How to Create a Wealth Plan

A personal wealth plan lays the foundation for building wealth but many investors aren’t sure of the steps.

Are you wondering how to create a wealth plan? The steps are clarifying your desired lifestyle, updating net worth to see if you’re currently on track to build the wealth you need to live how you want, and planning needed changes to income, spending, and investing patterns to reach your financial goals if you’re not on track.


couple creating a wealth planWhy Create a Personal Wealth Plan?

A personal wealth plan is the first step in reaching financial independence because financial independence is different for everyone.

Financial independence is truly about as personal as you can get. Your own wealth plan will stem from what you want in your life; only you can decide that.

While many people still see having enough money to retire as the ultimate financial destination, we decided to make financial independence our goal. Financial independence happens when you’re living off investments plus any other income streams with enough money for you to live how you want without fear of running out of money. 

Many people think a wealth plan is only about investing in stocks and bonds as much as possible over the years, but it’s so much bigger than that.

For one thing, wealth means something different to everyone. Therefore, a wealth plan is as much about your life as your money.

For another thing, there are many successful investors who create wealth from small business or real estate, with or without investing in stocks.

A wealth plan is a rough guide for you to create financial independence based on what you want to do and have. By creating a wealth plan, you may change what you thought you wanted.

Or you may see that stock and bond investing won’t get you to financial independence by the time you want. In this case, you may need to change your investing strategy or invest more in income generating assets for additional investment income.

Or you may find that simple passive stock investing will likely take you right to where you want to be.

In this post, you’ll be able to take the steps to create an initial wealth plan. First, we’ll focus on stocks as the primary investment, since almost everyone has a stock portfolio. Then you’ll see some options besides stocks you may want to consider if you find you need to increase your net worth before retirement after creating your own wealth plan.


How to Create a Wealth Plan

Grab a notebook or journal and write about the following life and money elements which will lay the foundation for creating a personal wealth plan.

1. Define How Want to Spend Your Time

We often lose sight of the fact that we work, save, and invest to build wealth so we can have the lifestyle we want. This means that wealth building begins by defining the lifestyle you want so you can create a plan to have that desired lifestyle.

Someone who wants to travel the world first class in retirement will need a completely different wealth plan than someone who is happy to take occasional road trips to great camping spots.

While you may not know what you want to do in ten or twenty years, you know yourself well enough to have a good idea of what you enjoy.

For example, when I think about what I enjoy doing, I know I have really enjoyed the following things most of my adult life:

  • Reading spiritual, philosophy, and investing books while sitting outdoors on a beautiful day
  • Walking with my Labrador in the woods
  • Watching a good movie with my family
  • Attending music concerts, whether it was Paul McCartney at ACL or the Austin Symphony at their free summer series
  • Enjoying a delicious healthy meal
  • Kayaking

While I loved our global adventures before we had children, now I really enjoy the above leisure activities about as much as anything. Notice that the activities above are all free or cost little. (Ok, seeing Paul McCartney with my sons was a splurge.)

Don’t get me wrong. I like nice things; I live in a large pretty home on over an acre of land just 20 minutes from downtown Austin.

I have noticed through this same process I am writing about here, however, that the things I love doing now don’t cost much.

The somewhat embarrassing truth is that if I were on a yacht, I would find the best place to curl up and read, while enjoying that as much as anything.

What do you enjoy that you do now?

What do you want to do now or when you retire?

How much does it cost? (Either is okay!)

Defining what you really like to do is the only way to link your desired lifestyle to your money so you can put your money to work to produce the results you want.

Don’t limit your dreams, just notice what you really like to do and want to do more of as you get older.

My financial coaching clients often find it hard to think about what they really want after a lifetime of feeling like they have to settle for what they can afford.

Many people have more than enough money to do what they want but they’ve never really defined it.

More often, however, people need to hustle a bit to get what they want.

That’s okay, too.

2. Decide Where You Want to Live

Where you live will have a big impact on the income you need to generate to cover your expenses.

