How to do Financial Planning – 5 Golden Rules (2022)

Do you remember the time when you used to get pocket money or grants from elder people? Remember how you spent all that money on things you wanted? We all do. Whenever I got my hands on money, I used it to buy the toys I want. Without giving it a thought. Life was so simple then. We had no need to worry about Financial Planning.

Is it the same now? No. As we grow up, we realize the worth of money and the responsibility on our shoulders. Growing up, we start thinking a little bit about our expenses and wants. We start thinking about the money we earned, working hard. But is that enough? Do we really think and act enough?

financial planning

The process of planning the usage of money, i.e., for spending, saving, investing, etc., is called Financial Planning. Planning finances can be divided in two ways –

  1. Personal Financial Planning
  2. Institutional/Organizational Financial Planning

As Capitalist Cabin is all about Personal Finance, in this article, I will talk about personal financial planning. But why am I always talking about Personal Finance, Financial Independence, and Financial Planning? Because I know what the real worth of money is! I know what can be achieved by managing money profoundly. And I know that you want to become rich, have your dreams converted to reality. Therefore, follow along and lay down your first step –

Below mentioned are the 5 Golden rules that will help you manage your finance, save & grow your money.

Beginner-friendly plan to Financial Planning 

1. First Rule to Financial Planning- Manage your Money

The first thing you need to understand is – Managing money is not Rocket Science. Anyone can do it. Even a high schooler. The only thing you need to have is a little dedication. 

 The first step towards managing money is to Decide that you want to save! Even if you do not invest, at least save. Suppose you have an emergency and you are short on money. Does it feel proud to ask other people for money? No.

But wait, I can swipe my credit card! Simple!

 Yes, you can. In fact, I ask you to swipe it a couple of times more. And Bingo! You’ll be trapped in credit debt before you know it. Mind you – A credit card can prove to be the most expensive debt.

Therefore, at least have some savings. The moment you decide to save and actually start saving is the moment you climb the first ladder of Financial Planning and Financial Independence. But how much should you save?

 Well, the upper limit is none! However, the minimum you should save is at least 10-15% of your income. I have talked about the 50/30/20 Rule in many articles. According to that rule, –

  1. You should use 50% of your income on daily necessities like rent, food, utilities, etc.
  2. The next 30% go on your wants and a bit of luxury.
  3. For the last 20%, you should start saving at least 20% of your income every month. In parallel – Learn about investing and invest the money you save. And soon enough, that invested money will start bringing more money to you.

If you know nothing about Personal Finance and Investing – Refer to this article.

2. Look at your Expenses Wisely


Let’s say you are set on the path of saving money, and I hope you do. Say you’re saving 10% of your income every month, if not more. Now the question is – What are you doing with the rest 90%? Is all of that portion being spent on necessities and requirements?

Monitoring your expenses is as much important as saving. If you do not know where your money is being spent or if your hand is free enough to spend all the money, then it might be a danger sign. Because let’s be honest, you can’t save money progressively if you don’t have a break on your expenses.

Spending on shelter, food, utilities, clothes is fine. You must accomplish your basic needs and a few of the luxuries with your money. Meanwhile, you must also avoid having wasteful expenses. Get hold of your unnecessary urges. Because you can have everything in the world and your wants will still be unsatisfied. Learn to satisfy yourself in less! And less is not bad, in fact, decluttering helps you grow mentally, and you are more likely to find true happiness.

  1. Restrict yourself from going out or dining out, or shopping every now and then.
  2. This helps you track your expense, control it, and save more.
  3. The less you spend, the more you save and the better is your personal financial planning!

3. Balance Sheet to track money!

track money

You have understood the importance of saving, spending less, and tracking expenses. Now, it might become a little overwhelming dealing with everything together.

 The idea here is to maintain a Balance Sheet that helps you keep track of your assets and liabilities. Now, what is an Asset and a Liability?

Asset – Anything that puts money in your hands or whose value grows over time is called an asset, while

Liability – Anything that takes money from you or reduces in value is called a liability. For example – car, loan, credit debt, etc.      

