Is Planning for a Prosperous Year Possible? January 30, 2024
Financial planning is like orchestrating a grand adventure, where the thrill lies not just in reaching the destination but in relishing every moment of the journey. It’s about turning your dreams and ambitions into reality. Yes, you read that right – financial planning can be a thrilling and joyful experience!
The Path To Financial Freedom is well-documented but often overlooked. It all begins with your ‘WHY’ – a compelling reason that propels you towards your goals. Without a strong ‘WHY’, plans can wither at the first sign of challenge.
This article aims to inspire a sense of urgency and a pro-strategic mindset to live the life you’ve always desired. Now without further ado, let’s delve into the essentials of well-crafted planning and set the stage for a prosperous financial year ahead.
5 Reasons Why You Should Start to Plan Strategically in 2024!
1. Roadmap for Clarity
Your ‘WHY’ acts as a roadmap, providing clear guidance towards your financial goals. It defines objectives, breaks them down into actionable steps for purposeful navigation.
2. Efficient Resource Allocation
Strategic planning facilitates the efficient use of resources from time, money to effort. It aids in prioritising tasks, preventing wastage, and ensuring meaningful contributions towards achieving your goals.
3. Motivational Fuel
In challenging times, your ‘WHY’ serves as motivational fuel. Understanding the purpose behind your goals reinforces commitment, keeping you focused and driven amidst obstacles.
4. Preparation for Success
Strategic planning prepares you for various scenarios, fostering greater confidence in overcoming obstacles. It enables calculated risk-taking, such as navigating market volatility for higher returns and faster goal achievement.
5. Balancing the Present and Future
Just like planning for a holiday, strategic planning lets you enjoy the present while securing your future.
Remember, if you can envision it, you can achieve it! A Harvard Business Study revealed that the 3% of MBA graduates with written goals earned ten times more than the other 97% combined within ten years post-graduation. This study underscores the power of strategic planning for success in finances, career, and life.
Maximise your chances of success with these 6 essential tips, a culmination of insights I have gained from attending numerous paid corporate and self-development courses on goal setting.
Tip #1 Reflect on Your Financial Battlefield
Consider these questions for introspection, and integrate past achievements and lessons into this year’s plan:
● What were your greatest financial lessons?
● What strategies were effective and which ones fell short? How can you approach things differently?
● Which risks did you take, and what were their outcomes?
● What knowledge do you need to acquire in order to make better decisions?
● Who can you ask for support or guidance for your continued success?
Reflection is a crucial tool for success. Evaluating your financial battles is vital to determining what you should ‘stop doing’, ‘continue doing’ and ‘start doing’.
With clear insights into these 3 areas, you’ll be well-prepared to strategically plan for the future.
Tip #2 Construct Your Financial Blueprint
Many harbour dreams of attaining Financial Freedom, but a vision without a plan remains a mere dream. To transform your vision into reality, consider these 6 pivotal questions to construct your financial strategy:
Why do you aspire to attain financial freedom? Uncover the motivation and implications behind this goal.
What is the desired outcome? or What does financial freedom look like for you and what is your target figure signifying success?
Where are you right now financially as compared to your ultimate goal? Where do you see yourself financially in 3-5 years?
When do you foresee yourself accomplishing each goal? Define a realistic timeline for the overall strategy. Specify the timeframe for achieving each goal and when you plan to attain the desired results.
Who are the key individuals who will support, advise and hold you accountable for your goals? (Your People). Who are the people who need to be involved in the process of executing the strategy in order to make it a reality?
How will you employ your resources to reach your goals? Develop a tactical approach to translate strategy into action. Determine the most efficient vehicles to achieve your desired results.
Remember, a robust strategy demands a clear planning process to ensure your financial journey is well-guided and successful.
Tip #3 Set Goals and Form Habits
The key to lasting success lies in setting achievable goals and fostering habits that support them. It is crucial to ensure that your goals align with your age, time horizon, and personality. Consider adopting these methods:
1. S.M.A.R.T Goals
● Specific: Clearly define your goals
● Measurable: Ensure they are measurable
● Achievable: Tailor the goals to your abilities and skill set
● Realistic: Avoid unrealistic expectations
● Time-bound: Assign a clear deadline to each goal
2. Reverse-Engineer your Goals
● Plan in reverse, starting with the end goal
● Identify small goals, targets, and tasks
3. Objective and Key Results (OKRs)
● Set quarterly goals based on objectives
● Define key results as measurable targets
Establishing habits that align with your goals is vital for success. Create a daily or weekly routine that supports your objectives and commit to it until you achieve your goal.
