ℹ️ Skipped - page is already crawled
| Filter | Status | Condition | Details |
|---|---|---|---|
| HTTP status | PASS | download_http_code = 200 | HTTP 200 |
| Age cutoff | PASS | download_stamp > now() - 6 MONTH | 0 months ago |
| History drop | PASS | isNull(history_drop_reason) | No drop reason |
| Spam/ban | PASS | fh_dont_index != 1 AND ml_spam_score = 0 | ml_spam_score=0 |
| Canonical | PASS | meta_canonical IS NULL OR = '' OR = src_unparsed | Not set |
| Property | Value | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| URL | https://www.schwab.com/financial-planning-collection/8-components-of-good-financial-plan | |||||||||
| Last Crawled | 2026-04-23 10:29:14 (16 hours ago) | |||||||||
| First Indexed | 2020-12-04 00:38:24 (5 years ago) | |||||||||
| HTTP Status Code | 200 | |||||||||
| Content | ||||||||||
| Meta Title | 8 Keys to Good Financial Plans | Charles Schwab | |||||||||
| Meta Description | Establishing a solid financial plan can help you achieve your dreams. Here are eight pieces every good financial roadmap should include. | |||||||||
| Meta Canonical | null | |||||||||
| Boilerpipe Text | While there are many ways to develop a financial plan—do it yourself, use a robo-advisor, work with a financial planner, or a combination thereof—Schwab has identified eight critical components every plan should include, regardless of the method used to create it. So, what does a good financial plan look like?
1. Financial goals
You can't make a financial plan until you know what you want to accomplish with your money—so whether you're creating it yourself or working with a professional, your plan should start with a list of your goals, both big and small, and the time horizons to accomplish them. Doing so can help you organize each objective by how soon you'll need the money:
Short-term goals
are those you hope to achieve in the next one to two years, such as paying off debt or building an emergency fund.
Medium-term goals
are those you hope to achieve in the next three to 10 years, such as a down payment on a home or starting your own business.
Long-term goals
are those that are 10 or more years away, including saving for college and, of course, retirement.
For each goal, specify a dollar figure and a target date. "The more specific your goals, the easier it is to measure your progress toward them," said Rob Williams, managing director of financial planning at the Schwab Center for Financial Research.
A host of
online tools
can help you run the numbers, weigh competing priorities, and determine the best course of action for you. Also, if you have multiple goals to work toward, a robo-advisor, or automated investing platform, can help you weigh the importance of each goal, ranking them by needs, wants, and wishes.
Any time is a good time to establish a financial plan.
Ideally, you start investing for financial goals early in life, but any time is a good time to check in on your current financial situation and assess how you're doing. Are you still on track? Do you have other goals you hadn't previously considered? Having a financial plan helps you assess where you are today and where you want to go next.
2. Net worth statement
Knowing your net worth today can serve as a baseline for framing your financial goals and setting a target for your net worth at some point in the future, like in retirement. To determine your net worth, make a list of all your assets (bank and investment accounts, real estate, valuable personal property) and another one of all your debt (credit cards, mortgages, or student loans). Your assets minus your liabilities equals your net worth.
"Don't be discouraged if your liabilities outweigh your assets," Williams said. "That's not uncommon when you're just starting out—especially if you have a mortgage and student loans."
3. Budget and cash flow plan
Your budget is really where the rubber meets the road, planning-wise. It can help you determine where your money is going each month and where you can cut back to meet your goals.
A
budget calculator
can help ensure you don't overlook irregular but important expenses, such as car repairs, out-of-pocket health care costs, and real estate taxes. As you're compiling your list, separate your expenses into two buckets: must-have items, such as groceries and rent, and nice-to-haves, such as eating out and gym memberships.
When considering how your goals fit into your budget, you may want to pressure-test it using "what if" scenarios: What if you want or need to retire earlier? What if you downsized your mortgage? Some robo-advisors offer tools that allow you to adjust certain assumptions to see how they could affect your savings strategy.
