The New Year is one of the best times to reflect on what you would like to do differently and improvements that you would like to make. It is natural to begin to think about finances as the cost associated with the holidays become apparent. There is a phenomenon with the New Year that gives one the feeling of a new beginning and having the drive for change. The difference between thinking and doing is all in an action plan.
Knowing where you are and what you want is the first step in the process of proper planning. The beginning of the year is perfect because most companies that you bank and invest with provide detailed statements. Whether you use a yellow pad, a spreadsheet or more sophisticated planning software importance is placed on compiling the asset values and debt into a visible format. The ultimate result will be a side-by-side balance sheet. In addition to the balance sheet includes a list of goals that you would like to accomplish. Make sure that
your goals are truly achievable with a few improvements and changes.
What are you trying to accomplish? Funding retirement, college, a new purchase or reducing your expenses to cover a change in employment involves finding the finances to make your goal a reality. If you are expecting a raise give yourself half and use the remainder to apply to your targets. Look at expenses thoroughly and identify what costs are still practical.
Do you pay for a gym that you never attend or a security system that you have not activated in more than a year? Are you overpaying for insurance or cable? Have you been hooked with a recurring charge on your credit card because you bought something that has auto re-order? The point of the exercise is to find wasted money and create a list of to do’s to research and make decisions.
With your goals, balance sheet and a list of costs that require research and decisions you are ready to create your action plan. Creating a written plan is a necessity. Creating a list of to do’s are the blueprint that you design to identify free cash flow and new habits that will make your goals a reality. Include quarterly progress updates and a celebration at the end for all that is accomplished. I have seen many plans that
include annual and long-term goals so that the ultimate desire is never out of sight.
Writing a strategic plan provides a means of direction and accountability. Reaching financial success is like a marathon not a sprint and should be approached annually for success. Your financial advisor can play a key role in helping you with the plan and process. If they do not, seek one who does.