The Good Life
Building a Firm Foundation
Why, you may ask, do you need a financial plan at all? The answer is quite simple. There is only one sure way to achieve financial security: you must identify your goals, then adopt strategies to meet them.
True, if you’re like most people you seem to get by from year to year without a financial plan. You collect your salary, pay your bills, and keep yourself and your family housed, clothed and fed. But what happens if a financial crisis occurs, you may find yourself lacking the funds of insurance to cover mounting bills.
If you talk to people who are most comfortable in their lives – the people who have achieved financial security - you will find they took an organised approach to financial management early on. Some did the work themselves. Others hired competent advisers to help them. But, somehow, they made sure the job was done.
The bottom line to financial security: you can get what you want only with an organised financial plan and the discipline to make it work. And the best time to start planning is now.
The Importance of Organisation
Why do most people fail to achieve lifetime financial security? Lack of financial goals is one reason. Ignorance of the tax law and poor investment strategies are others. But the chief culprit is lack of organisation. Organisation is critical to sound financial planning.
Organising your finances provides and exceptional measure of security. It protects you from surprises, and it also places your finances – both current and future – under a ‘master control’ programme that gives you a system of checks and balances. The system provides security when the unexpected occurs. Ant it even allows you to indulge yourself occasionally.
Then too, an organised plan can save you and your family from financial disaster. It helps you establish a pattern of spending, saving and investing that ensures financial stability now and growth for the future. Above all though, an organised plan builds financial independence. And financial independence equals financial peace of mind.
My Approach
The wrong way to begin the financial planning process is by making investments. It is far more valuable first to develop a financial profile of yourself, then to match appropriate strategies to your specific needs.
My approach to financial planning is built on answers to three deceptively simple questions:
• What do you have?
• What do your want?
• How do you get what you want?
Answer these questions in as much details as possible, and you’ll create a flexible, workable and successful financial plan. Repeat the exercise in a year or two or when your circumstances change, and you’ll update your plan.
The job is not as easy as it sounds. To answer these questions in a way that is truly helpful to you requires considerable effort. But the results are worth it. In the next series of articles, I will provide you with the information you need to answer these key questions. First, though, let’s look a little more closely at the question themselves.
What Do You Have?
Step one is the financial planning process is to determine what you have. And that involves developing your personal financial profile. Your profile is a composition of you stage of life, lifestyle, tolerance for risk, responsibilities and financial resources.
I will provide you with the tools you need to construct your personal profile in a separate article. For example, you’ll learn that stage of life is the sum of your age and circumstances – married, single, supporting children, not supporting children, and so on.
And you will see that life-style is about choices – your career choice, say, and how you choose to spend and save.
You will also learn about how to evaluate your responsibilities- elderly parents, perhaps, or other relatives who require financial assistance – and weigh your tolerance for risk. Can you afford to take risks with your money? And, if you can, what risks are you willing to take?
Your financial resources are simply what you have in Cedis and Pesewas or Dollars and Cents. How much do you have in your current and savings account? What is your cash flow – the amount that comes in and goes our each month? How much is tired up in retirement funds? Do you own a car? A boat? Is your house furnished with antiques? What about art on your walls?
The fact is; you can’t make informed financial decisions without first evaluating your financial health. In my next article I will show you how.
What Do You Want?
If you don’t know where you are going, you will probably end up somewhere else. Perhaps the most valuable aspect of a personal financial plan is that it forces you to state your financial objectives in Cedis or Dollars and milestones. What do you want and when can you get it?
In subsequent articles, you will learn in detail how to set financial goals that take into account your unique circumstance and aspirations.
How Do You Get What You Want?
Once you know what you have and what you want, you’re ready to develop comprehensive strategies for every aspect of your financial life. These strategies much be flexible enough to respond to changes in your personal and financial fortunes.
Your financial plan also much include a blueprint for implementing these strategies – a blue print that lets you know when and how to act. Later articles will help you develop flexible strategies for getting what you want. And they will show you how to direct your financial resources to reach your goals.
