Before we jump into why you need a written financial plan, let’s talk about achieving goals in general.
Think about people who have been successful in sports, business or even weight loss. Do you know the one thing they all typically have in common? They physically write down their goals. Statistics tell us that you’re more likely to accomplish your goal if you write it down.
Why have a written plan?
Now let’s circle back to whether you need to have a written financial plan.
Did you know that only 25% of American citizens have or use some type of written financial plan? And one-third of Americans have saved nothing for retirement!
Financial planning is something everyone needs to do. It is not just for the wealthy. You can’t go through life trying to achieve your goals without planning for them first. Whether you want to save for retirement, buy a house, put your kids through college or take two vacations a year, you need to plan in order to have the funds to do so.
A financial plan is your road map to your financial future. Writing it down holds you accountable. So if you’d like to increase the likelihood of following through and achieving your carefully analyzed and planned financial goals, then you should create a written financial plan!
How do I develop a written plan?
Then next logical question now that you know you need a written plan is how to develop one? Start by setting your financial goals and how you plan to achieve them.
Let’s look at a savings goal as an example. Say you want to start saving one thousand dollars a month and put it towards retirement. It’s important to write down the goal. But you also need to write out the ways you’re planning to reach the goal.
Coming up with a strategy for reaching your savings goal will involve analyzing your expenses to see where you can make some cuts. It may be that you’re going to make your lunch instead of eating out during the work week. Or you’re going to make your coffee instead of buying it every day. Whatever you decide, make sure you add these strategic decisions to your plan.
Once you have your goal (and accompanying strategy for reaching that goal) clearly written in your plan, you’ll increase the chance of achieving the goal.
What Should I Do with the Plan?
Now that you’ve created your written plan, where should you keep it? Don’t fall into the trap of letting it collect dust on a shelf. Make sure you put it somewhere so you’ll look at it often.
- First, understand your goals must remain firm. Even if you don’t achieve it each month, that $1000 savings per month doesn’t waver.
- Second, your strategies to achieve your goals need to be flexible and adaptable. You need to be aware of what is going on around you and adapt to changes.
One little trick that I’ve had great success with over the years is to ask people to simply write the dollar amount you want to save monthly on a post-it note or a small piece of paper. Then take that note and put in your wallet where you keep your credit cards. This way, every time you go to use your credit card you will see the amount of money you want to save. Give it a try.
The more you focus on your goal, it will remain in the forefront of your mind. This will ensure your plan affects your daily decision making, increasing the probability of successfully reaching the goal!
When Should I Create my Plan?
The best time to create a plan was decades ago. The second best time is right now. The sooner you create your plan, the better. As we stated above, once you start focusing on your financial goals, the higher the likelihood that you’ll get on the path to achieving them. So, don’t wait. Listen to more on our podcast below. Then call an expert to help you start developing your written financial plan today!