A Two-Year Financial Plan for Beginners

Updated: October 11, 2023

When you reach that point in your life where you realize the need to be in control of your finances, how do you start and make the change?

For most people, it’s as simple as spending less and growing their savings. For others, getting out of debt becomes the focus. While for some, this means finally learning how to invest.

If you’re just starting and still trying to overcome the hurdles of money management, then this post is your concrete, no-nonsense, two-year financial plan.

Below are the goals that you need to achieve, preferably in exact order, before you can move towards more sophisticated financial goals.

Follow these concrete steps, and I guarantee that you’ll be financially ahead of your peers within two years or less.

Month 1: Study your cashflow

Your first step is to know how much you are earning and spending in a month.

This is all about tracking your expenses and discovering how much money you actually receive after all the taxes and deductions.

Remember that cash flow is, and will always be, the foundation of all financial plans.

Starting Month 2 onwards: Create a budget

Based on what you computed last month, create a budget for the succeeding month.

What we hope to achieve here is to ensure that you are not spending more than what you are earning.

From here forward, make it a habit to study your cash flow, adjust your budget, and live within your means every single month.

Starting Month 3 onwards: Pay yourself first

It’s now time to work on building your savings. As always, the easiest way to do this is to pay yourself first; that is to immediately take away a portion of your income as savings and spend only what’s left after.

A good start is to save 10% of your income, which means if you receive P20,000 every payday, then you should promptly set aside P2,000 each time for your savings. But work your way up to the recommended 30% savings rate.


Starting Month 4 onwards: Build a plan to settle your debts

If you have credit card debts, personal loans, and other short-term debts, then this is when you’ll focus on how to eliminate them. The most effective way, which I’ve personally used, is the Debt Snowball Method – learn it and apply it to your finances.

Furthermore, while it’s tempting to pay off your debts using the cash that you’re paying yourself first, I discourage it because you need a cash buffer just in case a financial emergency happens during this time.

In short, build your savings while paying off your debts.

Month 5: Secure your home stash

At this point, if you’re paying yourself at least 10% of your income every month, you would now have an equivalent of 30% of your income saved. From our example above, you would have P6,000 already.

Take this cash and stash it in your home. This is your emergency money during holidays and long weekends when ATMs are offline and other similar circumstances when you can’t withdraw from the bank.

Month 6: Open a savings account for your emergency fund

While it’s perfectly okay to use your salary or business account as your personal savings account, I recommend opening a separate account so it’s easier to manage and monitor. Besides, it doesn’t cost a cent to open a second savings account anyway.

Your emergency fund should at least be six months’ worth of your average monthly expenses. So if you spend P18,000 a month, then your basic emergency fund should at least be P108,000 – and yes, it’s that high because you don’t want to run out of cash when a money emergency happens.

Having financial security for at least six months allows you to look for a good-paying job in case you lose your current one.

And it’s normally huge enough to cover several minor cash concerns happening all at once or one major financial emergency falling on your lap.

At this point, three things should have become a habit for you:

  • Creating and following a monthly budget;
  • Paying yourself first and, having the discipline to save every month, and
  • Eliminating all your short-term debts

Starting Month 7 onwards: Take care of your health

If all things run smoothly in the first six months, you will experience a lull at this point when it comes to your finances. This is a good thing because you can now start to focus on other things.

The first on your list is your health because medical expenses are usually the ones that break a budget.

This is the time for you to get health insurance (if you don’t have one yet), establish an exercise routine, and start making better food choices.

Month 8: Protect your loved ones

Life is uncertain, and accidents happen when you least expect it – that’s why it’s best to protect your family from a financial disaster by acquiring term-life insurance at this point – especially for breadwinners.

Shop around for policies, play around with your budget, and find a way to afford proper, basic coverage.

When choosing a company, make convenience and customer service your primary consideration, and choose an agent with whom you’ll be willing to have a long-term professional relationship.


Starting Month 9 onwards: Increase your income.

