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In the last couple of editorials we started the process of developing a personal financial plan. From the outset I want to emphasize that the idea is not to present a complete process or in any way suggest that this is the only process to be followed. Neither can any plan be a guarantee for success especially if it is not put into action. The idea of these editorials is to start a thinking pattern, to push our readers into the right direction and help them to make a start.
So, we know where we want to go (objectives), and we established where we are (present financial position). The next step is to develop a strategy as well as actions that we need to do to enable us to achieve the objectives that we set.
Financial Strategies
As simple as it may seem the only way to achieve your objectives is to increase your cash flow margin, the surplus cash after you deducted your monthly expenses. This can be done by doing one or both of the following. You can either increase your income or reduce your expenses. This sounds stupid, right, truth is the only way you will get a positive cash flow margin is if you apply these two strategies. There is no other way. You either have to get more money coming in or cut some going out.
This gets the creative juices flowing. Instead of thinking I don’t have money the question should be how can I obtain the money I need. Can I get a second job?, do I practice a hobby that can be used to generate more income?, or maybe I need a longer term strategy that requires me to improve my skills which will help me improve my income potential. The point is one need to start thinking about possibilities, ways to get to the stated objective.
On the other hand one may need to start cutting some expenses. Maybe some debt needs to be paid off or some luxuries need to be cut. No one said that is was going to be easy so I guess the question is are you willing to do what is required to achieve your goals or put another way “How badly do you want it?”. There may be some expenses that can be reduced or debt can be consolidated. You may need do take drastic steps to redirect your financial destiny but what ever needs to be done, putting it into words and planning it is half way on the road to financial success.
Action Plans
Once the general strategy has been developed and the specific focus areas have been identified, the how to part, you need to determine what the specific actions are that need to be taken and how to take them. This step entails the nuts and bolts of your financial plan. It states what needs to be done, how and by when. This will include specifics like “go and see the bank to renegotiate the repayment terms on my loan or update my CV, contact a personnel agency or sell my car. Whatever the actions are that you need to take and these steps should be written down. Remember action is a verb it entails doing something.
As stated at the beginning of this editorial the idea is to give our readers a little push in the right direction. This is by no means a complete process and we would encourage our readers to obtain the help of a financial adviser or to read more about the subject. There are many books available on this subject and I think that each individual should read at least one book on personal financial planning, preferably early in their adult life. As stated in one of our previous editorials financial literacy should be a compulsory subject at school and is as important as being able to read and write.
One last thought, a financial plan can not be successful unless it is implemented and committed to. It takes a lot of discipline and is not for the faint hearted since one will incur many obstacles and many temptations.
May your plans come to fruition and remember don’t wait for a feeling to make a start. Like the author John Maxwell says “You are more likely to act yourself into feeling than to feel yourself into action”
Till next time.
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