What is a personalised financial plan and what is it for?

January 25, 2023 by Susan Paige

A financial plan is a document that, starting from income and expenses, allows individuals to plan strategies to improve savings skills, better manage debts and setting goals.

To be effective, this tool must be customised and take into account the real economic and financial situation of the individual. Once a personalised plan has been created, it will be possible to answer questions such as: is now the right time to open a mortgage for a first home? Is £10,000 a good investment amount? What expenses can I cut to increase my savings capacity?

To achieve better results, it is worthwhile to turn to professionals in the sector, who have the appropriate skills to assess financial status and level of risk, as well as to draw up savings, loan and investment plans tailored to the needs and profile of the individual.

What a financial plan includes

As mentioned above, many factors must be considered when creating a financial plan. 

Firstly, it is necessary to establish financial goals to be achieved in the short, medium, or long term. These must be real, concrete, feasible and above all motivating.

Then, it is possible to proceed with the analysis of one’s own or family’s assets, including properties, income, and other additional revenues. Also, it is necessary to consider expenses that cannot be written off, such as mortgage, rent, utilities, etc.

Starting from these elements, the financial advisor will be able to establish a complete financial plan, which may, over time, undergo various modifications that will allow it to be readjusted to possible changes or new goals.

Savings plan

The first objective of a personalised financial plan is to help improve the management of the individual’s income and to encourage the setting aside of a sum of money to be allocated to savings.

The savings plan is aimed at identifying which, among recurring expenses, can be either cut or reduced. It may also involve the application of strategies designed by experts in the field and aimed at encouraging savings, such as Elisabeth Warren’s 50/30/20 method or Glenn James’ 1% rule.

The first involves dividing the monthly income into three parts: 50% to be allocated to non-prolongable expenses such as mortgage, health care, basic groceries, utilities; 30% for wants; 20% to be saved.

The second rule involves postponing any unnecessary expenditure, the amount of which exceeds 1% of one’s annual income, by 24 hours, so that one can assess the real need and avoid impulse purchases

The second consists of postponing any unnecessary expenditure, whose amount exceeds 1% of the annual income, by 24 hours, so that one can assess the real need and avoid impulse purchases.

Loan plan

The loan or debt plan includes both existing loans and those that may be needed to achieve goals.

In the first case, the advisor will try to identify strategies that allow the loan to be repaid as quickly as possible or in such a way as to place less strain on the client’s finances. In the second case, on the other hand, he will try to identify and recommend the appropriate loan option according to the client’s needs.

Investment plan

The third element that can be included in a financial plan is the investment plan. This must consider not only the objectives, but also, if not above all, the level of risk, both financial and emotional, that the person can bear without having to deal with overly complex and stressful situations, as well as the time factor.

In this case, the advisor will be able to provide guidance on the financial instruments best suited to his or her client’s portfolio.


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