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Financial Planning Pays Off
By Kelvin E. Boston
Spring 2005
Fail to plan, then plan to fail. That is an old bromide worth remembering, particularly as it applies to your personal finances.
Many of us dream of sending our kids to college, buying that first house or moving up to a larger one, or just taking regular vacations. With effective financial planning, you can turn those dreams into goals and, ultimately, reality within a predictable timeframe. Otherwise, your dreams likely will remain dreams and nothing more - except, perhaps, financial disaster.
To get started planning your financial future, take a step back and ask yourself, "Why have I failed to plan?" Answers I hear are: "I don't have enough money," or "I have no disposable income."
With the pressure of day-to-day living expenses, it might seem as if there isn't enough money to go around. But you don't really know what you have until you put the income and outgo down on paper in a cash flow analysis. You might be surprised at the "excess cash" you have that can be directed or redirected to a specific goal.
"I'm a procrastinator" is probably the number one excuse people give for their lack of proper financial planning. Typically, we procrastinate on tasks that are new to us or seem overwhelming. Call it what it really is: fear. As big or small a role as money may play in our lives, too many of us are afraid of it. As a result it handles us rather than us handling it. That is a situation of particular concern to those in the military.
Recent studies conducted by the Department of Defense and private researchers showed that personal money woes have become a growing problem that can impact military readiness. In 2003, the Department launched its Financial Readiness Campaign to help military personnel and their families learn more about financial responsibility and better manage their money.
"Our objective is to reduce the stress that people feel as a result of financial problems," said Col. Marcus Beauregard (USAF-Ret.), former Director for Morale, Welfare and Recreation Policy, at the time. This would happen, he said, "through awareness... helping them get out of debt, start saving and prevent them from being preyed upon by predatory practices."
One way families can take charge is to use a home computer and inexpensive user-friendly software. These tools can assist you in performing routine record keeping and financial calculations. Financial education websites can provide guidance.
For the big picture, work with a professional certified financial planner, if possible, or a personal financial management specialist at your military installation.
Some civilian planners are compensated on a fee basis from $100 and up, the cost depending on the level of service provided and products purchased. Others are paid by commission based on the products sold. Military personal finance managers earn salaries and are not compensated by fees or commissions.
Choosing a planner requires some diligence. Ask around for references. Review their credentials and educational background. A partnership with a good planner could be extremely beneficial in analyzing your financial life and helping you create a strategy for short-term goals that will take 12 months or less to achieve and long-term goals that will take a year or more to accomplish.
With the help of a financial planner, you should:
- Identify goals and objectives
- Analyze your situation
- Create alternatives
- Develop strategies to meet goals
- Implement strategies
- Review your situation periodically
It is easy to declare that you want to be a millionaire. But is it achievable, based on what you know about your finances? If not, then it is not realistic. It is important to set goals that are:
- Realistic
- Specific
- Measurable
To effectively utilize the assistance of a financial planner, think in advance about your life and what you want for it. Be prepared to answer these questions:
- Do you have any savings or a savings plan?
- Do you have a savings goal?
- Do you have an emergency fund? (How much of it is liquid?)
- Do you have savings on hand equal to three to six months' living expenses?
Keep some important points in mind when working with a planner, says Col. Beauregard. "Don't just sign up and forget about it. Review your plan every six to 12 months to be sure that it is up to date with your needs. There are a lot of products out there, and only you can really determine which is best for you."
Remember that no team takes the field without a game plan. When it comes to preparing your financial game plan, neither should you.
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Kelvin E. Boston is author of "Smart Money Moves for African-Americans," as well as executive producer and host of the PBS television show, "Moneywise."
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