The new year is my favorite time, perhaps because I’m a natural planner. It’s a time filled with hope and anticipation — anything is possible.
Not too long ago, I was going through some old files and found a Statement of Net Worth that I had prepared for myself, by hand and in pencil. It was a time in my life when I was starting over in many ways, and I guess I needed a starting point, and anchor, from which to begin again. That single sheet of paper gave me a lot of comfort as I see how far I’ve come. And not just financially.
A successful financial plan is rooted in a solid life plan. Take time this new year to reflect on your life situation and, when we meet to renew your financial plan, we will have a good direction from which to work.
Let me share with you some tools and the approach I use. If you’ve never done this before, you may find some useful tips here.
Begin Your Planning Year on February 1
Nobody says you have to start your planning year on January 1.
Think about it. In order to jump out of the gate running on the first, you have to be planning during what may be the busiest time of the year for you. Year-end. Christmas. Putting another important task on your calendar is impossible especially if you’re tired on top of it all. Then, if you end up starting your planning in January, you’re already behind. Or, if you think about planning in October and November in preparation for January, you wind up thinking about year-end plans and the holiday season.
Here’s my suggestion. Focus on getting year-end right. Take the holiday break to relax and enjoy. Get inspired. Read something motivational. Take a trip. Go on a hike. Move your annual planning period to February 1. Spend time in January developing your plan. You have your final year-end numbers available to you, so there’s no guesswork.
Bill Gates, when he was leading Microsoft, took time to think and ponder its direction during biannual “Think Weeks.” I heard a local physician with an extremely busy practice, a thought leader in his specialty, tell the audience that the key to his success lies in his practice of meditation, two hours each day.
If you think you don’t have the time, I can assure you that you do. The recent storm that blew through Pasadena showed me just how long an evening, or a series of evenings, can be without electricity. You say you can’t find the time to plan? Just turn off the electricity.
Create a New Five-Year Plan Each Year
It will be here before you know it. Knowing what you want is an important part of getting it. With a five-year plan (or even longer), I create context for what I want in the upcoming year. The plan for five years out is not terribly specific, but the one for next year is pretty detailed.
When I work with clients, we start by creating a timeline to when they’re 100. It may seem a bit silly at first (depending on your age!), but people start to view their lives and goals differently. They start prioritizing their goals, making better resource allocation decisions and, almost always, beginning to see synergies between their goals. They can see how one goal, if structured correctly, can lead to accomplishing bigger things for themselves and their families in the future.
Measure Your Progress
Much of my corporate and consulting career was spent developing performance measurement systems for large corporations. I put many of those same techniques to work in the financial planning process I use with my clients. It is my goal to incorporate more metrics into your financial planning methodology in 2012.
My clients include many successful business owners and corporate executives. They utilize planning and measurement at work, and I aim to show them that these techniques work equally well when adapted and applied to their personal lives and finances. I find that once they see these tools applied to their personal finances, their progress toward achieving their personal goals is “off the charts.”
In Summary
Take time to enjoy the past year before planning for the next one. Recharge and get inspired before starting on next year’s plan. Include a measurement system in your plan to get feedback, and to improve, your decision-making as well as to see your progress.
