Whether you’re an individual or a business, a financial plan can help you determine where you’re going with your money. Like any good plan, the key is to provide a goal or a source of inspiration that will help you stay on track for paying off debt, saving money, and accomplishing your goals. While personal finance and corporate finance plans are bound to be a little bit different – particularly in the number of zeros involved – they’re both important and both serve as a starting point for a brighter financial future.
1) Set a Goal
Your goal will become the driving force behind the plan. Think about what your goals are in the short and long term. Be realistic, but also specific. A short-term goal would be something you want to accomplish in the next 1 to 2 years. A long-term goal will be something you want to accomplish in 5 or more years. For example, a short term goal for an individual might be to save for a down payment on a car. A long term goal for a medium-sized business might be to surpass $1,000,000 worth of sales. Your goal should take into account your current finances as well as how urgent the achievement is.
A financial plan worksheet can be a great way to get started. It will include a space for your goal and measured increments to help you determine what steps you need to complete to make it to your goal. A financial planner can help with education / goal planning if you need assistance.
2) Build in Milestones
If you’re the type of individual or small business that needs a little bit of motivation to stick with your plan and reinforce good habits, you should build in milestones. For example, if you’re trying to save $2,000 for a down payment on a car, you can set a milestone at $500, $1000 and $1500. That way, you’ll achieve smaller wins along the way and feel like you’re making progress. These wins will keep you motivated to continue with your plan.
3) Set a Monthly Target
If your financial plan is savings-based, you will want to take some time to break down your plan into monthly increments or monthly savings goals. That way, you can see exactly how much you need to save and for how long you will need to save it to reach your goal. This makes it easier to plan your budget.
If you’re not able to save as much as you had planned, take a look at your budget and see if there are any places that you can make a small adjustment, like eating out less or making your morning coffee at home. When you spend less, you will have more to save and the ability to meet your goals.
If you can’t spend less and add to your savings, you will need to adjust your time-frame. You can also look for additional ways to bring in more money, like taking on a side job or raising the price of your goods or services.
Creating a financial plan takes time in the beginning, but the result will be a greater capacity to save and reach financial milestones that are important to you. Whether you’re a business or an individual, having a solid financial plan in place is the key to success today and for years to come.