February 4, 2019

Planning your finances for better 2019

Ikoyi cash seized by EFCC

By Emeka ANAETO,  Business Editor
You can pray all you like, you can wish whatever to happen, or dream them up, but you cannot get that good you hold in your desires for 2019 without working it out.


In this edition of personal finance we go further on how to make your dreams come true with strategic planning. But also note that planning is not enough. So the purpose of planning, beyond just a plan, should be the execution or implementability.

A few items should be in the list of your step-by-step plan for a successful financial year, 2019.

Note that the model espoused here is designed to be applicable to both individuals and small businesses or investors. However, this should not be taken as a model for a business plan when you have an elaborate business requiring a bankable business plan.

Nonetheless, it is a crucial lesson for your financial education and for future reference in financial planning.

*Set a Goal

Like any journey in life it is imperative you, not only know where you are going before you get started, but you need to keep your eyes on the goal, the target. So goal should go with focus

You may ask yourself open-ended questions to uncover anything and everything from immediate financial goals to feelings about risks and to what you intend to do when you meet the goals, target. A lot of people save money just for savings sake. This is very wrong and limiting.

The purpose of establishing the goal is to form the foundation or purpose of planning itself, to begin the financial journey with the clarification of a financial destination. Too many people save and invest money with no specific goal in mind. Going a bit deeper, too many people have financial destinations but these goals are not their own; the goals are whatever the so-called conventional wisdom has taught. The purpose of money must follow the purpose of life, not the other way around.

Do-it-yourselfers can fulfill this step by simply getting to know themselves a bit better. Financial planners do this by asking open-ended questions, which are questions that cannot be answered by a simple yes or no. Here are some examples of open-ended questions you can use in your own financial planning:

*What are your feelings about investing in the stock market? Why do you think you feel that way?

*What are some of your earliest memories and resulting experiences of financial planning (i.e., first savings account, first current account, and first business account or credit/ loan). How well did these efforts go in achieving your objectives?

*What are your financial strengths? What are your financial weaknesses?

*How do you plan to save enough for retirement?

Now you have an idea of your financial goal–the guiding philosophy to direct investment objectives, cash management, insurance needs, and other financial instruments to help achieve your goals.

*Gather  information

This step is where the information required to make decision for the appropriate strategies and financial actions to reach your goals is gathered. For example, what is your time horizon? Do you want to accomplish this goal in one year? five years, 10 years or 20 years? What is your risk tolerance? Are you willing to accept a high relative market risk to achieve your investment goals, or will a conservative investment be a better option for you?

Also, how far along are you in your goals? Do you have any money saved yet? What is the earning strength of your current income stream? Is it upscalable or do you require diversification to multiple streams of income to meet the target? How much do you know about the new areas of income opportunity? What of possible leverages you can tap into?

Do you have obligations including family that contend with the resources available?

Although you may already know this information, it is wise to have it all written down so that you can visualize all of the necessary information required to make investment decisions, to give yourself prudent “advice.”

*Put the Plan To test

Don’t test the depth of the river with both feet; do not put all your eggs in one basket if you must meet your goal by investing or starting a business.

Financial planning requires devising alternative solutions that are achievable at lowest cost and risk. With so many different variables to consider, your plan needs to develop, to evolve with your needs but remain within your capabilities and risk tolerance.

Warning, it is more risky not to take risk; take action; there is no success without venturing out for it. But there is what is called, calculated risk. Do something!

You may begin to wonder what may happen if you fail. This is where inaction grows into procrastination. Successful investors will tell you that just getting started is the most important aspect of success.

You don’t need to start out at a high level of savings or at an advanced level of investment strategy.

*Step up Implementation

The purpose of the step three above is to build your confidence level gradually. Now you simply put your plan to work! But as simple as this sounds, many people find that implementation is the most difficult step in financial planning. Although you have the plan developed, it takes discipline and desire to put it into action and make it work.

The point is to make your financial strategies achievable and to consider slowly moving up to desired level of activities.

*Monitor the Plan

It’s called “financial planning” for a reason: Plans evolve and change just like life. Once the plan is created, it’s essentially a piece of history. This is why the plan needs to be monitored and tweaked from time to time. Think of what can change in your life, such as marriage, the children, career changes and more. These events all require new perspectives on life and finance. Now think of financial changes beyond your control, such as tax law changes, interest rates, inflation rates, stock market fluctuations, and economic recessions, even loss of job or means of income. Nothing remains constant except change!