New Year, New Financial Plan
The new year gives us the opportunity review our current plans, and if necessary, implement a new financial plan. Financial planning isn’t new, but our plans should be up to date with the current economic landscape.
For families and business owners, effective financial planning can allow you to establish goals and track your progress. Furthermore, implementing a plan doesn’t have to be hard or complicated.
Financial Checkup
A financial review or checkup is just as important as a physical checkup. A regular review of your financial health can identify potential problems, track your progress, and implement action steps to achieve your financial goals. It can also provide motivation to make changes, if the plan is not working as expected.
Think of an annual financial review like a medical checkup with your doctor, a checkup to improve your financial health and screen for potential problems.
Many factors ranging from spending habits to how you manage your money can contribute to your financial plan.
Planning for the New Year and Beyond
An effective plan will allow you to make adjustments and implement new strategies and concepts along the way. The ability to compare strategies and run scenarios with different goals in mind may add confidence to your decisions.
Financial planning should not be difficult. It should be embraced and anticipated. At a minimum, we should evaluate our plans annually. Doing so can reduce our risk, and increase our wealth.
Some examples and questions that may arise when doing a financial review:
What if you were killed in a car accident? Who will support your family? Who will care for your children?
What if you were disabled and unable to financially support yourself and your family?
What happens to your business if you or your partner(s) are unable to participate in or run the business?
What happens to your business if the economy or markets change?
What happens if tax rates change?
How do the new results differ when compared to your current plan?
Non Traditional Financial Strategies and New Financial Concepts
Financial plans may include various concepts or strategies. The strategy you use is key in preparing your family or business for emergencies and opportunities that may arise.
While the names and strategies may differ, a financial strategy should improve one’s financial position over time. Unfortunately, most financial plans today are focused on retirement only, and leave participants vulnerable to many risks.
Our philosophy is that there is more to be had by reducing or eliminating wealth transfers than by chasing returns. In other words, we believe a defensive approach to protecting our real assets from loss will be more rewarding than risking our hard earned money in speculative investments.
In short, the strategies we implement should offer protection from risk, flexibility in funding, and options for change.
Below are some examples of non-traditional financial plans.
IBC – The Infinite Banking Concept™ (IBC) was created by R. Nelson Nash and detailed in his bestselling book, Becoming Your Own Banker™. It is a practical way for families and businesses to finance their major capital purchases on their own, without qualifying with traditional banks, so they remain in control of their finances.
LIRP – A Life Insurance Retirement Plan (LIRP) is a simple financial plan that utilizes the power of participating, dividend paying life insurance to maximize your wealth and income, with less risk than traditional financial plans.
SMART – The Strategic Movement Around Retirement Taxation® (SMART), is a safe, retirement planning process that focuses on minimizing income taxes and maximizing spendable income.
What Do You Want? And Why?
Our belief is that you must examine the “why” before you can accomplish the “what”. Goals fall short and changes can interrupt our plans. We have to understand why we are implementing our plan and commit to our why. The what will change, and is simply not enough to keep most on track until completion.
Creating and reviewing your financial plan every year can ensure that you stay on track to reach your financial goals. Commiting to the plan provides a path to follow while allowing for adjustments.
Once you commit to a plan you should have more confidence in your financial decisions.
Creating A Realistic Vision
A goal or vision for your financial future. Having a vision for the future can help you to commit to a plan, and create benchmarks for improvements.
Your financial vision may be totally different from others, or amazingly similar to others. Using a framework to help establish benchmarks and set goals can simplify the process, but it should be specific to your vision.
There is no “one size fits all” solution in financial planning. What works for one family or business may not necessarily work for another.
It can be tempting to compare your plan to others, especially when using cookie cutter plans, however this can be detrimental to your plan. Though there are always similarities, every family and every business is unique.
Just having a plan doesn’t guarantee success, however it does relieve the pressures and anxieties of wandering aimlessly and guessing on the results.
Tracking Your Progress and Success
A framework or plan for success is one thing, but a commitment to the plan requires tracking. This can be done daily, weekly, monthly, quarterly or annually. It all depends on your particular situation. You can track or measure progress on your own, or by meeting with your advisor(s).
Once you establish your plan, the plan is the framework, and tracking it can be as simple as checking boxes or reviewing your goals in detail. If you have a business, having a cashflow, or profit and loss statement will be instrumental.
Asking questions may help you determine how you are progressing toward your financial goals, and whether or not you have taken action to improve your finances.
Understand your history and learn from mistakes. These mistakes could be more from timing than anything else, things that you can not always control. However, this hindsight can help you understand and detect problems that may occur in the future.
Plans fail and fall short for many reasons, but this is not always a bad thing. If we analyze the issue and take a step back to examine our overall plan, these failures may be valuable and instrumental in making a change. We can then adjust our plan accordingly.
Family or Personal Financial Planning
Typically, our family is the underlying reason for why we plan. With family planning we are concerned about protecting our assets now and growing our wealth for the future.
Once we’ve successfully built wealth, our family legacy can then be transferred to future generations.
Business Financial Planning
In business we tend to focus on increasing profits and reducing costs. This may include business specific planning and will likely require more effort.
Creating a business financial plan is important for any business, regardless of the size. Following an effective business plan forces the business to commit to financial goals and prioritize costs.
An effective plan should be flexible enough to allow for changes in business or unanticipated expenses. It should have redundant alternatives for protection and safeguarding from losses.
Perhaps most importantly, the plan should allow the business access to capital when needed for cash-flow, and resources to take advantage of opportunities that may arise.
The End Result
At the end of the day, planning can identify potential problems, increase your returns or profits, and help to solidify that your plan is accomplishing what you want it to do.
Beginning with the end in mind most often produces the most desired results.
If I can help you establish, or in reviewing your plan, just let me know.
Until next time, plan accordingly!
Barry Page
Barry Page is an Authorized Infinite Banking Practitioner, Managing General Agent, and Founder of Legacy Insurance Agency, PLLC. He helps clients with tax-advantaged investment alternatives, and specializes in showing families how to protect their assets, income and lives using a unique approach to financial planning.
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