Personal financial planning: a model for getting organized

Many people associate financial planning with investing. But investing is one of the last steps. Before that comes knowing how much comes in, how much goes out, what is already committed and what you want the leftover money for.

This article proposes a step-by-step model for getting organized, based on the Central Bank of Brazil’s Financial Education Handbook (2026 edition). The figures are hypothetical. The model does not replace professional advice for your situation and does not recommend any product or institution.

Why get organized before investing

The OECD, through its International Network on Financial Education (INFE), defines financial literacy as the combination of awareness, knowledge, skills, attitudes and behaviors needed to make sound financial decisions and achieve financial well-being. The definition appears in the 2023 OECD/INFE international survey, which covered 39 countries and economies, Brazil among them, with data collected by the Central Bank.

The survey measures very concrete behaviors: making a plan to manage income and expenses, keeping track of spending, keeping bill money separate from everyday money, paying bills on time and setting long-term financial goals. According to the report, keeping track of money in the short term and holding long-term goals are behaviors that “could be improved” in many countries. The model below works on exactly these points.

Step 1: the monthly snapshot

The first step is knowing where you stand. The Central Bank suggests starting by recording everything you earn and spend over a period, usually a month. Split it into four groups:

• fixed income: income that varies little, such as salary, pension or rent received;
• variable income: commissions, extra jobs, private lessons;
• fixed expenses: rent, loan installments, monthly fees;
• variable expenses: those that change with consumption, such as electricity, water and food.

Two groups are often left out and throw off the month in which they appear. The Handbook mentions seasonal commitments (annual taxes, insurance, school enrollment fees) and commitments already made (upcoming installments, credit card bills). A practical way to handle seasonal ones is to divide the annual amount by 12 and treat it as a monthly expense.

Step 2: the budget in four steps

With the snapshot in hand, the Central Bank proposes a four-step cycle:

1. Planning: estimate income and expenses for the period, using previous months as a basis.
2. Recording: write down, preferably daily, all income and expenses, checking statements and bills.
3. Grouping: put spending together by type (housing, food, transportation, leisure) to see the weight of each group.
4. Evaluation: compare what was planned with what happened and decide on adjustments.

The core calculation is simple: income − expenses = savings. The result classifies the budget as in deficit (expenses greater than income), balanced (equal) or in surplus (expenses lower). According to the Handbook, the basic goal is to keep the budget in surplus.

The tool matters little. The Central Bank itself notes that anything from pen and paper to apps will do. What matters is consistency.

Step 3: map your debts

If the budget is in deficit or there are expensive debts, they come before any goal. The Handbook advises mapping each debt with its amount, term and interest rate, avoiding new debt while the situation is being reorganized and trying to swap high-interest debt for lower-interest debt, including through credit portability to another institution.

The reason is mathematical. Compound interest works against borrowers with the same force it works in favor of savers. High-interest debt tends to grow faster than most investments yield. The mechanism is explained in Compound interest: how it works in practice.

Step 4: goals with a name, an amount and a deadline

The Central Bank recommends “giving your money a name”: knowing when and on what you plan to use it. In practice, each goal should have three pieces of information:

• what it is (a trip, a down payment on a home, a course);
• how much it costs, as an estimate;
• when you need the money.

With an amount and a deadline, the monthly figure appears. A trip estimated at R$ 6,000 twelve months from now requires setting aside R$ 500 a month (6,000 ÷ 12), not counting returns. Over short periods, returns change the result little. Over long periods, they matter more, and so does inflation. That is why goals many years away call for simulations with interest and inflation-adjusted amounts; see Inflation: causes, measures and consequences.

A useful convention, used by the Handbook itself when discussing goals, is to separate short-, medium- and long-term goals. There is no official rule on where each range ends; what matters is that each goal has its own date.

Step 5: emergency fund, deadline and liquidity

Among the goals, one comes before the others: the emergency fund, money for the unexpected, such as loss of income, health problems or urgent repairs. The Central Bank’s Handbook highlights it as an important safeguard against falling into debt when something unexpected happens. How to size this fund is covered in Emergency fund: criteria for sizing it.

