October is Financial Planning Month. Of course it’s also Adopt a Shelter Dog Month, Breast Cancer Awareness Month, Global Diversity Awareness Month, National Bullying Prevention Month, and about ten other awareness, appreciation and support worthy causes month. But since Financial Planning is in there, there is no time like the present to do something important for you.
Rarely anything happens without a plan. Even your daily to-do list is essentially a plan. If something isn’t on that list, the chances of it getting done go down dramatically. So your financial security certainly isn’t going to happen without your attention. It won’t happen when you get a raise. It won’t happen when the kids are out of day care or college. It simply won’t happen unless you make a plan to make it happen.
Recently I’ve been speaking with a few couples who have just gotten started on their plan. They are in their sixties. They have saved a bit along the way, because they knew they were supposed to, but they haven’t followed a plan. As a result, they had not saved enough to support their lifestyles after they leave work. And in all cases, they are mentally ready to leave work.
Fortunately, because they have saved some, and they have equity in their homes, they are still going to be able to support themselves. But their lack of planning earlier means they will have to make significant changes to their lifestyle, even if they plan to work until they are in their seventies.
Now of course, if you are not currently saving, or saving enough, saving more will require a change in your lifestyle, even if it’s only being more conscientious with how you spend. It’s never too late, but the sooner you start the less dramatic and painful those changes will be.
The start of any plan is a goal. Some goals are far away and as hard to imagine as they are easy to put off. Typical savings metrics are uninspiring. You need three months of expenses in an emergency fund. You need 25 times your income in savings before you can retire. Both of these are daunting and unimaginable.
Savings goals aren’t actually about the money, but rather what you want to do with the money. So rather than save an emergency fund, a better stated goal would be to protect yourself from a financial setback, such as a job loss. Rather than saving for retirement, save for the freedom to choose whether to work and who to work for.
The next piece of a good plan is to define your goal, and this is where the money comes in. Your goal isn’t about the money, but it does have a price tag. If you find saving hard, simply start with a dollar figure you can live with. However ultimately you will want specific targets, especially for your long-term goals. And you’ll want to break those goals down into shorter more manageable targets, like how much you want to save this year, in the next three years, and so on. The rules of thumb can be a good place to start, but you know your circumstances, so make your own targets. For some free calculators to help you get started, check out my resource page.
With your goal defined, you can develop your strategy. Be very specific. Decide exactly what you will change on a daily, weekly and monthly basis in order to achieve your goal. Think about what might go wrong and how you will adapt, and if you can’t do all you want to now, think about how you can do more later. If you have a significant other, you have to work together on this. It will be hard to make progress if you both aren’t all in. Decide together on your goals and your strategy, and hold each other accountable.
I try to limit promotion of my book, Save Yourself, to the footer of my blog, but given the topic I’ll make an exception. My book provides a step by step guide to creating your own financial plan from developing goals and defining them to creating a strategy to achieve them. The final chapter walks through the development of a real couple’s financial plan. There are worksheets and references to calculators throughout. It’s available on Amazon and BarnesandNoble.com.
I hope you’ll take some time during Financial Planning Month to get started on your own path to creating your plan. Nothing happens without a plan, and that goes for your financial security too.
Save Yourself; Your Guide to Saving for Retirement and Building Financial Security, is available on Amazon.