The Power of Having A Personal Plan

Having a personal plan for your life is one of the most powerful financial solutions available to you. It can help you overcome personal challenges, and aids progress toward financial independence. And having a well-defined vision of your future, along with a personal goal setting plan, should be one of the first things you do for yourself as you begin your journey toward financial improvement.

I have written previously on some of the psychological issues that impact personal finance, both when it comes to credit card use, and when it comes to the relationship we have with money. And I continue to believe that psychology is the core fundamental issue that most often prevents people from doing better with their finances.

While it’s great to identify problems that inhibit progress, it’s not much help unless we also identify solutions that enable us to effectively overcome those problems and move forward to something better. That’s where developing a personal plan comes in.

Aligning Our Money And Our Values

One of the core principles of good financial management is aligning our spending with the things that we truly value. In order for that to be effective though, we need to have a good handle on exactly what it is we do value, and this requires some effort on our part.

Often, this process is called finding our “why”. What that means is that we’re really digging down to find the reasons behind the actions that we want to take. The reality is that committing to take action is one thing, but if we don’t really know the reason why we’re taking that action, it’s so much harder to keep on putting forth the effort to do what we know we need to do. Understanding “why” is the key to motivation.

(Simon Sinek is the master of explaining the importance of finding your “why”. More information from him can be found here.)

As an example, many of us have committed to improving our physical health. However, we often find it hard to get the motivation necessary to get up off the couch and do something about it. We know we should be getting more physical activity, eating better and taking care of ourselves, but somehow it keeps getting put off until a later point in time.

However, if we start having some serious health issues, and our doctor tells us that we need to improve our health to maintain a long, full life, suddenly everything is different. Now we have a much stronger, clearer reason for being physically active and getting healthier. In this case, it’s much less likely we’ll keep putting off what needs to be done, and we’ll knuckle down with a sense of urgency. The “why” has become clearer, more real, and more urgent.

Money issues tend to work the same way. When we have a clear and important reason to curtail our spending, pay down our debts and increase our savings, we’re much more likely to consistently follow through with these activities to reach our desired goal. Even in the face of the challenges that will inevitably arise.

An Example From My Own Life

To illustrate how this works in a small way, earlier this year my wife and I decided we wanted to take a trip to Europe. This is something we have talked about for years but we’ve always put it off; either we didn’t have the money, we didn’t have the time, or something else got in our way. So this year we decided we were actually going do it. However, there was one stipulation: we would only go if we could pay for the entire cost of the trip, in cash, before we left.

So, at the beginning of January we decided that our goal would be to leave at the beginning of May. We researched the cities we wanted to go to and all the things we wanted to see. This gave us a very clear picture of what that trip was going to look like, and how much it would cost.

We figured that, all in, we would need about $9,000 (Canadian) to cover the cost of our trip. Saving that amount in cash prior to our departure was our personal plan, and we now had a very clear reason for wanting to achieve it. The work we had put in to researching the trip left us highly motivated to make sure we took it.

So, how did things turn out? Well, not only did we manage to save all of the money for the trip in just four short months, but we even managed to save $2,000 extra!

Now you have to understand, we’ve never managed to save that much money over a four-month period before. Not ever in almost 26 years of marriage. Typically in any given month we contribute between $1,000 and $1,500 to savings and that’s it. This was really exceptional.

So what was it that made the difference? It was having a simple, achievable plan, along with a clearly-defined objective in mind. We appreciated exactly what that trip meant to us and why it was so exciting that we were finally going to make it. Those four months were the lowest spending months we have ever had as far as our regular expenses go.

Having a clearly-defined goal that you are passionate about, along with a personal plan for achieving that goal, truly does make all the difference in the world. It can absolutely change the way you think, and alter some ingrained money behaviors you may not even be fully aware of.

The First Step Is The Fun Part

So here’s my recommendation. Before you do anything else in regard to working on your personal finances, sit down with your partner, your loved one, your children, or even just quietly by yourself. Think deeply about what it is you really want out of your life. Talk about it. Define it. Identify why these things are important to you. And write them down.

And this process should be individual to you. Don’t borrow objectives from other people, or from things you’ve read. Take the time to make it individualized. Just about you and your family.

What makes this fun is that there are no right or wrong answers. Let yourself dream big, if that’s where you are drawn to. Even embrace dreams that may seem a little crazy, or harder to achieve. But it’s also okay to have simple goals. Maybe all you really want is a measure of safety and security in your life. That’s okay, too. Think about where you would like to be in the distant future, but also things you might like to accomplish sooner as well.

Ideally, at the end of this exercise you’ve identified a future that you can really embrace as being uniquely yours, and something you’re passionate about achieving. And you should be confident that you’ve set goals that are specific, attainable and realistic. Even if they may be a bit of a stretch.

Personal goal setting for foreign retirement.

Celebrate Smaller Victories Along The Way

The next step is personal goal setting; identifying the smaller steps that you can take on the way to achieving your primary goal. These smaller steps form the framework of your personal plan for meeting your objective. Achieving small goals along the way to your ultimate objective will give you a sense of accomplishment, and will motivate you to stay on track. It also gives you a clear way to measure the progress you are making.

For instance, let’s say you’ve decided you’d like to retire in a foreign country 15 years from now. Clearly define what it is you need to accomplish to make that goal a reality. In this case, let’s say you need to pay off $30,000 in credit card debt and contribute $250,000 to your retirement accounts.

Now, what are some of the smaller personal goal setting steps that you could take that lead to achieving that end goal?

Well, you could start by setting a goal to pay off the smallest credit card debt that you have first. Allow yourself to celebrate when you accomplish that goal. The next goal could be to pay off the next largest debt, and so on.

Other goals may be to set up an emergency fund so that you don’t have to go back into debt if something unforeseen happens. Once your debts are paid off and your emergency fund is healthy, the next goal could be to start investing in your retirement accounts. Set goals to reach specific dollar amounts in those accounts and celebrate each time a threshold is achieved.

The important thing is that as you’re working toward these goals and making progress, you keep the ultimate goal clearly in mind. It’s important to always have a very clear picture of what it is you’re trying to accomplish and why, because that is what it will take to keep you motivated to stick with your personal plan.

Keep It Flexible

It’s also important to understand that your goals are not necessarily locked in stone from day one. As time goes by and you experience success, you may find that your goals change.

In the example above, maybe family changes make retiring in a foreign country impractical. It’s important to identify what changes have taken place and what the new objectives are. Then you can realign your steps along the way to achieve your new objective.

The key is that no matter how many times your objective changes, always keep it at the forefront of your mind. Allowing that overarching objective to motivate you, to be your “why”, is what will help to keep you on track, keep you disciplined, and keep you moving forward even when times are tough.

Important Disclaimer: the information above is for general informational purposes only and does not in any way constitute an offer for the purchase or sale of any security and is not intended to be considered comprehensive or personalized financial or investment advice. assumes no responsibility for the use or application of this information. Always consult a tax, investment, or other appropriate professional before adopting any new financial strategies.

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