4. Debt management plan
Debt is sometimes treated like a four-letter word, but not all debt is bad debt. A mortgage, for example, can help build equity—and boost your credit score in the process. High-interest consumer debt like credit cards, on the other hand, can weigh heavily on your credit score. Plus, every dollar you pay in finance charges and interest is one you can't put toward other goals.
If you have high-interest debt, make sure you create a plan to help you pay it off as quickly as possible. If you're not sure where to start, a financial advisor can help you prioritize, then together you can determine how much of your budget should go toward your debt each month.
5. Retirement plan
An old guideline says you'll need approximately 80% of your present income in retirement. However, this assumes that retiring will free you from any work-related expenses, that you've paid off your mortgage, that any children will be financially independent, and you'll likely fall into a lower tax bracket.
It's also important to keep in mind that Medicare doesn't cover everything, and health care expenses that Medicare doesn't cover—such as long-term care—can add up quickly. You also might spend more on other things in retirement, such as travel, dining out, gifts, or financial support to a relative or friend.
Plugging different scenarios into a
tool
can help you figure out what you may need in retirement.Â
Don't count on the 80% rule.
If you're saving 20% – 30% of your pre-retirement income, then the 80% income-replacement rule is a good place to start. Otherwise, it's safer to aim at covering 100% of your pre-retirement income,
minus whatever you're saving for retirement
. As with any general rule, there are plenty of exceptions. So be sure to sit down and fine-tune your retirement budget as the time draws near. This should be your top priority because you can borrow for most other goals but not for retirement.
6. Emergency fund
When something unexpected happens—say you lose your job or get hit with an unexpected medical bill—an emergency fund can help you avoid tapping your long-term savings to make ends meet.
It's generally a good idea to save enough to cover at least three months'—ideally six months'—worth of essential living expenses (for example, groceries, housing, transportation, and utilities). Save this money in a checking or savings account so you can access it in a hurry should the need arise.
7. Insurance coverage
Insurance is an important part of protecting your financial downside—but try to ensure you're not overpaying for coverage you don't need and make sure to cover all your bases:
Health insurance
: Without it, even routine care can cost a pretty penny, while a serious injury or hospital stay could set you back tens of thousands of dollars. As you get older, you may want to consider
long-term care insurance
as well.
Disability insurance
: This coverage protects you and your family in case you're unable to work. Employer-provided disability insurance typically replaces about 60% of your salary.
Auto and homeowners'/renters' insurance
: If you own a car or home—or rent and can't afford to replace possessions out of pocket—make sure you're adequately protected.
Life insurance
: This is generally a good idea for those with dependents. Work with an insurance agent to understand what type of—and how much—coverage makes the most sense for you.
8. Estate plan
At a minimum, most people want a will in place, which states your final wishes with regards to your assets, dependents, and who you want to administer your estate. You should also keep the beneficiaries of your insurance policies and retirement accounts up to date. Also consider establishing powers of attorney for financial and health care decisions, in case you become incapacitated.
