It sounds simple, but it’s where so many people fail. The foundation of your successful financial future is having a written plan. This plan should cover your goals, objectives and dreams and how you plan to achieve them. The key to success is to make this a process where you revisit it on a consistent basis, preferably every year.
A good financial plan should have the following elements:
- It is in writing (either in electronic form or on paper)
- It is crafted based on your goals and objectives
- It contains a balance sheet
- It determines whether you can achieve your goals based on your current financial position and investment activity. It answers the age old question: am I on the right path?
- It should consider risks that could derail the plan and how to offset those risks
- It is part of a regular financial review
Unfortunately, some people’s experience with financial planning is hiring a planner who gathers a number of documents, asks a plethora of questions and then produces a report whose thickness rivals an old college textbook. While impressive as it gathers dust on the bookshelf, this misses the point: the key is the planning, not the plan! It is imperative that these topics are regularly reviewed and updated to reflect changing life circumstances.
Finally, successful planning is a process. We recommend that you get in the habit of periodically examining your major financial objectives. As President Dwight Eisenhower once said “plans are nothing; planning is everything.”