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Saving and spending wisely is key to reaching your financial goals. In this lesson, you'll learn how to create a personal financial plan, track your progress, and build healthy money habits.

Catch-Up and Review

Here are a few recommended readings before getting started with this lesson.
Budgeting fundamentals:


Basic interest concept:

  • Understanding that money can grow over time


Delayed gratification:

  • Understanding long-term vs short-term reward thinking


Basic spreadsheet knowledge: (optional)

  • If you plan to use budgeting software
Discussion

SMART Goals

SMART goals help you stay on track by making your goals clear and easy to follow. They help you know exactly what you want to do and how to get there.

Check the applet below to see what SMART stands for and how each letter can help you set a savings goal.

Explore

Goal Sorting: SMART or Not?

Determine whether the goals are SMART or not. Remember, a SMART goal is Specific, Measurable, Achievable, Relevant, and Time-bound. Assess each goal and move it to the correct box!

Example

Get SMART!

Let's look at each of the goals that we determined were not SMART and rewrite them so that they are!

Eureka-moment.png

a Which of the following is a SMART version of this goal?
I want to save some money.
b Which of these is the best SMART version of this goal?
I'll buy a new phone sometime this year.
c What is a better SMART goal?
I will stop spending so much money.

Hint
a How much money do you want to save? Why will you increase your savings?
b How much does the phone cost? Can you set a specific deadline of when you want to make the purchase?
c How much less do you want to spend? Do you have a savings goal in mind?

Solution
a SMART goals are Specific, Measurable, Achievable, Relevant, and Time-bound. When we create a SMART goal for ourselves, we should consider things like:
  • How much do we want to save?
  • Do we have something specific we want to buy?
  • When do we want to have the savings goal met?
  • How will we achieve our goal?

With those questions in mind, we can see that the better version of this goal is option B — I will save a week for weeks to buy a skateboard.

b Let's think again about the questions that we asked ourselves in Part A. We know that we want to buy a phone, but we don't have a goal, a price, or a deadline. Option C is the SMARTest way to improve on our goal.
This goal could be improved even further by adding the cost of the phone, like the one given in option A.
c Wanting to stop overspending is a very smart goal but, unfortunately, it is not a SMART goal. It do not provide any specific information that can be measured or achieved. Option B sets a clear path towards reducing spending. Let's think about how we could make the other options into SMART goals.
Given Improved
I will delete all shopping apps. I will cancel my subscription-based apps so that I can save per month and have an extra after months for holiday shopping.
I will stop going to the mall. In order to buy a new pair of sneakers within the next months, I will stop going to the movies at the mall on Fridays where I spend around each time.
I won't buy anything this month. I will save my entire allowance this month so that I can buy concert tickets next month.
Discussion

Personal Financial Plan

A personal financial plan is a written plan that shows how you'll manage your money over time. It includes saving regularly, preparing for retirement, and deciding when and how to borrow money using things like loans and credit. Having a plan helps you make smart decisions about your money.

Personal-financial-plan.png
Discussion

Financial Record Keeping

To make a financial plan work, you can use financial record keeping. This involves keeping track of all your money decisions — like saving, spending, and borrowing — by writing them down or using an app or spreadsheet. This helps you stay on track with your plan and make adjustments as needed.

Financial-record-keeping.png
Discussion

Planning and Record Keeping

Effective planning and record-keeping require the right tools and methods. Let's explore some essential ones to help you get started.

Tools and Methods for Creating a Personal Financial Plan

Tools and Methods for Financial Record Keeping
Example

Jordan’s Graduation Goal

Jordan wants to save money for graduation week. He plans to go on a trip that will cost He earns every two weeks from his part-time job. He spends about per paycheck on entertainment and on snacks. He wants to save enough in months.

Teenager-register-fast-food.png

a Jordan starts tracking his spending using a weekly log. What is the main benefit of doing this?
b Put the steps of creating a personal financial plan in order, based on Jordan's situation.
c Which part of Jordan's plan is not SMART and needs to be improved?

Hint
a Think about how knowing where your money goes can help you make better decisions about saving.
b You can't create a plan without first knowing your goal and you can't adjust spending unless you know your habits.
c A SMART goal includes a plan for saving over time, not just an end goal.

Solution
a Let's consider each of the given options.
Option Logic Conclusion
It prevents him from spending money on anything fun. Tracking spending shows where money goes, but it doesn't stop spending on wants. Incorrect. Tracking helps adjust choices, not block them.
It helps him get more hours at work. Tracking spending doesn't affect how much he earns. Incorrect. This has nothing to do with budgeting.
It guarantees he will save Tracking helps control spending, but doesn't guarantee savings — he still has to make decisions. Incorrect. Tracking is helpful, but not a guarantee.
It shows exactly where his money is going so he can adjust his spending. By logging spending, Jordan can see patterns and decide where to cut back. Correct. This is the main benefit of a spending log.