The deadline of each goal defines the liquidity needed, that is, how quickly and at what loss the money can come back to your account. The CVM (Brazil’s securities regulator), on its Investor Portal, sums up that choosing an investment involves return, risk and liquidity, and that for the emergency fund the priority is low risk and high liquidity. Distant goals can tolerate longer terms and, depending on each person’s profile, more volatility.

The concept is explained in detail in Financial liquidity: what it means in practice. The relationship between risk and time horizon appears in How to interpret investment risk and return, and the main investment classes in Fixed income and equities: risks and characteristics and Tesouro Direto: bonds, rates and risks.

Step 6: pay yourself first

The Handbook is direct: waiting until the end of the month to save is not very effective, because the money gets used up on unplanned expenses and little is left. The recommendation is to set aside the savings portion as soon as income arrives, before paying other expenses, and, if possible, to authorize the bank to make automatic transfers or investments on fixed dates.

This only works if the amount set aside fits the budget. That is why this step comes after the snapshot and the evaluation: the “pay yourself first” amount is the planned surplus, not an arbitrary number.

Step 7: review and involve the family

A budget is not done once. The monthly evaluation shows whether spending followed the plan. A larger review, at least once a year or whenever income or family circumstances change, adjusts goals and deadlines. The Handbook draws attention to a drop in income without a drop in expenses as a gateway to excessive debt.

When money is shared, the Central Bank recommends deciding the budget together and having common projects. According to the Handbook, seeking limits with everyone tends to work better than imposing them.

A complete example, with illustrative numbers

Consider a hypothetical person with an average net income of R$ 6,000 a month (R$ 5,500 in salary and about R$ 500 from extra work).

Group	Items	Monthly amount
Fixed expenses	housing R$ 1,800, transportation R$ 400, health plan R$ 350, course R$ 300, internet and phone R$ 150	R$ 3,000
Variable expenses	food R$ 1,100, electricity, water and gas R$ 250, leisure R$ 400, other R$ 350	R$ 2,100
Seasonal provisions	taxes and enrollment fees of R$ 2,400 a year ÷ 12	R$ 200
Total expenses		R$ 5,300
Surplus	R$ 6,000 − R$ 5,300	R$ 700

The budget is in surplus: R$ 700 is left over, about 11.7% of income. Now the goals come in. This person wants to build an emergency fund and take the R$ 6,000 trip in 12 months, which would require R$ 500 a month for the trip alone.

The two do not fit together within the desired timeframe. There are three paths, and the choice is theirs:

• change the deadline: R$ 400 for the emergency fund and R$ 300 for the trip. The trip now takes 20 months (6,000 ÷ 300);
• change the amount: a R$ 3,600 trip in 12 months fits within the same R$ 300 a month (3,600 ÷ 12);
• change the budget: in the evaluation, cutting R$ 150 from leisure and other raises the surplus to R$ 850. With R$ 350 for the emergency fund and R$ 500 for the trip, the 12-month deadline holds.

The example does not say which path is right. It shows that planning turns a vague wish into explicit choices between amount, deadline and spending today.

What this model does not do

A generic model does not know your income, your debts, your family or your risk tolerance. It does not decide what to invest in, does not calculate taxes and does not deal with retirement or estate planning. For decisions of that kind, it is worth seeking information from official sources and, where appropriate, advice from a licensed professional, checking their registration with the relevant bodies.

The channel video that accompanies this article, in Portuguese, deals with the behavioral side of the subject. According to its description, Márcio Manzi discusses why so many people struggle to plan for the future and balance the present, drawing on almost 30 years in the financial market. Márcio is Director of Social Security at POUPREV, a supplementary pension entity, a subject that also comes up in the conversation.

Key takeaways

• Start with the snapshot: fixed, variable and seasonal income and expenses, plus commitments already made.
• Use the cycle of planning, recording, grouping and evaluation, and aim for a budget in surplus.
• Expensive debts come before investment goals.
• Give each goal a name, an amount and a deadline. The deadline defines liquidity and the monthly amount.
• Set your savings aside when income arrives and review the plan whenever your life changes.