Financial Planning Made Easy

It might seem an odd time of year to bring this up, but let’s go on holiday, shall we?  Bear with me, this conversation is extremely relevant to your financial planning.

When we talk about financial planning, people tend to think it is this complicated process that will result in a thick, bound document sitting somewhere on a shelf.

People also tend to think that it will lead to a miserable life and that if you have a financial plan, it means that you will not enjoy your life. People also tend to get scared of having a financial plan because they think it will point out all the mistakes they have made and also keep emphasising how far they are from their objectives.

Putting figures down will force them to face the luxuries they cannot afford. So let’s not think about these things, and let us simply plan for a holiday.

This is how it works.

Step 1: Decide to go on holiday.

Seems simple enough. However you will be surprised how little people actually make this decision. To make a decision, you need to ask yourself, “What do I want?” You see, financial planning is not simply about making sacrifices that you are unhappy about. It is actually about planning your life so that you can actually get what you want – so that you can actually do the things you want.

You may want to buy a house, pursue further education, travel, maintain a certain lifestyle, education for your children, buy a new fridge or car, start a business, etc.

Decide what you want, not what others have told you to want. In this case, you want to go on holiday.

Step 2: Decide when to go on holiday.

Wanting to go on holiday means nothing until we actually put a time frame to it. To make that holiday a reality, we have to commit to a date.

That’s when it really starts to take shape and you start to do things to ensure this comes to pass. You make sure you have no commitments around that time; you arrange to take leave from work, and so forth. In other words, you make space for the holiday. When do you want to buy that property? Statements like ‘in a few years’ do not make sense. State when you actually want to have it.

Just like the holiday, you will actually start making space in your life to own a property. When you don’t commit to a time, then you do not put your most important resource at work for you, i.e. time.

Step 3: Where are you going on holiday?

How much will it cost? You can’t travel to all destinations at that particular time. You have to make a choice. To make this choice, you have to do the research. You will go on the Internet, call a travel agent, get a referral from a friend, etc. The point when you are figuring out the ‘where’ is most likely when you evaluate costs as well. However, you have already gone through about two steps before you start thinking about the money.

This is very important because you have gotten attached to the idea of going on holiday so you will most probably find a way of going. If your ideal destination does not work out because of money or bookings, you can find an alternative destination.

Your commitment at this stage makes it much harder to let go. This is actually where you want to be. If we started the first step with finding out how much a holiday costs, we would probably never go on holiday.

We would be tempted to write it off as too expensive or decide that we do not have enough time. The same thing will happen to all your other objectives, be it buying that property you want to, or starting that business.

Get committed and attached first, and then you can figure the money out. Yes, once you do bring a budget into the equation it may change some things, like what you will end up buying, when and where, but you will not let go of the idea.

You just may have to take a different route, or alternatively challenge yourself to come up with solutions so that you get what you want.

You may decide to do some extra work over the weekends and get some money, or ensure you meet your targets at work and get a bonus.

Step 4: Plan for the holiday.

Now that you have gone through the above, it’s really about making it a reality. It may mean putting aside a certain amount of money per month. Taking time to meet with the travel agent. Making sure you buy the air ticket on time.

Make sure to pack at some point. Coming up with the money will need some structured planning. You may need a structured way of doing research or collecting information.

You may need to engage various professionals or learn something different. Planning turns your decisions into measurable actions. “I want to buy a property next year in Thika” becomes “I will research by going there on weekends, I will go see a property agent, I will save a certain amount per month, I will put down a deposit, I will look for co-investors.” Planning is what puts you on that airplane to your destination.

Step 5: Just do it.

Get on to the airplane and go on holiday. It is possible to do all this and then get scared at the point of getting on board. Don’t overthink it. Buy that house, start the business, travel, buy your fridge.

Create your financial plan. It’s just like going on holiday.