For help
getting started
or tackling more complex estate-planning tasks, consider working with an estate attorney or a qualified financial planner. | |||||||||
| Markdown | [Skip to main navigation](https://www.schwab.com/financial-planning-collection/8-components-of-good-financial-plan#primary-navigation) [Skip to content](https://www.schwab.com/financial-planning-collection/8-components-of-good-financial-plan#content)
Menu
- [Find a Branch](https://www.schwab.com/branches)
- Contact Us
- Chat
- Log In
- Accounts & Products
- Accounts
- [Brokerage and Trading](https://www.schwab.com/brokerage)
- [Retirement Accounts (IRAs)](https://www.schwab.com/ira)
- [Education and Custodial](https://www.schwab.com/college-savings-accounts)
- [Personal Choice Retirement](https://www.schwab.com/pcra)
- [Small Business](https://www.schwab.com/small-business-solutions)
- [Accounts by Financial Goal](https://www.schwab.com/investment-account-goals)
- [Open an Account](https://www.schwab.com/open-an-account)
- Trading
- [Schwab Trading Powered by Ameritrade™](https://www.schwab.com/trading)
- [thinkorswim® Trading Platforms](https://www.schwab.com/trading/thinkorswim)
- [Platforms Overview](https://www.schwab.com/trading/thinkorswim/compare-platforms)
- [Education](https://www.schwab.com/trading/learn-to-trade)
- [Support](https://www.schwab.com/trading/support)
- [Order Execution](https://www.schwab.com/execution-quality)
- [Research](https://www.schwab.com/investment-research)
- Investment Products
- [Mutual Funds](https://www.schwab.com/mutual-funds)
- [ETFs](https://www.schwab.com/etfs)
- [Stocks](https://www.schwab.com/stocks)
- [Options](https://www.schwab.com/options)
- [Futures](https://www.schwab.com/futures)
- [Bonds, CDs & Fixed Income](https://www.schwab.com/fixed-income-investments)
- [Money Market Funds](https://www.schwab.com/money-market-funds)
- [Cash Solutions & Rates](https://www.schwab.com/cash-investments)
- [Annuities](https://www.schwab.com/annuities)
- [Cryptocurrency](https://www.schwab.com/cryptocurrency)
- [More Investment Products](https://www.schwab.com/investment)
- Banking & Borrowing
- [Bank Offerings](https://www.schwab.com/bank)
- [Checking](https://www.schwab.com/checking)
- [Savings](https://www.schwab.com/savings)
- [Home Loans & Rates](https://www.schwab.com/mortgages)
- [Pledged Asset Line](https://www.schwab.com/pledged-asset-line)
- [Credit Cards](https://www.schwab.com/credit-cards)
- Featured Offerings
- [Schwab Investing Themes™](https://www.schwab.com/thematic-investing)
- [Schwab Starter Kit™](https://www.schwab.com/investing-starter-kit)
- [Schwab Stock Slices™](https://www.schwab.com/fractional-shares-stock-slices)
- [Schwab Personalized Indexing™](https://www.schwab.com/direct-indexing)
- [Generating Retirement Income](https://www.schwab.com/invest-with-us/retirement-income)
- [Tax-Efficient Investing](https://www.schwab.com/invest-with-us/tax-efficient-investing)
- [Schwab Personal Trust Services](https://www.schwab.com/personal-trust-services)
- [Alternative Investments](https://www.schwab.com/alternative-investments)
- Advice
- Advice Solutions
- [Schwab Wealth Advisory™](https://www.schwab.com/wealth-management/wealth-advisor)
- [Automated Investing](https://www.schwab.com/intelligent-portfolios)
- [More Advice Solutions](https://www.schwab.com/invest-with-us/wealth-management-services/)
- Financial Planning
- [Financial Planning Offering](https://www.schwab.com/financial-planning)
- [How Much You Need to Retire](https://www.schwab.com/how-much-do-i-need)
- [Planning Calculators](https://www.schwab.com/financial-planning/tools)
- [Complimentary Plan](https://www.schwab.com/financial-planning/schwab-plan)
- Pricing
- Pricing
- [Commissions and Fees](https://www.schwab.com/pricing)
- [Understanding Investment Fees](https://www.schwab.com/costs-of-investing)
- [Low-Cost Investments](https://www.schwab.com/pricing/low-cost-investments)
- Transferring Accounts
- [Costs and Considerations](https://www.schwab.com/transfer-to-schwab)
- Other Details
- [Client Relationship Summaries](https://www.schwab.com/transparency)
\$0 online equity trade commissions + Satisfaction Guarantee.
[See our pricing](https://www.schwab.com/pricing)
- Why Schwab
- The Schwab Difference
- [Why Choose Schwab](https://www.schwab.com/why-schwab)
- [Our Education](https://www.schwab.com/why-schwab/investing-education)
- [Our Satisfaction Guarantee](https://www.schwab.com/satisfaction-guarantee)
- [Our Security Knowledge Center](https://www.schwab.com/schwabsafe)
- [Our Experts](https://www.schwab.com/schwab-experts)
- [Our Account Protections](https://www.schwab.com/legal/account-protection)
- Ways to Invest with Us
- [Overview](https://www.schwab.com/invest-with-us)
- [Self-Directed Investing](https://www.schwab.com/invest-with-us/self-directed-investing)
- [Active Trading](https://www.schwab.com/trading)
- [Automated Investing](https://www.schwab.com/intelligent-portfolios)
- [Wealth and Investment Management Solutions](https://www.schwab.com/invest-with-us/wealth-management-services)
- How We Compare
- [Compare Us to Our Competitors](https://www.schwab.com/compare-us)
- [See Our \#1 Rankings](https://www.schwab.com/awards)
More choices. More ways to invest how you want.