Building a Firm Foundation
Why, you may ask, do you need a financial plan at all? The answer is quite simple. There is only one sure way to achieve financial security: you must identify your goals, then adopt strategies to meet them.
True, if you’re like most people you seem to get by from year to year without a financial plan. You collect your salary, pay your bills, and keep yourself and your family housed, clothed and fed. But what happens if a financial crisis occurs, you may find yourself lacking the funds of insurance to cover mounting bills.
If you talk to people who are most comfortable in their lives – the people who have achieved financial security - you will find they took an organised approach to financial management early on. Some did the work themselves. Others hired competent advisers to help them. But, somehow, they made sure the job was done.
The bottom line to financial security: you can get what you want only with an organised financial plan and the discipline to make it work. And the best time to start planning is now.
The Importance of Organisation
Why do most people fail to achieve lifetime financial security? Lack of financial goals is one reason. Ignorance of the tax law and poor investment strategies are others. But the chief culprit is lack of organisation. Organisation is critical to sound financial planning.
Organising your finances provides and exceptional measure of security. It protects you from surprises, and it also places your finances – both current and future – under a ‘master control’ programme that gives you a system of checks and balances. The system provides security when the unexpected occurs. Ant it even allows you to indulge yourself occasionally.
Then too, an organised plan can save you and your family from financial disaster. It helps you establish a pattern of spending, saving and investing that ensures financial stability now and growth for the future. Above all though, an organised plan builds financial independence. And financial independence equals financial peace of mind.
My Approach
The wrong way to begin the financial planning process is by making investments. It is far more valuable first to develop a financial profile of yourself, then to match appropriate strategies to your specific needs.
My approach to financial planning is built on answers to three deceptively simple questions:
• What do you have?
• What do your want?
• How do you get what you want?
Answer these questions in as much details as possible, and you’ll create a flexible, workable and successful financial plan. Repeat the exercise in a year or two or when your circumstances change, and you’ll update your plan.
The job is not as easy as it sounds. To answer these questions in a way that is truly helpful to you requires considerable effort. But the results are worth it. In the next series of articles, I will provide you with the information you need to answer these key questions. First, though, let’s look a little more closely at the question themselves.
What Do You Have?
Step one is the financial planning process is to determine what you have. And that involves developing your personal financial profile. Your profile is a composition of you stage of life, lifestyle, tolerance for risk, responsibilities and financial resources.
I will provide you with the tools you need to construct your personal profile in a separate article. For example, you’ll learn that stage of life is the sum of your age and circumstances – married, single, supporting children, not supporting children, and so on.
And you will see that life-style is about choices – your career choice, say, and how you choose to spend and save.
You will also learn about how to evaluate your responsibilities- elderly parents, perhaps, or other relatives who require financial assistance – and weigh your tolerance for risk. Can you afford to take risks with your money? And, if you can, what risks are you willing to take?
Your financial resources are simply what you have in Cedis and Pesewas or Dollars and Cents. How much do you have in your current and savings account? What is your cash flow – the amount that comes in and goes our each month? How much is tired up in retirement funds? Do you own a car? A boat? Is your house furnished with antiques? What about art on your walls?
The fact is; you can’t make informed financial decisions without first evaluating your financial health. In my next article I will show you how.
What Do You Want?
If you don’t know where you are going, you will probably end up somewhere else. Perhaps the most valuable aspect of a personal financial plan is that it forces you to state your financial objectives in Cedis or Dollars and milestones. What do you want and when can you get it?
In subsequent articles, you will learn in detail how to set financial goals that take into account your unique circumstance and aspirations.
How Do You Get What You Want?
Once you know what you have and what you want, you’re ready to develop comprehensive strategies for every aspect of your financial life. These strategies much be flexible enough to respond to changes in your personal and financial fortunes.
Your financial plan also much include a blueprint for implementing these strategies – a blue print that lets you know when and how to act. Later articles will help you develop flexible strategies for getting what you want. And they will show you how to direct your financial resources to reach your goals.
Email me with any queries or comments.
I always have a hard time remember what I have spent money on, and difficulty saving money. Great advice here! I'm going to start managing my money better.
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