Once you maintain the record of all your assets and liabilities, you can have your net worth right before your eyes. A balance sheet can also provide you with a future plan idea of how to achieve your financial goals.

 Besides leaving this complicated stuff, you can simply note all your savings and expenses. Nowadays, several applications are available that can monitor your spending throughout and tell you the expense ratios and more!

You can download and use any Money Manager application and see how it helps you cut down wasteful expenses.

4. Build an Investment Portfolio


You save, you track expenses, and you have a balance sheet to have a written record of your money usage. In short, you have taken care of money-saving habits. But today, saving is not enough. You need to grow your money, and to grow, you need to invest.

Remember – ‘You won’t ever get rich by saving. To grow, you need to invest.’ 

 Now, what is an investment portfolio? It is, basically, a collection of all the assets and allocations where you’ve invested your money. Be it growth stocks, dividend stocks, mutual funds, PPFs, anything. Building a portfolio involves distributing your money over different investments to diversify your reach.

Creating your first investment portfolio will be a great milestone itself. You having an investment portfolio makes you among the top 10% of the world’s population. Now, my personal recommendation for you is –

Invest for the long-term. Think ten to twenty, thirty years ahead. Long-term investing is the real game. Your couple of thousands of dollars have the potential to become millions! This is the power of Compounding, and I’m sure you must have heard the quote by Einstein –

The eighth wonder of the world in Compounding!”

 Hence –

  1. Build an investment portfolio.
  2. Invest for long-term, i.e., at least 10-15 years.
  3. Repurpose your portfolio according to market changes and adaptations.

5. Decide the use of Surplus Money

surplus money

Now, it’s not like you will always have the same income and same expense. Many times, you may get a raise, a bonus, your side business may take off. In terms of expenses, you may have fewer expenses sometimes.

 The point is – What do you plan to do with that extra earned or extra saved money? Will you spend it, or will you invest it? Or will you simply leave it in your account or cash?

You see, not having a plan may cause overspending or bringing the value of money down. So, it is always better to invest in the surplus! You can buy more stocks; you can buy one-time mutual funds, and many more. Basically, what I’m trying to say is – Invest all the money you can have your hands on!

One more strategy that I can tell you is that collect that surplus money and keep it for a chance! A chance to invest in the market when it falls. Yes, you read that right! One fact about the market is – It will always go positive in the long run. Hence, when it falls, you get shares of great companies at a low price. Through this, you gaining smart profit becomes inevitable.

It’s alright if you don’t want to invest, you can also start a side hustle or a small business from that money. Just refrain from taking that surplus as granted and spending it all wastefully.

BONUS POINT – Future Planning – Retirement


Every financial planning is incomplete unless you talk about retirement planning. It makes sense too. You are investing long term for what? For your life after retirement, of course! While you earn, save, and invest all your life. What you’re doing is –

  1. Enjoying your present and cultivating a successful mindset
  2. And, you are securing your future and possibly your future generations too.

Imagine the thought of living your life to the fullest, having enough money to do anything after retirement, and still leaving behind a fortune for your future generation. In short, you are the king! You lived your life like a king!

Also, growing old makes you weak, and it is inevitable. You need to spend on medications, you can’t hustle, and you can’t have a job. The plan you put to work years before will work now! Your investments will take of you. 

 I can go on and on about retirement and its planning. But let’s keep it short; you must have understood by now.

Conclusion: Financial Planning


I have had a lot to talk about in this article. I explained to you all the basic aspects of financial planning. Hence, you can now do everything fine. All you need to do now is – Save, Plan, Invest. Invest thinking about your retirement too. Well, you know why!
And hey! You can retire early too! You can have Financial Independence early, and you can retire early. Read all about this FIRE Movement here.

Do you still feel confused? Don’t worry; we got you! Comment Below, And we will reply to you within 24 hours or Just Hit us with a DM on Instagram @capitalistcabin. We would love to help you. Till then – We would love you to read our Personal Finance blogs!



1 thought on “How to do Financial Planning – 5 Golden Rules (2022)”

  1. Pingback: 5 Best Passive Income Ideas – Earn Money Online - Capitalist Cabin

Leave a Comment

Your email address will not be published. Required fields are marked *