“ Good fortune is what happens when opportunity meets planning.” Thomas Edison
Financial planning sometimes feels like a mystery, a preserve of the financially “woke”. Nothing could be further from the truth. Financial planning is important to all of us, and it can be done quite successfully I might add by each of us. Let that sink in for a moment.
It will of necessity require you to come up with a broad plan that you will then break down to manageable chunks, and then execute it. Sounds simple? Yes, it does! And it is simple, however, it is not easy.
So, let’s look into some reasons that may make financial planning seem unattainable.
1. You do not have a plan
It may seem obvious but winging it just doesn’t cut it. And the plan cannot exist only in your head. Your memory may be good, but you are far more likely to create a better visual picture when you write down your thoughts. Sit down and create a plan for yourself. Make it as elaborate as possible, have a “brain dump” session so you can capture what you want to be in the plan, and then you can sieve it from there.
2. Your plan is not realistic
So, you’ve sat down and come up with a plan, only that the plan is the equivalent of building castles in the air. You have shot for the sky without factoring in the need for wings. In planning, you need to start from your current situation and grow progressively. For instance, if you are earning Kshs.50,000 (USD 500) monthly, you can not make a financial plan with an assumed income of Kshs. 250,000 (USD 2,500). Your feet must be firmly on the ground.
This is not to say there is no room for dreaming but start from reality as you make your journey to the top.
3. Thinking too small
It may sound contradictory to the advice above; however, it is important to create room for growth when making a financial plan, especially a long-term one. In the plan push yourself and move away from your comfort zone. Push yourself to find ways to pay-off your debt faster, find ways to increase your income, create ingenious ways to reduce your expenses, and suddenly you will find that you have room to reach your goals much faster.
4. You are unclear about your current financial status
You know you owe people money, but you can’t tell how much. You know you earn money from your business, but you are just not sure of the amounts because you don’t have proper systems in place.
I propose when making financial plans that we take a leaf from how banks operate. At any given time they have a proper record of how much is in all customer accounts as well as each loan balance, down to the last cent!
Information empowers us, so make sure as you start planning, you have all the data you need to have a feel of where you are at financially.
5. Not working the financial plan
By now you have bought into the importance of a financial plan. The next step is to work at executing your plan. The plan will only be as good as its execution. It will work if you work it. After developing the plan, roll up your sleeves and start working on it.
You can have the plan be as flexible as possible, without losing sight of your goals.
6. You do not monitor how well the financial plan is going
A plan is as good as its execution and as you execute check if you are still on course. Review and see for instance if you can reduce the time you need to reach a goal, do you have an asset that you can sell to reduce your debt? Can you start a side hustle that helps you bring in more income? Did you get a windfall that can help get started with your land purchase goal?
Keep monitoring because it will motivate you, in fact, it may just surprise you how much progress you will have made in a short time.
7. Divergent views with your spouse
Unity of purpose is important and cannot be overemphasized. When you move in two different directions as a couple, you will end up in trouble. You will take too long to achieve any goal assuming you agree on it.
For the best outcome, it would be important to build consensus and reach compromise. It may be that you may not reach your goal as fast as if you were working together but you will be on your way there.
Where you can’t agree I encourage you, keep at it. Do not give up without trying. It may be that you may not reach your goal as fast as if you were working together but you will be on your way there.
It is very likely to win your spouse when they see the progress you are making, so keep moving and keep hoping.
8. You have long-term goals without shorter-term goals to feed into them
In financial planning, it is critical to have a long-term goal and most of us do this through goal setting. We however go off track when we forget to have a series of shorter-term goals that are aligned to the long-term goal. For instance, your long-term investment goal could be to buy a house in 10 years. It would be wise to set short-term goals of say 5 years each, which could be broken down further to 2.5-year goals. The importance of this is to help you keep an eye on whether you are on course to achieve your long-term goals.
Often time when you don’t break down the short-term goals into manageable chunks, you may get to the set timelines without achieving your goal. You could wake up in 10 years to find that you don’t have enough to purchase your house.
Financial planning helps you to clear the fog that comes to your mind when you don’t know where you are going. It helps you be focused on your wealth creation journey and I am convinced that it is a must-have ingredient in our financial journey.
Article Source: https://pesasense.com/why-you-are-failing-at-financial-planning/