[Explore ways to invest](https://www.schwab.com/invest-with-us)
- [Learn](https://www.schwab.com/learn)
[Open an Account](https://www.schwab.com/open-an-account)[Log In](https://client.schwab.com/Login/SignOn/CustomerCenterLogin.aspx)
#
While there are many ways to develop a financial plan—do it yourself, use a robo-advisor, work with a financial planner, or a combination thereof—Schwab has identified eight critical components every plan should include, regardless of the method used to create it. So, what does a good financial plan look like?
## 1\. Financial goals
You can't make a financial plan until you know what you want to accomplish with your money—so whether you're creating it yourself or working with a professional, your plan should start with a list of your goals, both big and small, and the time horizons to accomplish them. Doing so can help you organize each objective by how soon you'll need the money:
- **Short-term goals** are those you hope to achieve in the next one to two years, such as paying off debt or building an emergency fund.
- **Medium-term goals** are those you hope to achieve in the next three to 10 years, such as a down payment on a home or starting your own business.
- **Long-term goals** are those that are 10 or more years away, including saving for college and, of course, retirement.
For each goal, specify a dollar figure and a target date. "The more specific your goals, the easier it is to measure your progress toward them," said Rob Williams, managing director of financial planning at the Schwab Center for Financial Research.
A host of [online tools](https://www.schwab.com/financial-planning/tools) can help you run the numbers, weigh competing priorities, and determine the best course of action for you. Also, if you have multiple goals to work toward, a robo-advisor, or automated investing platform, can help you weigh the importance of each goal, ranking them by needs, wants, and wishes.
### Any time is a good time to establish a financial plan.
Ideally, you start investing for financial goals early in life, but any time is a good time to check in on your current financial situation and assess how you're doing. Are you still on track? Do you have other goals you hadn't previously considered? Having a financial plan helps you assess where you are today and where you want to go next.
## 2\. Net worth statement
Knowing your net worth today can serve as a baseline for framing your financial goals and setting a target for your net worth at some point in the future, like in retirement. To determine your net worth, make a list of all your assets (bank and investment accounts, real estate, valuable personal property) and another one of all your debt (credit cards, mortgages, or student loans). Your assets minus your liabilities equals your net worth.
"Don't be discouraged if your liabilities outweigh your assets," Williams said. "That's not uncommon when you're just starting out—especially if you have a mortgage and student loans."
## 3\. Budget and cash flow plan
Your budget is really where the rubber meets the road, planning-wise. It can help you determine where your money is going each month and where you can cut back to meet your goals.
A [budget calculator](https://www.schwabmoneywise.com/public/moneywise/tools_resources/monthly_budget_planner) can help ensure you don't overlook irregular but important expenses, such as car repairs, out-of-pocket health care costs, and real estate taxes. As you're compiling your list, separate your expenses into two buckets: must-have items, such as groceries and rent, and nice-to-haves, such as eating out and gym memberships.
When considering how your goals fit into your budget, you may want to pressure-test it using "what if" scenarios: What if you want or need to retire earlier? What if you downsized your mortgage? Some robo-advisors offer tools that allow you to adjust certain assumptions to see how they could affect your savings strategy.
## 4\. Debt management plan
Debt is sometimes treated like a four-letter word, but not all debt is bad debt. A mortgage, for example, can help build equity—and boost your credit score in the process. High-interest consumer debt like credit cards, on the other hand, can weigh heavily on your credit score. Plus, every dollar you pay in finance charges and interest is one you can't put toward other goals.
If you have high-interest debt, make sure you create a plan to help you pay it off as quickly as possible. If you're not sure where to start, a financial advisor can help you prioritize, then together you can determine how much of your budget should go toward your debt each month.