You don’t have to know the exact place, but if you know your city vs country preference, you’ll be able to estimate your lifestyle costs much easier.

If you already know you want to live in New York City like one of my financial coaching clients vs my hometown of highly affordable Tupelo, Mississippi, for example, you’ll want to get more income from your investments.

You may already know you want to live near grown children or grandchildren. Or, like me, you may know you enjoy the city, but you have no desire to live downtown, which tends to be expensive.

Deciding on the area you most likely want to live is a huge contributing factor in creating a wealth plan because it affects so many expenses. Remember, your investment income will be a direct factor of the amount of wealth you need to cover those expenses so it’s all intertwined.

3. Decide How Much You Want to Spend

Very few people think about how much they want to spend. Instead, they think about how they can make do.

You can decide what you want and create a wealth plan that aspires to it. Or you can see what you think you’ll be able to afford and plan from that more limited perspective but the aspiration approach is more expansive.

Based on what you learned above about what you like to do and where you like to live, estimate how much it will cost for you to live how you want.

Start with how much you spend now and follow the next two steps.

Adjust Your Spending Plan

Next, adjust your current spending up if you are unhappy with your current lifestyle and know you want to enjoy activities that cost more money when you have reached financial independence.

Adjust your current spending down if you want to lower expenses. An example may be to move out of an expensive city and dwell in a smaller home in a cheaper area after you retire.

Mainstream financial planning suggests cutting your expenses before retirement income by 20% or more before estimating your retirement income goal. I don’t know about you, but I don’t really want to plan for spending less. On this midlife realization, we designed our own wealth plan around creating income streams and delaying retirement withdrawals until later in life.

And again, there’s no rule of thumb that works for everyone. There’s only what you want in your life, how much it costs and what you want to do to have your desired lifestyle from a wealth building or income perspective.

Consider Inflation in Retirement Planning

The financial nerd in me forces me to remind you to remember that inflation causes prices to rise about 3% on average based on history. More recently, inflation has averaged around 2% a year. It is imperative, therefore, to consider inflation in retirement planning which, again, is the ultimate goal for most wealth plans.

Inflation significantly eats away at the value of your money over time so you’ll want to consider it when creating your wealth plan with the following step.

Enter your desired spending into this inflation calculator to see how much your expenses will be in the future. You must enter the inflation rate you expect.

Even though the inflation rate has been around 2% in recent years, this inflation history table shows inflation as 13.58% in 1980! Many financial advisors now suggest using 4% or higher expected inflation for retirement planning.

Note that most financial calculators factor inflation into their equations.

4. Calculate Your Net Worth

You’ll want to calculate your net worth next if you don’t already know how much your net worth is now.

Many financial coaches and planners focus only on retirement savings when creating a wealth plan. I use net worth here instead of retirement savings since net worth includes your home and any other alternative assets, such as small business or real estate. This will allow you to assess your current situation and the big picture of where your wealth is.

For example, if you have a $1,500,000 home with no mortgage and $250,000 in an investment account, you’d be missing where your wealth is by considering only your investment accounts instead of your total net worth.

This approach leads investors to easily see if they may have too much of their net worth tied up in their home, which is common for older investors after years of building wealth mostly from appreciating home values. In the example above, significant net worth is in the home, maybe too much.

How much of your net worth should be in your home?  There is no exact formula for the home to net worth percentage; this really depends on your total net worth and your retirement income plan.

Your home may not be the best place for your money, however. This realization leads many people to downsize before retirement to free up investment capital.

How much net worth you need to retire will depend on the amount of net worth you have in income generating assets. Even though we love our homes, the reality is that a home will not generate retirement income unless a portion is being rented on AirBnB or elsewhere.

When creating a wealth plan, the process of calculating net worth removes emotions from the equation by showing us the math. Math doesn’t lie even though we want it to sometimes.


5. Estimate When You Want to Retire

Assuming you are working, spend some time thinking about when you want to retire.

