Financial Plan

My own personal financial plan is amazingly simple and is based on the system discussed by Lars Kroijer in his book Investing Demystified (I think it is an amazing book and well worth a read).

Essentially, at the end of every month, I split any excess cash I have into two types of financial vehicle; SAVINGS and INVESTMENTS (you can view a more granular version of how I allocate my income here).


The SAVINGS vehicle contains cash and is categorised by being ‘safe’. The capital is not really at any risk and this is balanced by the rate of return not being particularly high. They are usually (but not always) fairly liquid, meaning I can access the cash quickly and easily if I need it but there is no capital growth.

Examples of SAVINGS vehicles include savings accounts, regular saver accounts and government bonds.


The INVESTMENTS vehicle is a more riskier and volatile place to put money but this is balanced by the chance of greater rewards. Capital is at risk and it is more difficult to access once invested.

Examples of INVESTMENTS vehicles include stocks and shares, corporate bonds, loans, property and peer-to-peer lending.


I allocate 50% of my excess cash into SAVINGS and the other 50% into INVESTMENTS.

This percentage split is simply my preference at this moment in time based on my own attitude towards risk. I feel comfortable that this is adequately balanced and I sleep well at night. If I felt that I wanted to introduce more risk/reward into my financial plan I could change this to a 40/60% or 30/70%. The flexibility is there if I need it.


Over the course of time, one would expect (or hope) that the INVESTMENTS would outperform the SAVINGS. Or similarly (in a worst-case scenario), one could make a very bad INVESTMENT and lose some or all of their capital.

The outcome is that the split between SAVINGS and INVESTMENTS is no longer a 50/50 split.

Therefore, at least once per year, I perform what is called rebalancing.

This task involves moving cash between the SAVINGS and INVESTMENT vehicles to maintain the 50/50 split. It can also be performed by changing the funds allocated to each vehicle for a month or two until they are balanced.


And that’s all there is to it.

The difficulty, perhaps, is finding suitable products to use.

You can check out the SAVINGS products I use myself here.

And the INVESTMENTS products that I use are here.