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In my own experience and close observation of others, I have come to realize that remaining poor is normal and getting sustainably wealthy is exceptional. The beauty of life is that with persistence, focus and discipline, we can all get sustainably wealthy over time. And contrary to the deception especially in the third world, we do not need to steal to be wealthy. Paradoxically, sustainable wealth which keeps growing exponentially and which you enjoy with peace comes if observing utmost integrity is our consistent driving force.

Setting goals is important and helps measure success. Simply setting goals does not ensure you will someday accomplish them and achieving goals requires establishing plans. Planning is important to ensure a direction for your day-to-day actions. Deliberately establishing plans can help guide the decisions you make to aid you in reaching your goals. The further your goal is in future     (the planning horizon), the more important it is to have plans to ensure your success in reaching those goals. Since the future is highly unpredictable, the planning horizon must be reasonable to avoid making unrealistic assumptions. Goals may be short term, medium term or long term-the determination is subjective. Creating a personal financial plan has six basic steps namely determine your current financial situation; develop your financial goals; identify alternative courses of action; evaluate alternatives; create and implement your financial action plan and lastly, review and revise the financial plan. These steps are not linear and mutually exclusive but cyclic, interdependent and repetitive.

It is never too early to begin planning and the earlier you begin planning for your financial future, the sooner you will reach your goals. Because of the rules of compound interest, multiplier and acceleration effects of investing, starting early can have great benefits. The longer your investments have to grow, the greater their growth will be-it is most helpful to get started planning for your financial future as early as possible. Your financial goals won’t be realized just by setting them, you must be intentional about creating plans and diligent in executing them.

Determine Your Current Financial Situation

To know where you currently are financially and possibly how you arrived there is critical before you can begin setting goals and developing strategies to achieve the goals. Having a thorough understanding of your current financial situation will help you to formulate realistic and well-informed goals. Taking a detailed look at your situation may also help you identify specific changes you could make to change your situation and help you achieve the goals you will create later in the planning process.

To gain insight into your current situation, it can be helpful to determine your current net worth. To calculate your net worth, you will need to total your total liabilities and subtract them from your total assets. Assets are simply what you own that has value such as land, buildings, machinery, vehicles, inventories, receivables, cash in hand and at bank, equities, bonds etc. Liabilities include value of what you owe including loans, current bills and outstanding debt. Unless you know where you are financially and possibly how you arrived there, it is difficult to effectively move forward.

Develop Your Financial Goals

Once you have evaluated your current financial situation, you are ready to move forward in the financial planning process. The second step is developing your financial goals. Setting goals will give you a direction for your plan and a destination toward which you want to head. Anticipating future expenditures you would like to make and incorporating them into your financial plan can help you put yourself in a position to afford them as they arise without having to make sacrifices elsewhere in your budget.

Your goals should be SMART that is specific, measurable, attainable, realistic, and time-based. You should develop short-term, intermediate, and long-term goals. Developing each of these types of goals will allow you to achieve successes early in the plan while also keeping your eye toward the future.   Short-term or intermediate goals may also serve as stepping stones to reach long-term goals.

When developing your goals, be sure to differentiate between necessities and wants to help you establish priorities. Consider the net worth you calculated in step one and how realistically your goals align with your current financial situation.  Be sure to prioritize your financial goals in order of their importance to assist you later in the planning process. Once you have set your goals, refer to your target date and the duration of your goals’ costs to determine a monthly cost that will be associated with working toward your goal.

Identify Alternative Courses of Action

So far you have evaluated your current financial situation and established some SMART short-term, intermediate, and long-term goals. But your goals won’t be accomplished simply by creating them;   you will have to devise strategies to help you bridge the gap from where you are today to where you would like to be. Just as there is more than one way to get from campus to your favorite ice cream shop in town, there is more than one route you can take to achieve financial success as you have defined it.   The next step of the financial planning process involves identifying alternative courses of action that can lead you to your goals.

Generally, your alternative courses of actions will fall into one of two categories: reallocating existing resources, or generating new ones. Existing resources can be utilized by earmarking current savings or shifting current allocations as in the example above. Generating new resources may require changing jobs to improve your wage outlook, taking on additional hours or investing your savings more aggressively to generate higher rates of return.

Evaluate Your Alternatives

Once you have given serious thought to the options available that could lead you to your goals, you may begin to realize just how many options there are. So, which courses of action should you take to achieve your desired goals? The answer is: that depends because the various financial strategies available to aid you in accomplishing your dreams are not equal. Therefore, before you can select strategies to complete your financial plan, you’ll have to thoroughly evaluate and weigh your options.

When assessing your options consider the pros and cons of each option. An option you are considering to increase your income may be moving income you are saving from a savings account to a stock portfolio. The change in investment methods may increase your rate of return received on your savings, helping you generate new revenue without having to work more hours. However, the stocks your savings are now invested in may also carry substantially more risk than did the savings account in which you previously deposited your savings. When evaluating your alternatives, also be sure to consider the opportunity costs of what you will forego to pursue your goal through each course of action. Adequately evaluating each of your options can help to ensure you select the best course of action to accomplish your financial goals.  

Create and Implement Your Financial Plan

So far you’ve looked at your current situation, set goals, identified alternative courses of action, and evaluated your options. Now it’s time to put all of the pieces together to create and implement your financial plan.As you put together your financial plan, it’s important to look at the entire picture. Having identified options for reaching your goals and having weighed each strategy, it’s now easier to look at the cost of your goals in terms of your current situation. This can help you to prioritize your goals as you consider how much it will cost you to implement each one.

Finalizing your plan will require you to make decisions as to which goals to pursue and the best courses of action to take. All of this will have to be weighed in terms of your current situation and practical predictions for your future to maintain realistic and obtainable goals.Once you’ve gone through the effort of creating your plan, discipline is paramount. After mapping your path to your goals, it important that you follow that path. Be conscious about establishing actionable steps you can take to lead you to success when creating your plan. Having concrete steps to take will help you ensure you are doing what you need to do to stay on track to accomplish your goals.

Review and Revise your Plan

Plans are dynamic and living. You may have done your due diligence at each step along the way and created a solid financial plan. However, one fact remains -life and environments evolve. For this reason, it is important to review your plan often and revise it as needed. Reviewing your financial plan can help you to gauge your progress toward meeting your goals. Original strategies may not be having the expected results and may require adjustment to help you meet your goals.

No matter how carefully you go through each of the steps to create your financial plan or how perfect the plan may be when conceived, unforeseen events will occur, your financial situation will change from time to time, you may incur unplanned expenses or receive unplanned incomes. These events may require you to change the path you will follow to reach your goal.

Your goals may also change and as current goals wane from your list of priorities and you develop new goals, your plan will have to change to help lead you to your new objectives. The fact is your life will change. Your financial plan will have to change too. Be faithful in reevaluating your plan from time to time to ensure your goals haven’t changed and that you are on pace to reach those goals.