Also consider if you will likely want to work at least part time after you retire. If you have a fear of retirement boredom, working at least a few hours a week is both a stimulating and financially rewarding solution.

There are endless options now to work from home with online business and remote work. Many retirees decide to start a consulting business or start an online business for extra income in retirement.

While retirement may be years away, you know your personality enough to know if you enjoy the process of wealth building or income generation. I know that I enjoy the mental stimulation of creating income streams as well as investing.


6. How Much Will Your Savings Be Worth?

Now you’re ready to use the Retire Certain Early Retirement Calculator and enter:

  • How much your investment account is now
  • The age you want to retire
  • Your current savings
  • The return you realistically expect to get from your investments

Click “Calc” to see how much money you will have at your desired retirement age. (See the retirement calculator image below.)

For example, if you are 50, want to retire at 55, have $750,000 invested now, save another $1,000 a month, and expect a 5% annual return, your investments would grow to $1,095,528 by the time you are 55.

early retirement calculator results

How Much Investment Return Can You Expect?

This is the million dollar question! Unfortunately, no one knows how much investment return you’ll make, which is probably the biggest flaw in retirement planning.

Please note that I am not suggesting your investment return will be 5%. There are so many variables here.

One of the biggest is how the stock market is valued in comparison to history at the time you invest if stocks are your primary investment, like most individuals. Market valuations can help predict whether the stock market will go up or down.

Bull and bear markets have a big impact on investment returns, particularly over time frames of less than twenty years or so.

Also, your investment asset allocation model between stocks and defensive investments will determine your investment returns for a traditional portfolio.

All you can do is estimate future investment returns. Recent valuations in the stock market and the economy, however, are often overlooked but valuable clues for how much investment return you can reasonably expect over the next decade or so.

After you input the data, you have an estimate of how much your retirement savings will be at the time you want to retire. Again, this is only a rough estimate since no one can predict investment returns.

7. How Long Will Your Money Last?

Next, see how long your estimated future retirement savings will last.

Vanguard has an amazing retirement calculator for this.

In the Vanguard retirement calculator I added the following data:

35 Years, but you will enter the number of years you choose for your savings to last based on your desired retirement age

I rounded up and entered a savings balance of $1,100,000 from the Retire Certain calculator result.

Annual spending of $48,000 a year, but you will enter the cost of living you came up with from the earlier steps after considering other income sources, such as social security

I’ll leave the standard portfolio asset allocation of 50% stocks, 30% bonds, and 20% cash.

I clicked Run Simulation and saw there is a 79% chance I could withdraw $4,000 a month for 35 years based on this investment portfolio model.

79% is not reliable enough for me since I don’t want a 21% chance I will outlive my money when I am 85. (You probably don’t either:)

Note that this example is based on withdrawing 4.4% of the investment portfolio in retirement. This is high based on standard retirement withdrawal rates since the 4% rule is more common for withdrawals as I wrote about retirement withdrawals strategies. 

Also, I might not have 50% in growth stocks after retiring. Instead, I’d probably have higher income investments so I could live off investment income as much as possible as explained more in my post How Much Money Do You Need to Live Off Investments?

You can see how, from this process, using calculators to help you to invest with math and logic steers you away from investing with emotions. something to which we can all easily fall prey.


8. Brainstorm How to Improve Your Wealth Plan

As you can see, there are a lot of estimates that go into creating a wealth plan, but that’s okay. Estimates are so much better than never estimating how much your investments might grow based on your current investment strategy.

If you have seen that what you are doing now has you solidly on track to have funds for life based on a basic stock and bond investing plan, congratulate yourself.

However, if you have seen that what you are doing now looks like it won’t have you on track for financial independence, realize that there are many options to change the track you’re on nowadays.

Creating a wealth plan will push you to improve your financial and investing habits by asking questions such as:

  • Can I save and invest more every month?
  • Would downsizing work?
  • Can I cut living expenses?
  • Do I want to start a side hustle in retirement, or now so I can save and invest more?
  • Could I strategically lower my taxes?
  • Can I increase investment returns?
  • Am I doing the best I can with my investing?
  • Do I spend too much on wealth management fees?
  • Can I systematize my savings?
  • Can I systematize my investing?
  • Can I increase my job income?

