Someone’s sitting in the shade today because someone planted a tree a long time ago” — Warren Buffett
A new year. A new beginning. ‘Tis the time of the year when we are motivated, excited and raring to set our goals and plans for the year that has just started. As we get busy planning for our next performance targets, travel destination, diet and exercise plans, and major projects, let us be mindful to include financial planning in our list. Oftentimes, this aspect is overlooked, leaving our financial health to chance. No wonder most Filipinos end the year with the same financial standing as when they started the year, or sometimes, even worse.
People don’t do financial planning for different reasons: it’s complicated and intimidating, they lack the know-how, they do not see its value or they do not have the finances to manage. Regardless, the only way to getting ahead of our financial freedom is getting started. And NOW is the right time!
Consider your financial planning journey like your other travel adventures. Your goal is to make the necessary preps to reach your destination. These are the same considerations when we talk about your finances.
WHERE ARE YOU GOING TO? This is the first important question to consider. If you do not know where you’re going to, it will be difficult to make your travel plans. That’s why in financial planning, it’s important to be clear with your money goals. What do you want your money to accomplish for you? It can be for a college education, an annual family vacation, a major purchase, or a comfortable retirement. How much money do you need for it and when do you need it? May be after 1, 3, 5 or 10 years. Having clarity will guide you make those major financial decisions.
WHERE ARE YOU COMING FROM? As we may not all have the same starting point, where you will be coming from is crucial when making your travel plans. Some may be just few meters, some may be mid-way while some are still miles away from the desired destination. Similarly, our current financial situations are different from each other. How does your current income, expenses and savings look like? Do you already have some savings to start with or are you starting from scratch? What types of assets and debts do you have? How much time do you have or need to get to your financial goals? Who are with you in your financial journey? Your answers to these questions will ground you as you make your money moves.
HOW WILL YOU GET THERE? Knowing where you are now and where you want to be will allow you to determine the how’s and the what’s. How will you reach your desired destination from your starting point? Identifying and making your immediate first step towards your financial freedom can be the most challenging part of the journey, but it’s the most important. Otherwise, everything will stay as a plan, a wish, a dream. What will be your short, mid and long-term plans and priorities and the timelines/deadlines for each? What are the right savings/investments options available to support your requirements? Choosing a long-term instrument to support a short term money goal is not considered a smart decision. What are the possible setbacks to your journey and how will you manage them? The clearer your execution plan is, the better prepared you are for your financial journey.
WHO ARE YOUR SUPPORT SYSTEM? While you should personally lead your financial journey, you will need some support system to make the execution smoother and less bumpy. How complex or simple is your financial plan? How confident are you to work on your plan and carry them through especially during tough times? Are you comfortable directly managing your funds or would you rather stay in the background and allow professionals to manage it for you? Depending on your confidence level, you may need the help of some professionals and experts. A well trained financial planner/advisor is the best person to partner with you on your financial journey. They can guide and assist you in choosing the best financial instrument that suits your needs, monitoring your progress and making adjustments as may be required. They can liaise also with other experts like lawyers and CPAs should the need arises. The more professionally managed your financial journey is, the better. Oftentimes, our emotions lead us to wrong financial decisions.
As they say, the journey of a thousand miles starts with one step. Take that first BOLD STEP(s) and you are off to a good start on achieving your financial freedom. Your one day starts with day one!
