Sure, there are more aspects to financial planning. However, these two
major keys are absolutely essential, and without them, none of the others
matter. So they're the ones you should start with:
1. Create a Plan
When you plan, you set up a sequence of actions you intend to take that
will take you where you want to go. And if you have such a plan, you're much
more likely to get there than if you don't. In spite of that, most people
don't plan how to make money. They plan even less how to allocate their
income to create wealth. Instead, they rely on "winging it", and end up
making mistakes.
What can you do to get better results? Focus on clarifying and
articulating your destination. Start with the goal and work backwards to
determine what it would take to achieve that goal.
Let's say that a child's education will cost $50,000 at some time in the
future. From that goal, you can work backwards to determine how much you
need to save each year (assuming certain rates of return) and what
investment programs you can use to achieve that goal.
And you won't have to do it alone. There are some really good financial
planners out there who can help you plan for your financial goals and help
you achieve them.
2. Invest with Purpose
Once you have determined your financial goals, then, and only then,
you'll be ready to determine how to invest the money for those goals. There
are several different types of investments, and all of them may have their
place within a properly structured investment strategy.
For each account, you'll need to figure out the purpose you want to
achieve. Only then you'll have a basis to determine what investment vehicle
to use to best accomplish that objective.
People can lose money when they haven't matched their purpose to the
investment. For example, when you are saving for a car that you plan to
purchase in 3 years, you wouldn't buy stocks or annuities. On the other
hand, if you are saving for retirement income in 25 years, you wouldn't put
the money in savings accounts or CDs.
Why not? Stocks, while potentially offering terrific growth potential in
the long term, are too unpredictable in the short term. If you need your
money in three years, the market may or may not be in a good place to sell
stocks. CDs, on the other hand, play it much safer, but they don't have as
much earning potential as stocks. So you don't want to use them for funding
very long-term goals, such as your retirement. On the other hand, they're
great for short-term goals such as saving for that car.
These two keys to effective financial planning can make the difference
between achieving your life goals on one hand, and not achieving them on the
other. Money is the fuel that propels these goals, and the way you handle it
will mean the difference between success and failure.
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After 15-plus years of being a financial planner, Christopher Music
decided there had to be a better way. Witnessing financial debacles of big
industry and government-driven economies caused Christopher to take action,
developing an instrument that measures the success of any financial plan.
The Financial Security AnalysisTM (FSA) is the back bone of Music’s firm,
Wealth Advisory Associates (WAA). WAA is a financial planning firm focused
on helping private-practice physical therapists understand and implement the
most effective strategies to achieving financial success and security. Visit
www.wealthadvisoryassociates.com