While trimming unneeded expenses is always wise, creating income streams or increasing investment income has much more upside as you’ll see next.

The Vanguard retirement calculator model is based mostly on using traditional retirement withdrawals. This works for a lot of people. There are many new ways to retire,  however, so don’t be discouraged if it doesn’t look like the traditional method of only stock investing will give you the money you need to retire comfortably when you want.

Living Off Investments Instead of Living On Investments

One approach that can be used if you don’t have enough money to sustain your desired lifestyle from retirement withdrawals is to create a slightly alternative retirement plan with income generating assets or side hustles later in life. This can help you live off investments or skill based assets to supplement or delay monthly retirement withdrawals.

The reality is that retirement savings withdrawals deplete wealth. Therefore, keeping withdrawals at the minimal percentage and delayed as long as possible is always smart for anyone who isn’t 200% certain they have enough retirement savings to last a lifetime.

Should you decide to boost income, deciding how much investment capital you want to use in that endeavor will help determine the best income stream to start before retirement from among the many choices.

Below is my video on Living Off Investments that explains this approach more.


The goal is that by focusing on investment income vs retirement withdrawals you’ll be able to cover some or all of your living expenses outside of retirement withdrawals.

Some popular examples of income investments are:

While many may not see starting an online business as an investment, it is the lowest capital investment with the highest ROI that I see nowadays. This is because it can be started entirely with time instead of investment capital.


Align Your Wealth Plan with What You Like

As you can see, there are many ways to fulfill your wealth plan. You’ll want to choose a strategy that aligns with the lifestyle you want as defined in Step 1.

For example, since I love reading about investing strategies. This with the fact that my husband and I have built alternative income streams over the past 15 years made starting an online business on wealth and financial coaching ideal for me.

If you love analyzing stocks, maybe your retirement income shortfall will be dividend stocks, or even selling covered calls on dividend stocks.

On the other hand, if you’re handy around the house, real estate rental properties may be your answer.

The list of ways to supplement your existing wealth plan now or later is endless, with everything from starting a consulting business to simply investing for a better return, and everything in between.


9. Improve Your Wealth Plan

Spend some time researching better ways to build wealth or create income streams.

Write down the wealth building strategies that appeal to you from a time, capital, and skill perspective.

Then write down the very first step toward implementation. Act on it within 24 hours.

This is exactly what I did about decades ago and it has been a successful adventure with many bumps along the way (and 2 recessions, bear markets, and early retirement for my husband Larry Gaines).

This led us to research buying local businesses but eventually buying rental real estate instead and also creating online businesses due to their low risk and high income and wealth building potential.

I also began selling covered calls, mostly on dividend stocks as opportunities present themselves, in addition to investing a tactical asset allocation portfolio.

In all, we have over 13 income streams now. I have written a ton about our income stream adventures here at Retire Certain so take a look around.

How to Create a Wealth Plan Summary

If you’re still with me, hopefully, you have taken the steps to create a wealth plan. This can truly be a life changing document that will motivate, empower and guide you to have funds for a life you enjoy.

My Ultimate RISE Wealth Plan has the best wealth building solutions and strategies that allowed us to create financial independence. 

Thanks for visiting my website. Please share this post on social media if you think others may benefit from this free financial education.

You’ll also enjoy these related posts:

Does Net Worth Include Your Home shows how to value your home in your net worth

How to Know if Stocks Will Go Up where I share a leading financial expert’s rules that anyone can use to help predict stock market direction

How Much Do I Need to Invest to Make $10,000? with more information on income investments.

Living Off Investments with strategies to live off your investments to delay or supplement retirement withdrawals

New Retirement Strategies


Vanguard Retirement Calculator

The information on this website is for education only and is not to be construed as personal financial advice.