Laying The Foundation Of Your True Financial Future
Think about your financial life as a pyramid, made up of several layers. At the bottom is wide block that acts as the foundation. What is this sturdy bottom layer? Your financial plan.
However, every foundation is made up of specific parts that keep it strong and durable. In a financial plan, what makes up that foundation? Let’s break down the three pillars of a healthy financial foundation.
1. Write Down Your Goals
You might have already guessed it: your outcomes begin with your goals. What are you goals for your financial life? Now physically write them down.
There is power in writing out your goals. The sad truth is that 90% of people never write their goals down or discuss them with their spouse. Write those goals down, share them with one another, and increase your chance for achieving them!
2. Know Your BAM (Bare-Ass Minimum)
Next you need to know your BAM - your bare-ass minimums. Look over your current financial status and locate the minimum expenses you have. What are the regular bills and payments you must make to keep a roof over your head and food on the table?
BAM offers a clear indication for how much you can save and invest for the future without your extraneous expenses. It also helps you answer an important question: Could I make it if I left my income to pursue a dream?
3. Build Your Dashboard
Once you have your goals written and your BAM designated, it’s time to build your financial foundation - your dashboard.
To create a dashboard, you need to write down everything - everything. List your mortgage, insurance, stocks, debts - anything you are bringing in and paying out. Map this out and combine it with all important life data such as birthdays and anniversaries.
Finally, add any legal information - lawyers, wills, executors of your estate. This will give you a clear view of where you are - and how to move forward to meet your goals.
Planning In A Brave New World
Why are Goals, BAM, and The Dashboard so essential to your financial future? In the post-COVID world, we have been forced to drastically change our style of planning. Before the pandemic, you could approach your plan with a sniper rifle - hone in on a goal in the distance and fire with laser-tight focus.
The pandemic has changed much of that. For individuals and businesses, planning is more like hunting with a shotgun. You aim, fire, analyze, adapt, and fire again. To ensure that you reach your goals, you need a firm foundation that gives you stability and flexibility.
Once you lay that first layer, you can move ahead with confidence.