3 ESSENTIAL STEPS TO A FINANCIAL PLAN

3 steps forward may not seem like much but the average person hasn't moved yet.

It is common to us all to have various number of alternative ways to appropriate our finances.The problem however is that the vast majority of us have a limited amount of financial resources to meet all our various desires.This therefore makes it mandatory for us to efficiently allocate our resources as much as possible.Key to achieving this is to determine the goals that are most important to us.I hope we still remember what we were taught in elementary Economics class about the scale of preference.

Step One- Set financial goals

Setting financial goals is the absolutely essential first step to a financial plan.This defines the reason for the very existence of the plan itself.We must set SMART goals.

S-  specific

M- measurable

A- achievable

R- realistic

T- time-bound

A study was carried out to determine the key factor that made successful people successful.The researcher interviewed hundreds of people from different backgrounds and socioeconomic walks of life and found 58% of them had achieved average levels of financial success. Of the top 13%  of subjects classified as having above average levels of  financial success,he found 3%  to be extremely successful.He then discovered that what these 13% had in common was that they were goal setters.The second most important thing that they had in common was that they were planners.For the 3%, he discovered that the key characteristic was that they wrote down their goals!

Step Two- Determine your current position.

Determining your starting point is equally as important as setting goals.This step answers to the question,"what do I have to work with that is going to help me achieve my objective?". The answer you give to this question must be consistent with the Reality Principle which states that "you must deal with life as it is not as you wish it were or could be". Most people live in a world of partial-self delusion, or even fantasy with regard to money.They wish, hope and pray about their financial futures while at the same time,deep in their heart, they know their dream will never materialize.

Most people have two primary resources available to them;their current income and their current assets.Their discretionary income[the portion of ones income after all obligatory payments are made such as tithes, mortgage,savings,debt.etc] must be allocated efficiently to those areas that will help them attain their goals.The same is true of assets.Your assets must be in line with your goals otherwise the consequence will be inefficient money[money that doesn't work hard for you]. Achieving financial independence requires the elimination of inefficient money.

Step Three- Develop a step by step written plan 

.Once you know where you are and where you want to go, the next chapter is to develop a step-by-step written plan to achieve your goal.This written plan must be outlined in actionable steps with specific time frame within which each  step must be taken.Milestones should be built into the plan so that your progress can be measured on a regular basis.

These 3 simple steps are all it takes to put in place a financial plan of action for one's financial future.The sad reality however is that majority of people will not take these steps until it is almost too late.A lot of people only begin to think of retirement just when they have a few years to retire.The ideal thing is to begin planning for your retirement the very day you commence work. Stories abound of people who have earned huge salaries for years and at retirement or termination of their appointment find it difficult to maintain their desired lifestyle and some often end up in dire financial straits.