My Financial Comeback: Financial Planning

Financial planning is one of the crucial steps in reaching your financial goals.   Last month, I talked about the importance of knowing where you want to go financially so that you can plan and chart your course to get there.

I want to stress that financial planning is for everyone who wants to organize their finances, set money goals and strategize to reach those goals.  Before you start worrying about where you want to go, you first have to figure out where you are now.  

Hubby and I created our financial plan the day we joined our finances together 10 years ago.  We outlined where we stood financially at the time, shared each other’s financial goals, created a simple net-worth statement, strategized the steps we needed to take to achieve those goals, then laid out our investment strategies.

The first step was tough.  In order to get to know each other’s financial situation, we had to strip naked financially.  That was especially hard for me because it was the first time in my life that I had ever done that.  I’m glad it happened because that exercise changed my life. 

To reach our financial goals we created our financial vision board, which I will talk about in an upcoming post.  Luckily, we both had similar financial goals  – moving to NY, a good nest egg for our retirement, and travel the world with no debt.   On top of that, we had to figure out our net worth, which was essentially an honest measure of our wealth.  

To calculate your net worth, simply tally up the value of what you own (asset) and subtract what you owe (liabilities) and you get a number that represents your net worth.  This net worth number can help you chart your financial progress over the years.  As mentioned previously, we never factored in the cars, silverware, and jewelry as part of the net worth calculation.  

We then outlined a series of steps that we needed to take in order for us to achieve those goals from eliminating my debt to cutting unnecessary spending using the 50/40/10 rule.  We also had a good handle on our cash flow by understanding how much we were spending and saving at the same time.

We knew exactly what our monthly cash flow was and whenever we had the itch to invest in something big, like real estate, we would run the numbers to determine if our monthly cash flow was sustainable.  Since then we’ve been reviewing our cash flow on a weekly basis.

To reach our financial goals faster, we needed some help in the investment area.  With hubby’s brilliant investment strategies, we made a huge return within a very short timeframe.  

Remember, financial planning constantly evolves because situations and experiences will shift some of your financial priorities.  Like us, we were on target to move to NYC, but having twins made us realize that moving to LA would make better sense because we would benefit a lot from my family’s help.  We saved a lot of babysitting fees.  Now that the twins are a lot older we are revisiting some of our financial goals.

Regardless of your income, you don’t have to make a lot to save a lot.  As a matter of fact, a lot of people who made more money tend to spend more, and they get stuck in that financial spiral and don’t know how to pull themselves out.  

My advice is to know where you want to go and devise a plan to get there.  If you want to hire a financial planner to help you make sure they are reputable.  We always say that we would not take any financial advice from any financial planner who is not financially well-off.  It’s like hiring a personal trainer who is not fit at all to help you get fit.

If you want to tackle this on your own, you can.  I can also tell you that the journey may seem like neverending but you will eventually get there before you know it.