If You Fail to Plan Then Plan to Fail

I’d like to think we are all Project Managers in charge of managing the most important asset we have … our lives. Think about it, you can plan your education, your professional career, higher education, going out on a date and even your next vacation. What do all these things have in common or more importantly, what do they require?

  • Definition & Organization
  • Planning
  • Tracking & Managing

Becoming financially independent is no different, it requires looking toward the future and developing a clear roadmap for building the kind of security you’d like to have and the things you’d like to be able to afford. But what are the top challenges in financial planning? In my opinion, it boils down to having unclear objectives, unrealistic expectations, changing priorities, poor communication (especially for couples) and lack of commitment. Understanding and acknowledging this reality should help you prepare to not only face but overcome the challenges that will surface when walking down the path that leads to FI. Let me walk you through my own process in an attempt to provide a mitigation strategy that has increased my chance of success.

When your paycheck hits every month I’m pretty sure within a few days you’re wondering where all that money went. No matter how much you make, financial success is directly dependent upon your ability to live within your means. I encourage you to start reviewing your monthly expenses as early as possible. Log in to all your accounts and download your statements. The process should be fairly straight forward but if it’s your first time it may require some time. Gather and organize the data and put in a place that facilitates performing the analysis. I’d recommend using Excel but then again you could do it on a piece of paper. The point is you have to do it and you should try to keep it simple.

As you go through this exercise I can guarantee you it will not be easy. I remember doing this with my dad and as soon as he saw the numbers he decided not to believe the information he had in front of him. I remember hearing him say: “this is all wrong, I don’t spend that much money on so and so and so, it can’t be right”. This was really tough for him and it will be for you but guess what, there is no way around it. Ultimately my dad let his guard down and so will you. History has been tough on me and has made me realize there’s a big difference between assuming something and knowing something and today I can tell you with a lot of confidence I’d rather know.

Think of analyzing and understanding your spending habits as an educational experience. This might sound kind of nerdy but I can’t stress enough the importance of this critical step. I encourage you to hang in there and just remember that every dollar has a name and a last name so get to know them and get to know yourself. Fixed and variable expenses will start to surface so begin to understand what those are and collect your thoughts around devising the ultimate strategy for improving the way you manage your money and your life.

Evaluating the present and being honest with yourself in terms of understanding where you’re at financially speaking is a must. Only then will you be able to take actions that will put you on the right track for achieving your goals more effectively. But where to begin? how do you set up goals? Don’t worry, I have a suggestion that you might want to consider ….set SMART goals.

This has worked very well for me and has helped me develop a game plan that includes short, mid and long-term goals. Now, the difference between these goals is the time require to achieve them. Below is a short description with some examples:

Short-term (0 – 1 year): something you want to accomplish soon – creating an emergency fund, buying a car or perhaps losing weight.

Mid-term (1 – 3 years): require a little bit of planning – getting out of debt, down payment on a home or pursuing graduate studies.

Long term (3 years+): usually built upon short or mid-term goals – kid’s education, retirement.

Being financially independent is not rocket science; however, it will require time, discipline and commitment. Unless you’re ready to stick to a dedicated financial plan that fits your personal situation, then FI more than likely will be beyond your reach.

So, you’ve spent time thinking about your goals,  what should you do next? well, put them on a piece of paper, napkin or whatever works for you. This makes it easy to hold yourself accountable. Furthermore, you need to visit them from time to time to make sure you’re on track or in case you need to make adjustments along the way. The tool I’d personally recommend and that just work for me is Evernote, simple, easy to use and best of all FREE!

So you know, where you’re at and you recognize the opportunity set is huge. Next, create a plan and review it before you put it in motion. This plan should highlight (if possible) scope, timelines and order of priorities. The key in all of these is to make sure you don’t try to shoot for the moon. Simplicity is key but more importantly making sure your goals are specific, measurable, realistic, attainable and time bound. If they’re not you’re playing a fools game and you might as well just stop the whole process.

Quality over quantity is important but having a sense of urgency is paramount in the context of FI. There’s no perfect time to start, so why not put your plan in action right now?. If you keep delaying your plan you’ll lose momentum and energy and you’re at risk of falling back to old habits. Believe me when I say momentum is key especially if you’re able to capitalize on small wins that will provide evidence that you can actually make stuff happen.

So if you thought this plan was a one-time deal then sorry to disappoint you but you’re wrong. Just like going through your expenses on a monthly basis, this is something you’re gonna have to get used to doing on a frequency that makes sense to you. In my case, I look at my plan and progress on a quarterly basis or when I’ve had to make adjustments based on unforeseen events.

Key Performance Drivers (KPDs) are also important and I highly encourage you to incorporate metrics as part of your tracking mechanism to evaluate progress in a more systematic fashion.

Overall, realize that financial planning is truly a call for challenging the status-quo in the way we live our lives.

It’s your call, are you ready for a change?

Until next time … JJ


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