Do you have a financial plan?
Let’s continue the money conversation (but not around the dinner table, remember!). If you look at people who are financially successful, most of them have been making good financial decisions all their lives. The sooner you start making good financial decisions for yourself, the sooner you will know where you want to go. If you have a plan to get there, you are much more likely to attain it. Time is the one thing nobody can give us. We all have the same amount. If you were to start in your 20’s, you wouldn’t have to save as much. But, the longer you wait, the more you will have to save to achieve your financial goals. The good news is that it is never too late. You can take action today that your future self will thank you for!
Here are eight reasons to create and maintain your financial plan:
Define your financial goals by starting with the end in mind
Interestingly, most people spend more time planning their next holiday than planning their financial goals. Your first step is to identify what your financial goals actually are. For example, are you interested in property investment or regular getaways/holidays? Is it further education, or your children’s education that you strive for, or do you want to pay off your house in five years, instead of the traditional 20 years? Plus there is the good old retirement to plan for. Imagine saving 40% of your income? How? you may ask. Well, it takes planning but it can be done.
Your goals vs. your timeline
Please do not mortgage your life to the hilt and then spend the rest of your life paying it off. After taking a look at your goals you can identify what you need to save.
What types of investments to make? Are your goals realistic? Are they attainable? You may find that you have more goals than financial resources. It’s usually not that the goal is not attainable; it’s that the timeline is not attainable. Many goals can take years to accomplish. Create the mindset ‘anything is possible’.
Is your spending in line with your goals?
Once you know where you’re headed and how long it will take to get there you can look at your cash flow to find out if you’re spending more money than you’re taking in. If you have negative cash flow, you cannot expect to meet your goals.
The exercise of analyzing expenses often surprises people. They say, ‘I had no idea I was spending that much on those lattes or eating lunch out every day!’.
To identify patterns in your financial flow, you need to know where your money is going, day by day. I like to recommend that you set up a 30 day tracking system. Tracking what you spend, on what and when. Knowing this information makes a difference. You can use this template – download it HERE.
Money mistakes you may be making
Aside from spending too much, when you analyse not just your spending but your overall financial picture, you will find that mistakes are exposed. For example, if look at your credit card debt, you might see that you are paying 18% interest to a bank on that credit card debt. The question to ask is, are you making anywhere near 18% on your investments? Is compounding interest working against you?
Progress on your goals
Once the plan is in place, you can set up measurable goals such as a monthly contribution to saving a specific amount of money. Aim to increase your saving regularly. Then you can see in a year from now and ask yourself ‘Did I do what I said I was going to do?’
It is important to know that you must not compromise on your savings because of your debt. Without at least an Emergency Fund, you will not be able to escape the cycle of debt. I teach in my online training courses what I like to call ‘saving your way out of debt’. It is both psychologically powerful and it will get the results you want. Why? Because you get to feel better.
Maximize your money
A financial coach, like myself, would look at your financial picture with you and reveal opportunities for you to make more or save more (maybe we’ll garner in some ‘how to’ ideas you hadn’t thought of). I offer a holistic coaching approach tailor-made to suit you. While you don’t necessarily need to hire a financial coach to create a financial plan for you, a lot of people do so to save themselves the time and energy of sifting through a lot of advice, some of it potentially contradictory. Bottom line is, you want to improve your financial results so that you can achieve your goals.
Confidence with your money
The good news is that you can expect to feel very confident about managing your money, your savings, and your investments when you have a clear plan! The plan guides and supports you to live well now and to also achieve your long term financial goals. I find that when I have finished creating financial plans with clients they are inspired and generally feel more at ease with their finances. They also report a new level of peace of mind. Clients report: “I don’t feel like my life is out of control anymore, but I’m in control”.
A financial plan is the first check point for building wealth.
Clients working with their financial plan end up having more money saved and are more likely to pay their credit card bills in full each month. Notably, those with a plan who are in the lower income bracket are more likely to save and pay their credit card bill than people who make much more, but don’t have a plan, which will result in losses happening. There is possibly nothing worse than wondering, at the end of each month, “where has my money gone?”
OVER TO YOU:
Have you been tempted to give up on your financial plan? What is the biggest challenge to maintain your financial focus? I’d love to hear from you in the comments below!
Blessings in abundance