How to Create a Wealth Plan

A personal wealth plan is the foundation for building wealth but many people delay in making one.

Are you wondering how to create a wealth plan? The steps are clarifying what you want, updating net worth to see if you’re currently on track to create the wealth you want, and updating your existing habits to reach your goals if you’re not on track.

Why 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 plan will stem from what you want in your life; only you can decide that.

While many people still see retirement as the destination, we decided to make financial independence our goal. Financial independence happens when you’re living off investments with enough money for you to live how you want without fear about running out of money. 

Many people think a wealth plan is primarily about being employed and investing in stocks and bonds as much as possible. It’s so much bigger than that, however. For one thing, there are many successful investors who never invest in stocks. Instead, they invest in real estate or small business.

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

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 investing won’t get to financial independence by the time you want. In this case, you may need to invest in something else.

Or you may find that simple passive stock investing will likely take you right to where you want to be. Create your wealth plan by following along in my post so you’ll know in a few minutes. 

How to Create a Wealth Plan

Grab a journal and write about the following life and money elements to lay the foundation for your wealth plan.

1. How Do You Want to Spend Your Time?

The reason we work, save, and invest is to build wealth so we can have the lifestyle we want. This means that wealth building begins by defining the lifestyle you want.

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 all 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 or the Austin Symphony
  • Enjoying a delicious healthy meal
  • Kayaking

While I loved our global adventures before we had kids, I really enjoy the above things now about as much as anything. Notice that they 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 just noticed through this same process I am writing about here, however, that the things I love doing 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?

How much does it cost?

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


Click here to get my  Ultimate RISE Wealth Plan packed with wealth building solutions and strategies light years beyond passive index investing.

2. Where Do You Want to Live?

Deciding where you want to live will have a huge impact on the amount of wealth you’ll want to accumulate. 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 easier.

If you already know you want to live in New York City like one of my clients vs my hometown of highly affordable Tupelo, Mississippi, you’re going to want to plan to have a lot more money accumulated or flowing in monthly.

3. How Much Do You Want to Spend?

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 by jotting down how much you spend now.

Adjust Your Spending Plan

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

Adjust that number 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 place later in life.

Mainstream financial planning suggests cutting your pre-retirement income to estimate how much income you need to retire. I don’t know about you, but I don’t really want to plan for spending less so we didn’t do this.

And again, there’s no rule of thumb that works for everyone. There’s only what want you want in your life and how much it costs.

Consider Inflation in Retirement Planning

The 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.

Either way, inflation significantly eats away at the value of your money over a decade or two so don’t forget to consider this when thinking about your cost of living.

4. Is Net Worth the Same as Investments?

How much is your net worth now? I use net worth here instead of investment savings because using net worth to assess your current situation allows you to brainstorm the big picture of where your wealth is.

For example, if you have a $1,500,000 home with no mortgage and $150,000 in an investment account, you’d be missing where your wealth is by considering your investment accounts instead of your total net worth. In this case, significant wealth is tied up in your home; this may not be the best place for your money.

Click here to read my post Does Net Worth Include Your Home with how to value your home in your net worth.

5. When Do You Want to Retire?

Assuming you are working, ponder when you want to stop working. How many years away do you want to stop working? Do you want to work at least part time after retirement, as we did?

6. How Much Will Your Savings Be Worth in the Future?

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

  • How much your investment account is now
  • The age you want to retire
  • Your current savings (Don’t worry, I don’t see your data!)
  • The return you think you can 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?

Please note that I am not suggesting your investment return will be 5%.

There are many variables here. Most notably 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.

Also, your investment asset allocation model is a strong component of investment returns.

This is a huge and important topic for all stock investors that is being overlooked by many.

Click here to read my post entitled How to Know if Stocks Will Go Up where I explain this more.

7. How Long Will Your Money Last?

Next, see how long the amount of money you will have at retirement age (from the Retire Certain retirement calculator above) will last.

Vanguard has an amazing retirement calculator for this. (I have no affiliation with Vanguard other than a 30 plus year adoration for them given their low cost investment products.)

In the retirement calculator I added this data:

35 Years, but you will enter the number of years you choose for your savings to last based on when you retire

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 setting 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 run out of 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. I wrote about retirement withdrawals strategies here. 

Also, I probably wouldn’t have growth stocks after retiring. Instead, I’d have high income investments so I could live off investment income as much as possible.

I explain this more in my post How Much Money Do You Need to Live Off Investments?

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 looking at what you want and how you can have it.

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

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.

Perhaps you can trim lifestyle expenses; while this is always worthwhile, increasing income has much more upside.

Living Off Investments Instead of Living On Investments

I like to switch mainstream retirement planning from withdrawing money in retirement to buying or creating income producing assets.

This allows you to live off investments instead of depleting your wealth through monthly withdrawals. I write more about living off investments here. 

Here is a video on Living Off Investments.

The Vanguard retirement calculator model is based mostly on using retirement withdrawals. This works for a lot of people, but it is not the only way to fund retirement life. Many proactive wealth builders with retirement savings that were hit by the two bear markets in the 2000s are taking steps to build wealth alternatively. This is out of necessity. As someone who is doing this, I’ll admit that it’s also pretty fun to create wealth with alternative strategies.

By focusing on income investing pure investment income can cover a lot of your living expenses. Some examples of income investments are:

  • Real estate rental properties
  • REITs
  • MLPs
  • High dividend stocks
  • Covered calls
  • Lending in real estate and small business
  • Online business

Click here to read my post How Much Do I Need to Invest to Make $10,000 a month with more information on income investments.

Have an entrepreneurial spirit? You can also create income from small online businesses while building a marketable asset.

Click here to read my post with 115 businesses to start later in life. 

Align Your Wealth Plan with What You Like

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 earlier.

For example, since I love reading about investing strategies, and the fact that we have built alternative income streams over the past 15 years, starting a wealth building blog was ideal for me. I can work and write by my pool and feel happy and fulfilled.

In fact, your ideas about how to remedy your potential shortfall become a part of your wealth plan.

Nest is the last step.

9. Take Steps to Remedy Your Wealth Plan

Spend some time researching alternative ways to build wealth and create income streams. Write down the wealth building strategies that appeal to you.

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

This is exactly what I did in 2003 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).

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 sell covered calls, mostly on dividend stocks as opportunities present themselves, in addition to investing a tactical asset allocation portfolio. Click here to read my post on writing covered calls.  

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, you have taken the steps to create a wealth plan. This can truly be a life changing document that will lead you to have funds for a life you enjoy.

Get started now with my  Ultimate RISE Wealth Plan with the wealth building solutions and strategies that allowed us to create financial independence. 


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Vanguard Retirement Calculator

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