## 5\. Retirement plan
An old guideline says you'll need approximately 80% of your present income in retirement. However, this assumes that retiring will free you from any work-related expenses, that you've paid off your mortgage, that any children will be financially independent, and you'll likely fall into a lower tax bracket.
It's also important to keep in mind that Medicare doesn't cover everything, and health care expenses that Medicare doesn't cover—such as long-term care—can add up quickly. You also might spend more on other things in retirement, such as travel, dining out, gifts, or financial support to a relative or friend.
Plugging different scenarios into a [tool](https://www.schwab.com/financial-planning/tools) can help you figure out what you may need in retirement.
### Don't count on the 80% rule.
If you're saving 20% – 30% of your pre-retirement income, then the 80% income-replacement rule is a good place to start. Otherwise, it's safer to aim at covering 100% of your pre-retirement income, *minus whatever you're saving for retirement*. As with any general rule, there are plenty of exceptions. So be sure to sit down and fine-tune your retirement budget as the time draws near. This should be your top priority because you can borrow for most other goals but not for retirement.
## 6\. Emergency fund
When something unexpected happens—say you lose your job or get hit with an unexpected medical bill—an emergency fund can help you avoid tapping your long-term savings to make ends meet.
It's generally a good idea to save enough to cover at least three months'—ideally six months'—worth of essential living expenses (for example, groceries, housing, transportation, and utilities). Save this money in a checking or savings account so you can access it in a hurry should the need arise.
## 7\. Insurance coverage
Insurance is an important part of protecting your financial downside—but try to ensure you're not overpaying for coverage you don't need and make sure to cover all your bases:
- **Health insurance**: Without it, even routine care can cost a pretty penny, while a serious injury or hospital stay could set you back tens of thousands of dollars. As you get older, you may want to consider [long-term care insurance](https://www.schwab.com/insurance-basics/long-term-care) as well.
- **Disability insurance**: This coverage protects you and your family in case you're unable to work. Employer-provided disability insurance typically replaces about 60% of your salary.
- **Auto and homeowners'/renters' insurance**: If you own a car or home—or rent and can't afford to replace possessions out of pocket—make sure you're adequately protected.
- **Life insurance**: This is generally a good idea for those with dependents. Work with an insurance agent to understand what type of—and how much—coverage makes the most sense for you.
## 8\. Estate plan
At a minimum, most people want a will in place, which states your final wishes with regards to your assets, dependents, and who you want to administer your estate. You should also keep the beneficiaries of your insurance policies and retirement accounts up to date. Also consider establishing powers of attorney for financial and health care decisions, in case you become incapacitated.
For help [getting started](https://www.schwab.com/public/schwab/investing/retirement_and_planning/estate_planning/estate_planning_checklist) or tackling more complex estate-planning tasks, consider working with an estate attorney or a qualified financial planner.
##
- ### Learn more about financial planning
[Explore related articles](https://www.schwab.com/financial-planning-collection)
- ### 5 Times When Financial Planning Can Matter Most
[Read next](https://www.schwab.com/financial-planning-collection/5-times-in-life-when-financial-planning-can-matter-most)
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.
Investing involves risk, including loss of principal.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.
(0924-GWZP)
Investment and Insurance Products Are: Not FDIC Insured • Not Insured by Any Federal Government Agency • Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or any of its Affiliates • Subject to Investment Risks, Including Possible Loss of Principal Amount Invested
The Charles Schwab Corporation provides a full range of brokerage, banking and financial advisory services through its operating subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co. Inc. ([Member SIPC](http://www.sipc.org/)), and its affiliates offer investment services and products. Its banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides deposit and lending services and products.
This site is designed for U.S. residents. Non-U.S. residents are subject to country-specific restrictions. Learn more about our services for [non-U.S. residents](https://international.schwab.com/), [Charles Schwab Hong Kong clients](https://www.schwab.com.hk/), [Charles Schwab U.K. clients](https://www.schwab.co.uk/).
