Personal financial planning

stuck in success

How do you define personal success? I get this question a lot, and interestingly enough, the answer often includes the concept of financial freedom. When I dig a little deeper, financial freedom translates into a variety of dreams.

Why is financial freedom so attractive? Perhaps because many people limit their ability to turn dreams into reality due to their financial situation.

We all know people who are in jobs that no longer bring pleasure, but who stay because they need to maintain a certain income level. How many business owners tread water in stagnant markets because they are afraid to take steps to change the business until profits reach a certain level? If only they were financially free…

At what point is it acceptable to take risks? What is enough? Do what you love and the money will follow, so is that wise advice? While the reasons why people avoid change are multifaceted, finances are often cited as the reason, so let’s explore the issue.

Strategic financial planning

If your financial situation is preventing you from moving forward, what would you do if you were in a better financial position? Assuming you can answer this question with a few clearly defined goals (and if you can’t that comes first), financial planning can help you take steps toward addressing concerns and demystifying the unknown by systematically identifying risks and evaluating alternatives.

Let’s take a look at each step of the financial planning process:

Sets goals

Collect all relevant data

Identifying obstacles to achieving goals

Set a time frame for achieving goals

Develop methods and procedures to help achieve those goals

Re-examining objectives periodically and adjusting them as circumstances change

Sets goals

Although many people deal with financial issues as they arise such as a child entering college, the death of a family member, or the time has come to sell the business, financial planning requires you to anticipate the future by setting goals. Without goals you cannot get very far in the financial planning process, and without a financial plan you may be limited in achieving your goals.

Collect relevant data

Comprehensive financial planning requires that a number of critical areas be assessed at the same time. Looking at any area in isolation will only tell a partial story, and the best alternatives to any one issue are often missed. Standard areas are tax planning, investment management, cash management, budgeting, retirement planning, estate planning, and insurance. The analysis is adjusted to specific needs and may also include education funding, charitable giving and managing trusts. The picture formed by looking at all the parts together is the starting point for creating optimal financial strategies and making realistic, well-considered decisions.

Identify obstacles to achieving goals

People’s attitudes towards money vary greatly. Our attitudes towards money are often influenced by the values ​​formed over time by our families and to some extent, by the amount of money we have. Our subconscious attitudes play a huge role in achieving financial success.

One of the essential tenants of 67 Financial and Strategic Planning is that we are in control of our attitudes. We can move on or continue doing what we’ve always done (often ignoring the whole situation). While this sounds easy enough, it is common to see people with goals that they do nothing to achieve. If you struggle in this area, a financial coach can help you explore situations that may be holding you back.

Set a time frame for achieving goals

Effective goal setting requires setting target dates for each goal. Financial forecasting, described below, can help develop realistic time frames.

Develop methods and procedures to achieve goals

There are a variety of methods and tools that are helpful in helping you reach your goal. Some of the important concepts used in financial planning are: forecasting, budgeting, portfolio diversification, market timing, and dollar cost average

Forecasting – Forecasts of income and expenses are an essential part of any financial plan. For an individual whose salary and living expenses may be. Business forecasting includes projections of income and expenses. If you are thinking of starting a new business or project, before you start looking for financial support, you should be sure that the idea will generate enough profits to make the project viable. Financial forecasts are an important part of planning and control.

Budget – Where do you spend your money? If you can’t answer this question very accurately, go ahead. When you know how much and where you spend the day, then you can begin to see opportunities for improvement. Regular and reasonable budget preparation along with an ongoing process of comparing actual results to plan can highlight areas where costs require attention or a particular product or service line is problematic. Creating regular Budget Reviews allows you to take corrective action before it turns into a crisis.

Portfolio diversification – “Don’t put all your eggs in one basket.” When it comes to investing, if you put your money into a variety of investments with different return potentials and different levels of risk, you may be able to offset potential losses in one type of investment with potential gains in another. As a result, diversification often reduces exposure to risk overall.

If you’re running a business, revenue diversification can be achieved through a range of products and services, or by working with companies in a variety of industries. A combination of different revenue streams can offset risk and keep you afloat when one industry hits hard times, or one product becomes unpopular.

Market Timing – No one knows for sure which direction tomorrow’s markets will head. Instead of trying to guess, Dollar Cost Average can help you invest regular amounts at regular intervals, which often results in a lower average cost. For the “dollar cost averaging” strategy to work, you must be willing to continue investing during potentially nerve-wracking periods in declining markets.

Recheck targets periodically

Conditions change regularly over time. It is important to stay on top of any assumptions that may have changed since your last financial plan review.

If your definition of success includes the concept of financial freedom, don’t let your current financial situation turn you into a deer in the headlights! Set your goals, check your positions, do your homework, and move forward with a well-thought-out plan. It’s your choice.

Leave a Comment