Do you have a financial plan? How to start planning a financially happy future in 4 ways right now.
Do you have a financial plan? Do you know what a financial plan is? Would you like a financial plan?
Knowing where you would like to go and how to use your money to get there, i.e. a personal financial plan will significantly increase your chances of getting there and certainly a lot quicker than without one. Write down what you want. Where are you right now? What’s the gap and what options do you have to bridge the gap. Finally what actions are you going to take first, second and so on?
“If you don’t know where you are going,
you’ll end up someplace else.”
― Yogi Berra
What do you mean by a financial plan?
In short, this means a plan of how to manage and grow your financial assets vs your liabilities to achieve your short, medium and long terms goals.
It’s your road map to help you understand where you are now, where you want to get to, and the gap between the two. With this information, you can work out what changes you might need to undertake to get to your destination. Without a financial plan, you might well be trying to get somewhere in the dark no idea whether to turn left or right.
Would you try and go on a long journey without some sort of map? I doubt it. You would likely ask people who have been to your destination before, look for directions, get a map, figure out how long it might take and what you might need to take with you. Stopping now and again to make sure you are still going in the right direction, for refreshments and or to check if you still want to go there.
Why is a financial plan important?
Well if you don’t have one, where are you going to end up?
Without a plan, you are at significant risk of wandering from one place to the next with little to show for it or idea how to get to where you want to go.
How many times have you gone out with or are meeting up with friends, and the first questions is “right what’s the plan? When and where are we going to meet? What are we going to do when we get there, who else will we encounter, and where do we hope to end up.
Yes, of course, some serendipitous nights out are good when crazy things happen with no plan, but are you really saying that that will work for your finances and life?
Much better to have an idea of the things you would like to do. When, where and with whom and then work towards that than leave it all to chance.
What does a typical (bad) finance plan look like?
Stage 1 nothing is going to happen
There is no point planning as everything is ok and or going to be ok in the future, I’m sure. I am going to get paid more and more, and when I do, I will save more, probably. It is unlikely anything will go wrong, and if it does, I will just find another job. If things breakdown, I will use my credit or take out a loan to pay for it. Savings are for losers, and I like living to the max (of my credit limit)
Stage 2 something might happen, but I should do nothing about it
Well maybe things might change for the worse, but it’s unlikely to happen to me. Even if they did, I can’t do anything about it, so I should just live for today. You cant take it with you, besides I shoes are assets.
Stage 3 maybe there’s something I should do, but there is nothing I can do
Ok so I probably should save more, but you try and save anything with all my expenses. I am just living a typical 4-bed house, two holidays abroad, two cars, private school maxed out credit cards normal lifestyle like everyone else. There is nothing can do about my finances even if I wanted to.
Stage 4 maybe there was something I could have done but its too late now.
Yep, I should have saved more and taken more interest in my pension, whatever that is, and budgeted/lived within my means, but that is easier said than done. It’s too late now anyway, and I will just have to keep working forever before I can retire broke.
4 ways to start developing a financial plan
So, to prevent the above potential chaos lets start with a few basic financial planning ideas
- Start with a Written Plan. Get a pen and paper and write down all the things you would like to achieve in 1, 5, 10 years and the big one in your lifetime. Having a clear written plan for your goals can keep you from going off in the wrong direction. Have a go a figuring out what each goal might cost in terms of time and money to reach it.
- Review where you are right now in terms of your net worth, income vs spending, saving and budgeting. Are these under control or all over the place? Do you even know? Do you have any debt, is it being managed or left to get worse? What’s your plan for the debt? How are you continuing to build your financial knowledge?
- What could you do to reach your goals and or build your wealth sooner? Earn more, spend less? Could you save more and invest more or start doing this? Could you automate any of these things to take the decision making and temptation not to do it away?
- What could you do right now to set you on the right track? Write a plan, automate your savings, work out how much is enough? Work on a side hustle to earn more money.
Three potential ways to get help with your financial plan.
- Have a go at it yourself – some useful book links here.
- Work with a financial coach to help you think through your ideas
- Find a financial advisor and get them to help you design a plan for you.
Start now get perfect later
Sitting down with a pen and paper will be a great start. Don’t worry about it being perfect or unsure of exact figures. Don’t let perfect be the enemy of a good enough plan, or even worse you not doing it at all. Have a go and keep iterating it as you learn more. Start now; get perfect later.
Do you have a financial plan or tips for how to develop one? Please add your thoughts and ideas below.
As a financial coach, I can help you to think about how to manage your money for a stress-free life and what your options for budgeting, saving and investing might be.
Through this education and guidance process, you will be able to make informed choices for yourself and start taking action towards your Financially Happy life now before it becomes even more painful and expensive.
I won’t be recommending specific products or trying to sell any. If you need specific debt or product advice, then a financial advisor might be your best call.
Contact me here for a free chat about what options you might have for making money work for you.