan for each expense category. Determine monthly spending limits for food, transportation, car payments, utilities, and other essentials, and adhere strictly to them.

If you fail, especially in the beginning, adjust your plan: redistribute expenses or try to earn more. The key is to stay within the budget and resist the temptation to dip into savings. Otherwise, your financial goals will keep getting postponed.

Record all income and expenses and refer to the plan daily. This keeps you in control of your financial situation. For convenience, consider using financial planning services.