YOUR FINANCES
Four Steps
to map out Financial Success
Without clear
goals and a road map, you won't maximize your business or
your personal wealth
In order to build your personal wealth through your business
you need the structure of a financial plan for yourself
as an individual and you need one for your business. Usually,
what gets in the way are what I call practical obstacles.
Let me help you identify the three practical obstacles standing
between you and your successful financial planning. Once
you know what they are you will have a clearer path to achieving
your personal financial goals.
1) Lack
of goals and numbers
Building your wealth is a financial journey. For those who
lack specific goals and numbers, the journey is often rambling
and aimless. To build an effective financial plan you first
need to decide where you want to head and know where you
are now.
Here are some questions to ask yourself that will help you
define your goals and let your financial planner crunch
the numbers relevant to you and your business.
- How do I visualize my future
desired lifestyle?
- Specifically,
how much money will I need to support it per year?
- Exactly how much wealth will
I have to accumulate to live the lifestyle I want in retirement?
- How many more years do I have
to work?
- To achieve my desired wealth,
how much of this money could reasonably come from my business
income or salary and how much from investments?
- What do I plan to do with my
business?
- What is my business exit strategy?
By answering these questions you
can start to construct a truly useful plan, and insure your
odds of success for achieving your specific financial goals.
2) No
written financial plan
Do you have personal and business financial plans that are
written down? Or do they exist only as ideas floating around
in your head? A written plan will give you a much better
chance of achieving your dreams. Here is something that
should get you very pumped up: Years ago, a famous Harvard
Business School study found that only 3% of the population
puts their goals in writing. Another 14% have goals, but
don’t write them down; 83% do not even have clearly
defined goals. Which group do you think clocked in as having
the greatest earning power? That’s right, the 3% who
have a written financial plan were found to earn an astounding
ten times that of the 83% group. I don’t know about
you, but when I can stack those kind of odds in my favor,
the effort is well worth it.
3) No
Road Map
How close am I to financial independence and what should
my action plan be for getting there? These are two common
questions I’m asked by new clients at my financial
planning firm. When you lack a road map for building your
wealth, you can’t answer either question.
Do you know how close you are to achieving financial independence?
Are you a quarter of the way there? Ninety percent there?
Are you taking the most direct route? If you were planning
a trip from New York City to Washington, D.C. you’d
recognize that going through Ohio would not be an effective
route. You need to select a sensible path to your financial
goals, too. Unfortunately, that’s not as simple as
going to Mapquest.com.
Working with your financial planner — who should also
be a CPA — map out exactly how far along you are on
the road to financial independence. Together, you should
identify and write down what actions you need to complete
to build your wealth. These should be steps that are specific
to both your personal financial situation and to that of
your business. Your action plan should include counsel from
your financial planner about what things you need to look
out for — at home and at work — that may be
a drain on your financial future. A competent planner should
counsel you on how to plug these drains on your wealth.
Steps to Success
To recap, here are four steps to put you on a clear road
toward financial planning success:
- Establish goals and determine
your specific numbers.
- Put your financial plan in writing.
- Create a timetable to complete
the action steps necessary for the business to achieve
your needed numbers.
- Construct a road map in your
financial plan that guides your wealth building journey
and tracks your progress.
By following these steps you won’t
fall prey to practical financial planning obstacles. Instead,
you can focus your time and attention on what strategies
and tactics will help you build and preserve your wealth
both at your business and at home.
Guy McPhail, CPA, CFP®, is president of Zdenek Financial
Planning, LLC.
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