Planning: Three Steps to a Solid Financial Plan

Have you ever heard the phrase, “If you fail to plan then you plan to fail”?

It applies to so many aspects of our lives, so why would investing be any different?

Consider following this easy three-step process to help yourself set goals, and actually follow through with them.

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Get an Honest Start

We all start somewhere in life. Some of us come from “rags” and some of us from “riches”. Either way, it’s important to have a solid understanding of your current situation before developing any long-term investment goals.

Here are some questions you should ask yourself. Is my credit score high enough to qualify for bank financing? How much do I have in liquid assets to start my investment portfolio with? What type of investments do I already hold? Do I know anyone who would be willing to partner with me on an investment deal? The answer to these questions will ultimately help you determine a realistic starting point.

For instance, if you have poor credit, it might be hard to start your investment portfolio with rental properties. You may be limited to starting with stock market investments while you repair your credit over the next few years. On the other hand, if you already have a substantial 401(k) from your employer and good credit, you may want to focus your investments in other areas, such as real estate or personally-held businesses. We always suggest you work toward building a three-legged investment plan , that includes businesses, real estate and stock market investments.

Determine What the Ultimate Goal Is

People need to be pushed, and often have a finish line stretched in front of them. Some even need to have a pot of gold at the end of the rainbow to motivate them to keep going. For this reason, I believe your ultimate goal needs to be something that is realistic and motivating, but difficult to obtain.

A good friend of mine, Phil Trietsch of Tenex Properties, developed my favorite phrase for a long-term goal. He’s striving for the day when he finally has “go-back-to-bed money.” He’s currently building a real estate portfolio with the goal of having enough passive income that if he doesn’t feel like getting out of bed in the morning, he doesn’t have to.

This goal is a perfect example. It’s motivating (who doesn’t want this choice in their lives?), it’s realistic (other people have been successful building similar real estate portfolios), and it’s difficult to obtain.

As you develop your own long-term goals, be sure to leave some room for them to adjust as your personal life changes throughout the years. It’s OK for this to be a fluid process, so long as you’re not simply making your long-term goals easier as time goes on because you haven’t worked hard enough toward them.

Create Smaller Steps Along the Way

We’re getting towards the end of the year, which means New Year’s Resolutions are right around the corner. This is the time of year we all set life-changing goals for ourselves, only to give up on them by February. You might be surprised, however, to find the actual goals we set for ourselves are not the problems. The problem is that the “payoff” is often too far away to stay motivated to achieve it. The best way to stay motivated to achieve a significant long-term goal is to set progressively harder short-term goals along the way.

I would also caution that it’s easy to get bogged down in the details by trying to figure everything out at once. I recommend focusing on no more than three things at a time, but then really focus on them. Make them a priority, view your to-do list through the lens of your priorities, and you’ll notice a lot of things you thought were important fall off your list or get put on the back burner, because you realize that they won’t help you towards achieving your goals.

And keep in mind. If your goal is to do 5,000 push-ups this year, the hardest one you do will be the first. Building a successful investment portfolio is no different. Getting started is always the hardest part.

Matthew Vitlin is a Fee-Only financial advisor with Reliant Wealth Management. He helps individuals and families from all walks of life start, grow and manage long-term investment portfolios. As Vice President of Finance for Nevsky Prospekt, LLC, (a family-operated real estate investment portfolio), Matthew is highly skilled at looking beyond traditional stock market investments for his clients.


About the Author:

Tim Plachta, CFP® owns and operates Reliant Wealth Management and Reliant Consulting Partners.  He works primarily with small business owners to help them increase profit, reduce their workload (so they can relax more), and invest enough of their earnings to achieve financial independence.