© 2026 Charles Schwab & Co., Inc. All rights reserved. [Member SIPC](http://www.sipc.org/ "SIPC"). Unauthorized access is prohibited. Usage will be monitored.
[Visit Schwab on YouTube](https://www.youtube.com/channel/UCToe3dspZyw2L_JY-JmP3Mw "Charles Schwab YouTube page") [Visit Schwab on X formerly Twitter](https://twitter.com/charlesschwab "Charles Schwab Twitter page") [Visit Schwab on Facebook](https://www.facebook.com/CharlesSchwab "Charles Schwab Facebook Page") [Visit Schwab on LinkedIn](https://www.linkedin.com/company/charles-schwab "Charles Schwab LinkedIn Page")
- Accounts
- [Brokerage](https://www.schwab.com/brokerage)
- [401(k) Rollover](https://www.schwab.com/ira/rollover-ira)
- [Individual Retirement Accounts (IRAs)](https://www.schwab.com/ira)
- [Schwab Bank Checking](https://www.schwab.com/checking)
- [Small Business Retirement](https://www.schwab.com/small-business-retirement-plans)
- [See More Accounts](https://www.schwab.com/open-an-account)
- Investment Products
- [Stocks](https://www.schwab.com/stocks)
- [Mutual Funds](https://www.schwab.com/mutual-funds)
- [Exchange Traded Funds (ETFs)](https://www.schwab.com/etfs)
- [Annuities](https://www.schwab.com/annuities)
- [Bonds](https://www.schwab.com/fixed-income)
- [See More Investment Products](https://www.schwab.com/investment)
- Trading
- [Trading Platforms](https://www.schwab.com/trading/thinkorswim)
- [Execution Quality](https://www.schwab.com/execution-quality)
- [Options](https://www.schwab.com/options)
- [Futures](https://www.schwab.com/futures)
- Research & Tools
- [Retirement Calculator](https://www.schwab.com/retirement-planning-tools/retirement-calculator)
- [Roth vs. Traditional IRA Calculator](https://www.schwab.com/ira/understand-iras/ira-calculators/roth-vs-trad)
- [Research Tools](https://www.schwab.com/research)
- [Mobile Apps](https://www.schwab.com/mobile)
- Learn
- [Insights & Education](https://www.schwab.com/learn/)
- [Trading](https://www.schwab.com/learn/trading)
- [Market Commentary](https://www.schwab.com/learn/market-commentary)
- [Planning & Retirement](https://www.schwab.com/learn/planning)
- [Podcasts](https://www.schwab.com/learn/podcasts)
- [Schwab Network](https://www.schwab.com/schwab-network)
- About Schwab
- [Why Schwab](https://www.schwab.com/why-schwab)
- [Compare Us](https://www.schwab.com/compare-us)
- [Satisfaction Guarantee](https://www.schwab.com/satisfaction-guarantee)
- [Forms & Applications](https://www.schwab.com/forms-and-applications)
- [Pricing](https://www.schwab.com/pricing)
- [Notify us of a Death](https://www.schwab.com/life-events/losing-a-loved-one)
- [SchwabSafe](https://www.schwab.com/schwabsafe)
- [Privacy](https://www.schwab.com/legal/privacy-overview)
- [Additional Schwab Sites](https://www.schwab.com/other-sites)
- [Site Map](https://www.schwab.com/site-map)
- [Business Continuity](https://www.schwab.com/legal/continuity)
- [Financial Statement](https://www.schwab.com/legal/financials)
- [Accessibility Help](https://www.schwab.com/legal/accessibility-help)
- [Contact Us](https://www.schwab.com/contact-us)
- [About Schwab](https://www.aboutschwab.com/)
- [Careers](https://www.schwabjobs.com/)
- [Investment Professionals' Compensation](https://www.schwab.com/legal/compensation-advice/investment-professionals-compensation)
- [Important Notices](https://www.schwab.com/legal/important-notices)
- [Account Protection](https://www.schwab.com/legal/account-protection)
- [SIPC®](https://www.schwab.com/legal/sipc-account-protection)
- [FDIC Insurance](https://www.schwab.com/legal/fdic-insurance)
- [FINRA's Broker Check](https://brokercheck.finra.org/)
- [Bank Client Complaints](https://www.schwab.com/legal/consumer-complaint-notice)
- [Client Relationship Summaries](https://www.schwab.com/transparency)
(1124-0VG4)
 | |||||||||
| Readable Markdown | While there are many ways to develop a financial plan—do it yourself, use a robo-advisor, work with a financial planner, or a combination thereof—Schwab has identified eight critical components every plan should include, regardless of the method used to create it. So, what does a good financial plan look like?
