Unless you are planning to win the lottery, the best way to a sound financial plan is through sound money management. In general money management strategies depend on such factors as age, and risk tolerance, financial status and your retirement goals to help in the development of a personal plan. Here are some basic pointers that will help you to develop your own money management strategy.

You need to factor in your age as a major component in your plan. Your age dictates the overall investing strategy you will employ in your money management plan. The rule of thumb formula for age factoring is to spit your portfolio mix such that the maximum percent of non stock investments is equal to your age. For example if you are twenty years old, you would have a portfolio with 80% stocks and 20% interest bearing securities such as bonds. If however you are 60 years old, you would have a maximum of 40% of your portfolio in stocks and the other 60% in bonds. This money management strategy helps to reduce risk as you get closer to depending on the money in your plan.

Your long term and short term cash needs are also a major factor in your money management plan. You have to factor in your day to day expenses such as food, rent or mortgage payments, and utilities along with annual payments such as insurance, taxes and the like. These factors will help you decide your monthly and yearly cash needs. You also need to project five and ten years into the future and see if there are any expenses that will show up such as a new house, car, or home remodel. These events play a significant role in your money management plan.

Finally you need to consider at which age you plan to retire and you need to estimate what you think your annual salary and increases will be over time. This helps to establish your overall budget and how you can allocate your money within your plan. Once you have all of these factors in hand you can either manage your money yourself or try to find a money manager to handle the investment portion of your plan.

Money managers take a percentage of your portfolio value to manage your money with the expectation that they can provide you with better overall performance than you can achieve on your own. My own personal experience is a bit mixed in this area. In some cases a money manager has helped me manage my money in a more efficient way, and in some cases I have out performed the money manager when you take into account their management fees.

Also, there are a number of personal finance software programs and dedicated websites that can help you to formulate your financial plan. They can also help you with investments, but if you are not experienced a dedicated money manager is the way to go.