The main benefit of tracking spending is to understand where money is being spent, which allows for better financial adjustments.

b Now we want to put the steps in order that Jordan needs to take for creating his personal financial plan.
We need to keep in mind that you can't really create a plan without first knowing your goal so the first step that he takes should be to set a goal. We know that his goal is to save for his graduation celebration trip.
  1. Set a specific savings goal

Next, you can't adjust your spending unless you know what you are spending your money on. Jordan should track his habits and then adjust his spending according to his goal.

  1. Set a specific savings goal
  2. Track current spending habits
  3. Adjust spending to meet the goal
c A SMART goal should be Specific, Measurable, Achievable, Relevant, and Time-bound. Let's think about the given pieces of Jordan's situation.
  • He wants to save
  • He spends on entertainment.
  • He earns every two weeks.
  • He hasn't clearly planned how much he will save per paycheck.

Of these, three of them are specific facts about the plan. He knows when his trip is and how much it costs. He knows what his income and expenses are. Also, based on his income, this trip is an achievable goal. What Jordan's plan lacks is clarity on how much he will save per paycheck, which makes it not fully SMART.

Example

Marissa's Monthly Spending Check-Up

Marissa earns a month from babysitting.

Girl-babysitting-dreaming-shopping.png

She has the following expenses:

  • for school lunches
  • on phone bill
  • on makeup and accessories
  • on savings
  • on streaming services
  • on going out with friends
a Which part of Marissa's budget shows she is already practicing financial planning?
b Match each tool to how Marissa might use it.
c Marissa wants to save more next month. What is the best first step she can take?

Hint
a Financial planning includes preparing for the future, not just paying for today.
b Think about what each tool helps you do.
c Before you change your habits, it's important to understand them.

Solution
a Financial planning means thinking ahead about how you use your money, not just spending as it comes in. One key part of financial planning is setting aside money specifically for savings before you start spending on other things. Let's consider the given options.
Option Reasoning Conclusion
She has a lot of wants in her spending. It shows spending habits, not planning. Incorrect, doesn't show financial planning.
She uses all her money each month. Marissa does not use all her money — she saves some. Incorrect, doesn't show financial planning.
She spends money on going out with friends. That's part of her wants, not part of a financial plan. Incorrect, doesn't show financial planning.
She has included a category for savings. Marissa already puts per month into savings. That shows she's not spending everything she earns. It also means she's prepared for future needs or goals. Correct, shows financial planning.
b To match each tools with the potential use Marissa might have, let's first consider what each tool does.
  • Spending tracker: A log where you write down everything you buy so you can see where your money is going
  • Budget worksheet: A simple table that helps you list your income and expenses. You can use it to plan where your money will go each week or month.
  • Savings goal chart: A visual tool (like a thermometer or progress bar) that shows how close you are to reaching a goal.
Now that we remember how each tool works, we can decide which use case they each have.

Why would she use all of these tools at the same time?

Marissa uses the spending tracker because seeing where her money is going helps her spot areas where she spends too much. Her budget worksheet helps her decide ahead of time how much money she wants to put toward needs, wants, and savings. This helps her prepare instead of react. The savings goal chart allows her to watch her goal being met which makes it easier to stick to her plan.

c When someone wants to save more money, they have two basic options.
  1. Earn more income
  2. Spend less money

However, before Marissa randomly cuts expenses or chooses a random savings amount, it's smart to first check where her money is going now. This is why the correct option is to Review her past spending and find areas to reduce. Let's think about why the other options do not work.

  • Set a random savings amount and hope it works: That's guessing, not planning.
  • Delete all streaming services immediately: This might help her save money, but it's extreme and not the best first step. Reviewing spending helps her make smart cuts, not just quick ones.
  • Ask her friends to lend her money: That doesn't solve the real issue of her spending habits.

If Marissa looks back over last month's spending, she will hopefully notice areas where it makes the most sense to her to make cuts.

Remember, you are the only person who can truly decide if something can be cut from your own budget.

Closure

When & How to Reevaluate Your Spending and Saving

When to Check In

  • At the end of every month
  • Anytime your income changes (like getting a raise or losing hours)
  • If you're not reaching your savings goal
  • When you have a new expense (like a phone bill or subscription)
  • Before big life events (graduation, moving out, buying something big)

How to Do It

  • Compare your budget to what you actually spent
    • Did you stick to your plan?
  • Look at your savings progress
    • Are you getting closer to your goal?
  • Check for spending habits you can adjust
    • Spending too much on snacks? Subscriptions you don’t use?
  • Update your SMART goals if your situation changes
  • Use a tracker, journal, or app to stay organized

Why It Matters

Reevaluating your plan helps you stay in control of your money and make smart choices, even when things change.

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