## 1\. Financial goals
You can't make a financial plan until you know what you want to accomplish with your money—so whether you're creating it yourself or working with a professional, your plan should start with a list of your goals, both big and small, and the time horizons to accomplish them. Doing so can help you organize each objective by how soon you'll need the money:
- **Short-term goals** are those you hope to achieve in the next one to two years, such as paying off debt or building an emergency fund.
- **Medium-term goals** are those you hope to achieve in the next three to 10 years, such as a down payment on a home or starting your own business.
- **Long-term goals** are those that are 10 or more years away, including saving for college and, of course, retirement.
For each goal, specify a dollar figure and a target date. "The more specific your goals, the easier it is to measure your progress toward them," said Rob Williams, managing director of financial planning at the Schwab Center for Financial Research.
A host of [online tools](https://www.schwab.com/financial-planning/tools) can help you run the numbers, weigh competing priorities, and determine the best course of action for you. Also, if you have multiple goals to work toward, a robo-advisor, or automated investing platform, can help you weigh the importance of each goal, ranking them by needs, wants, and wishes.
### Any time is a good time to establish a financial plan.
Ideally, you start investing for financial goals early in life, but any time is a good time to check in on your current financial situation and assess how you're doing. Are you still on track? Do you have other goals you hadn't previously considered? Having a financial plan helps you assess where you are today and where you want to go next.
## 2\. Net worth statement
Knowing your net worth today can serve as a baseline for framing your financial goals and setting a target for your net worth at some point in the future, like in retirement. To determine your net worth, make a list of all your assets (bank and investment accounts, real estate, valuable personal property) and another one of all your debt (credit cards, mortgages, or student loans). Your assets minus your liabilities equals your net worth.
"Don't be discouraged if your liabilities outweigh your assets," Williams said. "That's not uncommon when you're just starting out—especially if you have a mortgage and student loans."
## 3\. Budget and cash flow plan
Your budget is really where the rubber meets the road, planning-wise. It can help you determine where your money is going each month and where you can cut back to meet your goals.
A [budget calculator](https://www.schwabmoneywise.com/public/moneywise/tools_resources/monthly_budget_planner) can help ensure you don't overlook irregular but important expenses, such as car repairs, out-of-pocket health care costs, and real estate taxes. As you're compiling your list, separate your expenses into two buckets: must-have items, such as groceries and rent, and nice-to-haves, such as eating out and gym memberships.
When considering how your goals fit into your budget, you may want to pressure-test it using "what if" scenarios: What if you want or need to retire earlier? What if you downsized your mortgage? Some robo-advisors offer tools that allow you to adjust certain assumptions to see how they could affect your savings strategy.
## 4\. Debt management plan
Debt is sometimes treated like a four-letter word, but not all debt is bad debt. A mortgage, for example, can help build equity—and boost your credit score in the process. High-interest consumer debt like credit cards, on the other hand, can weigh heavily on your credit score. Plus, every dollar you pay in finance charges and interest is one you can't put toward other goals.
If you have high-interest debt, make sure you create a plan to help you pay it off as quickly as possible. If you're not sure where to start, a financial advisor can help you prioritize, then together you can determine how much of your budget should go toward your debt each month.
## 5\. Retirement plan
An old guideline says you'll need approximately 80% of your present income in retirement. However, this assumes that retiring will free you from any work-related expenses, that you've paid off your mortgage, that any children will be financially independent, and you'll likely fall into a lower tax bracket.
