How to Create a Comprehensive Personal Financial Plan

Before you plan your financial journey, you need a clear picture of where you're starting from. Start with your cash flow. Determine how much you take in each month and how much goes out. This can uncover problems like excessive credit card use. If you use credit cards to make up for a lack of cash, your monthly expenditures probably outpace your monthly income. If you have a positive cash flow, you most likely have good spending instincts. Either way, you need to write down your expenditures and income.

You need to determine how you want to live. You must address issues such as how much income you want, how much cash after expenses you want, what kind of retirement you envision and how you feel about vacations and luxury items. You can daydream, but keep it real. Choose goals that you think you can reach, but make sure your goals take you where you want to go. For example, if you want to retire and live in your own home, calculate the expenses you will have to pay for with retirement funds. The rule of thumb is that you should plan to live off of 4 percent of your money each year during retirement so you won't deplete your retirement savings.

Even if you don't have the cash flow you want at the present time, you should set goals for investments and debt payments. You can set these goals at the same time. You do not have to pay off all your debt before you begin investing. Knowing that you are setting aside funds for the future can inspire you to keep paying off debt so you can invest even more. Set a goal of a monthly amount you would like to put aside for buying mutual funds, stocks, CDs or bonds. You may have to save your money until you have a lump sum to invest, such as $500 or $1,000. Match your monthly investment savings with a debt payment. If you plan to set aside $50 per month for investments, plan to pay $50 toward debt.

Your comprehensive plan must include insurance. You need health insurance to prevent financial ruin from health problems, but you can also consider disability insurance, life insurance, liability insurance and collision insurance for your vehicles. You can speak with insurance companies about potential premiums you would pay for each type of coverage. You must balance your current needs to save money against the risk of losing everything if you don't have the insurance you need. For your financial plan, create an ideal scenario and add up the costs, ignoring cash flow issues for the time being.

Compare what you'd like to do with what you currently do. If your investment, debt service and insurance call for cash that you don't have every month, you have two choices: You can increase income or reduce expenses. To increase income, you can ask for a raise, start a weekend business or get a second job. You can reduce expenses by -- for example -- eating out less or taking fewer vacations. During the planning stage, simply determine how much additional money you need to save or earn to make your financial plan work.

Once you have your financial plan the way you want it, implement it. Make all the changes you need to make to put the plan into action. This may require gradual changes, such as when you need to cut expenses. It may also require radical changes, such as searching for a new job that pays more money. If you know that your plan is level-headed and doable, making it happen is a matter of choosing to do so.

Monitor your progress each year to see if your plan is working out the way you thought it would. If not, make adjustments. A comprehensive financial plan is a process that never ends. Part of your plan should be to revise your plan each year.