Who can you turn to for qualified financial advice? The well-publicized answer is a certified financial planner. If you’re like many Americans, you may feel that you cannot afford a financial planner or a planner won’t meet with you unless you meet minimum income and assets qualifications. There is some truth behind this sentiment. A certified financial planner operates on a fee-only basis, commonly a set hourly rate or a set percentage of assets under management. To make each hour as profitable as possible, financial planners may establish a high hourly rate or may set a threshold for assets under management. Either way, it’s an arrangement out of reach for individuals just setting out for financial success.
You can take control of your finances, without a certified planner to hold your hand. The process will take some discipline as you learn to think about yourself and your financial situation objectively. Your first step is an honest and thorough assessment of your financial situation. Sit down with your pertinent financial information – recent bank statements, credit card statements and other bills, and a recent paycheck. Schedule an appointment with yourself at a time when you can focus with no distractions. Compile one list with everything of value that you own; this list represents your assets. Create another list of every bill you owe, particularly loan balances and credit card balances; this list represents your liabilities. Add up each list and compare. If the assets are more than the liabilities, your net worth is positive. If liabilities outnumber the assets, you’re hurting, but it’s not hopeless. Second, catalog your spending on an annual or monthly basis. Using a recent paycheck, evaluate your income over the same annual or monthly period. Again, compare the results of each. If you are spending more than you are earning, you won’t get ahead. Now that you know where you stand, it’s time to learn where you are going.
Define your financial goals and your financial priorities. What does financial success look like to you? When do you expect to achieve financial success as you have defined it? Remember, a successful goal is a SMART goal. The acronym SMART represents Specific, Measurable, Action-oriented, Realistic, and Timely. Many people fail to set goals that fulfill all of these characteristics, and thus fail to ever accomplish their objective. If your goal is specific and measurable, you will know how far you have to go and when you have reached your goal. Action-oriented gets you off the couch and moving toward the finish line. A realistic goal is about circumstances you can control, not pie-in-the-sky dreams like winning the lottery. Timeliness sets a specific deadline for the goal; without a deadline, procrastination wins every time.
Develop a plan to reach your goals. If your goals are ambitious, break each one apart into mini-goals and tasks. For example, if you would like to save $1million, your first step is still to save $1. Your early accomplishments will pay large dividends as you move toward the finish line. Each goal achieved or task completed feels like victory. When you get overwhelmed and feel like your progress has stagnated, reflect on these smaller achievements to keep you moving forward. Many people will abandon a goal after a setback. By dividing goals into manageable pieces, you can build a momentum of success to drive you forward.
Stop periodically to evaluate your plan and your financial situation. Are you making progress? Do your goals still represent who you are, or have your priorities changed? Are there any changes to your assets or to your income that impacts your ability to see things through to the end? This is one of the most critical parts of being your own financial planner. In fact, a large number of individuals who seek advice from a professional planner fail to engage follow-up services, only to wonder why their plan stops working. As your own financial planner, it is your duty not to disappoint yourself or to let down those who depend on you. After your self-evaluation, make adjustments to the plan as needed. Adapting your plan may involve seeking out new information on investment strategies or rearranging priorities from paying down debt to saving for retirement. Be sure you take time to celebrate any milestones you have reached on your path to financial success, and keep making time for these self-checks as you go forward.
Acting as your own financial planner can be a time-consuming and challenging experience, but it is not without rewards. When you watch the news and see a story of another financial professional who squandered client monies, you will be reassured because your financial planner is someone you can trust. You will be confident when the stock market swings up and down because you will know exactly where your investments lie. Most importantly, you will feel in control of your financial future, knowing that the ultimate accountability for your financial success lies in your own hands.