Tip #4 Build Your Support Network
With your strategy and goals in place, it is time to assemble a support network. Surround yourself with financially savvy individuals such as coaches, mentors, or trusted advisors who can act as strategic partners on your journey to financial prosperity in 2024.
List down the specific characteristics and areas of financial expertise you need and find those genuinely interested in your success and who can:
1. guide you with insightful questions to help you reach your goals
2. offer constructive challenges to keep you on track
3. provide you with valuable resources to help you make well-informed decisions
Consider leveraging the expertise of mentors who have navigated similar paths. Their experience can help you avoid potential pitfalls and hasten your progress. This could include consulting with a seasoned financial advisor who can provide tailored guidance based on their wealth of experience and insights.
Tip #5 Navigate Investment Options Wisely
Choosing the right investment path is akin to selecting the appropriate vehicle for a journey—it depends on various factors. Whether you’re impressing a date, ferrying your family, or racing in the desert, the vehicle (investment) must align with your goals and expertise.
Tailored Investment Vehicles for Different Risk Profiles:
For Risk-Averse or Low-Risk Profiles (2 – 4%)
Aim for stable growth with options like Money Market Funds, insurance-backed plans, or contributing to your CPF Ordinary Account (OA) for a solid foundation.
For Low to Middle Risk Profiles (4 – 7%)
Opt for a balanced approach, diversifying across Bonds, Real Estate Investment Trusts (REITs), Investment Linked Policies (ILPs), or CPF Retirement Account (RA).
For Middle to High Risk Profiles (7 – 11%)
Embrace a dynamic strategy like Robo Advisors, Investment Linked Policies (ILPs), Unit Trusts, or Index or Sector’s Exchange Trusted Funds (ETFs).
For High Risk to Adventurous Individuals (11% and Above):
Seek opportunities for substantial wealth. Explore individual securities on the US Stock market for a more hands-on, high-risk and high-reward approach. To share my personal investment approach, I blend Fundamental Analysis to identify top-quality stocks in the US market with Technical Analysis to enter the market at opportune times, amplifying my Margin of Safety. This dual approach capitalises on both analytical and technical strengths.
Tip #6. Track and Measure Your Growth
Regularly monitoring your progress is crucial for adapting to the ever-changing financial journey. Tracking progress encompasses the fulfillment of aspirations, reflecting the real-life impact of your financial decisions. By tracking your growth, you not only quantify your financial trajectory but also savor the tangible and intangible rewards along the way, enhancing the richness of your journey toward financial goals.
Here are my Top 5 Key Ratios for Measuring Your Financial Progress:
1. Savings Rate (Total Savings / Net Income):
Aim for a savings rate of at least 20%, indicating a strong financial position and increased capacity for future goals.
2. Basic Liquidity Ratio (Liquid Assets / Monthly Expenses):
Strive for a ratio of 3 – 6 months or more to cover living expenses, providing a solid financial cushion.
3. Debt to Asset Ratio (Total Debt / Total Assets):
Aim to maintain this ratio below 0.5 (50%). for reduced financial risk and a healthier balance between debt and assets.
4. Net Investment Asset to Net Worth Ratio (Total Invested Assets / Net Worth):
Seek a progressive increase in this ratio, particularly as you approach retirement, for a robust financial standing.
5. Return on Investments (Profits from Investment / Total Invested Amount):
Tailor this ratio based on individual goals and risk profile, as discussed in Tip #5.
In the words of Peter Drucker, ‘If you can’t measure it, you can’t improve it.’ Regularly review your investment strategy, set performance benchmarks aligned with your objectives, and let positive ratios affirm successful investment decisions.
Call To Action: Bridge the GAP!
Kudos to those who are embarking on this financial journey — keep leveling up to reach your ultimate goals. For newcomers, engage a wealth coach, seek guidance from mentors, and envision us as your seasoned generals. A sound strategy is rooted in meticulous planning.
To delve deeper into flourishing in 2024, schedule a 1:1 consultation session with me and kick-start your journey toward financial success
Phillip Securities Pte Ltd (A member of PhillipCapital)
About the author
Phillip Securities Pte Ltd
Diego, an investor with two decades of experience and a former IT consultant, achieved Financial Independence and Retired Early (FIRE) at the age of 40. Now, he serves as a founder, educator, community builder, coach, mentor, and advisor.
In his role as a professional wealth advisor, Diego's passion is more than a flame; it's an all-consuming FIRE. This fervor drives his commitment to assisting individuals in expediting their journey to financial freedom, making it less complex, more efficient, and enjoyable.
Diego's vision is centered on instilling the values of Education, Empowerment, and Embracing Financial Literacy in families, empowering them to elevate their financial standing and attain Financial Freedom. His message resonates with the idea that each of us has the power to be the change we want to see in our family trees