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  • Nate Carter

Stop Sleepwalking Through Your Financial Life

Where is Your Financial Plan?


Are you happy with your current financial plans? Did you follow through on your retirement goals from five or ten years ago? Or are you falling short in securing your financial future? Understandably, many households are focused on managing jobs, getting kids to school and clearing through daily errands. However, this routine can play out week after week for years. This leads to perpetuating the cycle instead of creating solutions that slow the tempo, reduce stress and strengthen financial positions. If you are caught in this routine it is time to stop sleepwalking through your financial life.


A Wake Up Call for Financial Freedom

Creating and implementing a financial plan is not as hard as you may expect and provides tremendous benefits. You are rewarded with the peace of mind of no longer living paycheck to paycheck. And eliminating the financial fragility that comes from relying on one source of income. As you implement your plan you will lower your spending, create multiple revenue streams and dramatically reduce money and job related stress. The four components of financial planning are below and each one is equally important. Neglecting any of the four will hinder your chances of success. Consider this your wake up call and get started on the path to financial freedom.


Four Components of Financial Planning

  • Motivation

  • Aligned Goals

  • Understanding Money

  • Daily Perseverance

Motivation


You are the only one who knows what will motivate you to achieve financial freedom. This is commonly referred to as "finding your why". Finding this motivation is about exploring why you want to be financially free and what will keep you committed to the plan when obstacles emerge. This is the starting point and you cannot proceed until you have clearly defined and written down what will motivate you to achieve your goals.


If you are having trouble finding your "why", it may help to think about what fears and anxieties you have about your financial future, along with the solutions that would eliminate them. When channeled properly fear is an excellent motivator. On the positive side, consider the things in life you truly enjoy and what your life will look like once you reach financial independence. This could be retiring at a certain age, switching to working part-time or turning a cherished hobby into a business. It may also include more time to travel, learn new skills or volunteering.


Write down four or five broad goals that will motivate you. You can add more goals or sub goals to the list if it helps sharpen your motivation. To keep focused, this list of goals in a place where you will see it every day.


Aligned Goals


If you have a spouse or partner creating a plan is a shared process. It may help to separately define your motivations and goals to bring more ideas to the table for discussion. One person can be the driver of the process, but both parties must be committed to plan for it to succeed. Otherwise at the implementation stage you will be working at cross purposes. One person is saving to achieve the goals while the acts in a way that pushes them further away. This will only create friction in the relationship.


Each partner's goals do not have to be exactly the same. One person may want to retire early, while the other wants to keep working. One person may want to start a business while the other wants to focus on traveling or volunteering. The priority is defining clear and measurable goals that are aligned and not in conflict.


Understanding Money


There are are a few facets to the component of understanding money. The first is on the spending side and understand that money is a tool that needs to work for you. This includes determining how much money will be saved each month and how much will be allocated to expenses. It helps to break down specific budget categories. If you want some additional information on this topic see Five Steps to a Financial Freedom Budget. This process also requires tracking your spending for a few months to ensure you are staying within the targeted range.


The second part of the money component is on building wealth through buying assets and creating passive income. The only way to eliminate the need for a job is by creating income streams that replace your salary. The starting point will be to maximize your pre-tax retirement savings accounts like a 401k or Individual Retirement Account. There also resources here that explain 12 types of passive income and strategies for generating your first $2,400 in passive income to help you get started.


The money component will eventually require learning about real estate, taxes and other aspects of investing. It helps to begin listening to podcasts and reading articles and books about personal finance. Do not become overwhelmed, this is a very broad topic. What is important is to take actionable steps each day to learn something new about making your money work for you. Keep notes on what you learn to refer back to over time.


Daily Perseverance


A great plan is worthless unless you implement it. The last component is adding daily perseverance to achieve your goals. This requires identifying specific steps to take each day, especially in first few weeks and months. Each time you complete a task, cross it off, and add another to the list. This will serve as a record of your progress. At the beginning set weekly meetings with your spouse or partner to discuss your progress. As your plan progresses you can make these meetings monthly. The key is to stay motivated in the beginning so your plan gains traction and becomes a part of your life.


It helps to divide up responsibility on specific tasks. For example, one person does the research on index funds for bonds and the other person researches discounts on car insurance. An action step might be setting up a college savings account and funding it with $5,000 before the end of the year or buying your first rental property within 18 months. This perseverance component is about the daily progress that will snowball in the next few months and years to produce life changing results.


If you are struggling with writing your plan or understanding the money component, there are detailed explanations in Become Loaded for Life. If you need help identifying specific action steps see the Become Loaded for Life 10 Stages Workbook. The workbook is a step-by-step guide for achieving all four components of a plan as described above. Let this be your wake up call and start your plan today.


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