It's also important to keep in mind that Medicare doesn't cover everything, and health care expenses that Medicare doesn't cover—such as long-term care—can add up quickly. You also might spend more on other things in retirement, such as travel, dining out, gifts, or financial support to a relative or friend.
Plugging different scenarios into a [tool](https://www.schwab.com/financial-planning/tools) can help you figure out what you may need in retirement.
### Don't count on the 80% rule.
If you're saving 20% – 30% of your pre-retirement income, then the 80% income-replacement rule is a good place to start. Otherwise, it's safer to aim at covering 100% of your pre-retirement income, *minus whatever you're saving for retirement*. As with any general rule, there are plenty of exceptions. So be sure to sit down and fine-tune your retirement budget as the time draws near. This should be your top priority because you can borrow for most other goals but not for retirement.
## 6\. Emergency fund
When something unexpected happens—say you lose your job or get hit with an unexpected medical bill—an emergency fund can help you avoid tapping your long-term savings to make ends meet.
It's generally a good idea to save enough to cover at least three months'—ideally six months'—worth of essential living expenses (for example, groceries, housing, transportation, and utilities). Save this money in a checking or savings account so you can access it in a hurry should the need arise.
## 7\. Insurance coverage
Insurance is an important part of protecting your financial downside—but try to ensure you're not overpaying for coverage you don't need and make sure to cover all your bases:
- **Health insurance**: Without it, even routine care can cost a pretty penny, while a serious injury or hospital stay could set you back tens of thousands of dollars. As you get older, you may want to consider [long-term care insurance](https://www.schwab.com/insurance-basics/long-term-care) as well.
- **Disability insurance**: This coverage protects you and your family in case you're unable to work. Employer-provided disability insurance typically replaces about 60% of your salary.
- **Auto and homeowners'/renters' insurance**: If you own a car or home—or rent and can't afford to replace possessions out of pocket—make sure you're adequately protected.
- **Life insurance**: This is generally a good idea for those with dependents. Work with an insurance agent to understand what type of—and how much—coverage makes the most sense for you.
## 8\. Estate plan
At a minimum, most people want a will in place, which states your final wishes with regards to your assets, dependents, and who you want to administer your estate. You should also keep the beneficiaries of your insurance policies and retirement accounts up to date. Also consider establishing powers of attorney for financial and health care decisions, in case you become incapacitated.
For help [getting started](https://www.schwab.com/public/schwab/investing/retirement_and_planning/estate_planning/estate_planning_checklist) or tackling more complex estate-planning tasks, consider working with an estate attorney or a qualified financial planner. | |||||||||
| ML Classification | ||||||||||
| ML Categories |
Raw JSON{
"/Finance": 998,
"/Finance/Financial_Planning_and_Management": 949,
"/Finance/Financial_Planning_and_Management/Retirement_and_Pension": 638
} | |||||||||
| ML Page Types |
Raw JSON{
"/Article": 987,
"/Article/How_to": 435
} | |||||||||
| ML Intent Types |
Raw JSON{
"Informational": 994
} | |||||||||
| Content Metadata | ||||||||||
| Language | en | |||||||||
| Author | null | |||||||||
| Publish Time | not set | |||||||||
| Original Publish Time | 2020-12-04 00:38:24 (5 years ago) | |||||||||
| Republished | No | |||||||||
| Word Count (Total) | 2,067 | |||||||||
| Word Count (Content) | 1,261 | |||||||||
| Links | ||||||||||
| External Links | 12 | |||||||||
| Internal Links | 103 | |||||||||
| Technical SEO | ||||||||||
| Meta Nofollow | No | |||||||||
| Meta Noarchive | No | |||||||||
| JS Rendered | No | |||||||||
| Redirect Target | null | |||||||||
| Performance | ||||||||||
| Download Time (ms) | 192 | |||||||||
| TTFB (ms) | 187 | |||||||||
| Download Size (bytes) | 46,589 | |||||||||
| Shard | 185 (laksa) | |||||||||
| Root Hash | 12386545145768976185 | |||||||||
| Unparsed URL | com,schwab!www,/financial-planning-collection/8-components-of-good-financial-plan s443 | |||||||||