People who reach this point will often become complacent in their financial habits. I couldn’t blame them because if you’ve successfully done all the previous steps, then I’m sure that you’re now financially stable – your debts are going down while your savings are going up.

As such, it’s now recommended that you go back to your cash flow and explore new income opportunities to further accelerate the growth of your wealth. You can try freelancing, start a home-based business, or even join a network marketing company.

It’s time to explore other ways to make money, not only to create additional sources of income but, more importantly, to acquire the mindset and skills that will eventually help you quit the rat race within the next few years.

Starting Month 18 onwards: Learn about and start investing

If you’ve done everything right, your six months’ worth of emergency fund would have been complete by now, your short-term debts are already paid off, and you now have multiple sources of income.

The next item on your list is to start learning about investments – particularly paper assets like bonds, pooled funds, and the stock market – because this is where the money that you’re paying yourself first will go next after your emergency fund is complete.

Why study investments only at this point? In my opinion, it’s better not to get distracted and be overloaded with financial information during the beginning – when your goal is simply to develop good money habits.

Focus and discipline are needed to lay your financial foundation, and bombarding yourself with various knowledge about investments will tempt you to go off-track from this financial plan.

Furthermore, I believe that the key to wealth is being able to live below your means and investing regularly for a long time. This won’t be possible if you haven’t mastered the most basic money management skills.

Month 24: Create a new financial plan

Finally, you’ve completed your 2-year financial plan, and it’s now time to create a new one. This time, take into consideration your short-term, medium-term, and long-term goals and start planning accordingly.

Hopefully, you’ve acquired the necessary knowledge to develop a new financial plan that can now consider all your life goals, which includes a retirement plan.

If you’ve successfully reached this point, be sure to congratulate yourself on a job well done because you are certainly on your way to financial freedom.

What to do next: Click here to start your financial journey with IMG Wealth Academy
Photo credit: pinkpurse and remysharp


  1. Good advice. I agree its really important to have step by step financial plan. We build emergency fund first and have ourselves protected for a peace of mind. With sir Fitz advise, last april we got our term insurance policy 4200 pesos only per year for a 1 million coverage.
    We are so grateful bec. we came to realize the importance of financial planning early and these lessons na natutunan namin ituturo din namin sa aming mga anak paglaki nila. A good advise for them once they graduate college and have their first job, we could guide them to start investing bec as we grow tumataas ang ating responsibilities.

  2. Hi Sir, thanks for publishing this kind of content. Definitely a must to us, especially to young professional like me.

  3. Hi Alicia I took our ( me and my husband) term insurance sa Philamlife. But as I understand that offer is exclusively for IMG Wealth Academy members only. I joined IMG because I want to learn financial literacy and doing great. And sa lahat ng nabasa ko na blogs, books and napakinggan ko sa You tube local and international financial advisors emphasized importance of term insurance and health insurance. They call it the roots of your money tree or the solid financial foundation . Kaya I am grateful we started applying the step-by step guide sir Firz is mentioning in this blog. Its a more peace of mind having emergency funds and protection before investing…towards financial freedom.. and we enjoy the journey.
    To God be the glory.. above all we commit our giving to God before paying ourselves.

  4. Nice and simple. I like it.

    Normally I advise people to “pay themselves first,” but tracking expenses a couple of months before saving is a new insight and it’s a REALLY good way to start. You get a good idea about where you’re wasting money, and then you realize how you can easily set aside at least 10% of every paycheck.

    I’m really cautious about money so I don’t keep any more than what I need for the week (and everything stays in the ATM unless necessary), but I should try that “home stash” thing. My emergency fund is in my ATM, so it’d be really bad if all of them were down or if a few thousand is needed ASAP.

  5. Thank you big time for this article, there are many folks that come to mind who would benefit greatly if they could read these words. Many of the people I have in mind really live a minimalist life do to poor choices. Some do not even have electric power so could not read this on a PC, if they owned one. My thought, with the authors permission, print out many copies of this article. What a great but simple gift to those that may benefit immensely! So how about it, may I print out copies to give to others who might otherwise not be able to read this information? Thank you in advance for any response.

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