13. Leverage

Principle: You must use your assets wisely to achieve your goal.

Unfortunately, most plans are written at a high level, making it difficult to know how to put it into action effectively. To deal with this, you must take the time to personalize your strategy. This means communicating your plan into clearly defined, actionable terms so you can actually see yourself completing the task in the strategic plan. You must create a map to serve as a visual communication tool that you use to draw a picture of your financial success creation plan, which includes your values, goals, vision, and strategy in the form of steps to be accomplished to get you closer to achieving your goals. You, as well as those that must help you follow the plan, must see the plan in action.

This map enables you to communicate the priority of the various objectives in the plan. When done right, this plan can guide the financial decisions of all those in your family or home who must follow this strategy on a daily basis. It helps them determine where to best focus the resources or assets available to them.

So now examine a series of steps for an individual or business with which you can organize your finances, and design a blueprint using your assets to ensure you accomplish your financial goals for earning, spending, and saving current and future income.

Often it’s too difficult to see through your mess to see what’s right in front of you. This usually occurs because you are tripped up by your past mistakes or stuck at the pit stop in the town of “reality.” One of the biggest mistakes you can make is spending or investing without a plan. Without a plan, you’re prone to make mistakes and experience setbacks. Because of these setbacks, you might not think winning is possible, mainly because you can’t see past what’s before you now. Your situation seems so big it blocks your view of the future. Because of this block, you might be short on vision, and without vision, you’re blind. If successful people listened to the negative press, comments, and all the naysayers that said they were sure to lose, it would affect their psyche and decrease the probability of reaching their goal. The key is to block the negativity, choose your direction, and choose it wisely. Have a definite desire of what you actually want life to pay because it’s willing to give you what you ask of it.

Creating the master plan is a crucial step in reaching your desired results. Following are five key steps to formulating your plan. Regardless of the purpose for the plan, it must cover five key areas:

1. What is the goal or the end result?

2. What do you need to do to get there (steps/objectives)?

3. How do you plan to accomplish it (action plan)?

4. How long will it take you to accomplish these steps or how much time have you allowed to accomplish the steps (measurement/time)?

5. What resources and tools do you have to help get you there?

Imagine that you’re preparing to build a new home. You’ve had many experiences through the years that have taught you lessons, and also you’ve had ideas of what the perfect home would look like. Before construction begins, you sit down with your builder to review your design goals. You ask when you can see the blueprints, but he tells you he doesn’t use blueprints, but rather likes to design as he goes. He feels that blueprints are restricting, so he doesn’t use them.

The odds are you probably wouldn’t hire a builder that did that. It’s a proven fact that when building a house, it’s good to have a blueprint or plan of action that outlines what’s needed, the steps, the materials, and the time to complete before beginning the task. The bigger the goals, the more planning is needed. Unfortunately, you might be operating without a plan; even though you think you have it in your head, you actually don’t have a plan and have chosen to operate by default rather than on purpose or intentionally.

Why would you take something as important as building a solid financial future for granted or leave it to chance? Where you are financially currently is by design or lack of design. Many people don’t stop to think about this until it’s too late and their financial lives are in ruin, which is where most realize a plan is needed. You cannot nor should you make any financial decisions independent of a master plan.

Now is the time to allocate some time to create a personalized Financial Success Plan that’s designed to build the kind of financial future you envision.

This chapter is designed to help you create a plan that works for you. There is no cookie cutter answer, but this blueprint can help you by providing the key components and customizing a solution for yourself. For this plan to work, you have to revisit the chapter on goals to make sure you have identified clearly defined goals to establish your financial priorities.

List your goals. Create a spending plan, or what some people call a budget, which is an essential tool for everyone, no matter how much money they have. Without a spending plan, you can’t intelligently implement saving and investing strategies because you don’t know if you have any gaps or a surplus in your plan. Therefore, you can’t make informed financial decisions.

Your personal financial goals and budget reflect how you view and use your assets. Married couples should make these planning decisions together because it establishes you as a team rather than opponents. One-half of marriages end in divorce, and 80 percent of those are due, in part, to money problems. Jointly establishing a financial plan helps create a foundation for a solid financial future and can potentially help save your marriage.

The following are key components that you should include in your plan, but you can make adjustments where needed to customize it for your financial life:

1. Make a Financial Success Plan, relying on your current spending to establish realistic initial estimates in each category. You must track your expenses carefully to ensure your spending plan uses realistic figures.

2. Establish your short- and medium-term financial goals. Then look at your budget to determine if your available surplus puts you in a position to realize your goals. Or if you have a gap that needs to be filled either by changing positions for one with a larger salary or looking at ways to create additional streams of income.

3. Get realistic estimates of how much money you’ll need to retire. Sound Mind Investing (SMI)’s Retirement Planning Worksheet Calculator (www.soundmindinvesting.com/tools/) can help you with this task, as can many of the other good calculators available at other financial websites. Having specific figures in mind can help motivate you if you need to start saving more, or potentially keep you off the austerity budget if you’re doing better than you thought. Attack your debt, while avoiding further debt. This might not be easy, but it’s worth it. It doesn’t make much sense to be paying high interest rates while you attempt to save because the high interest rates cancel out your savings.

4. List all your debts, including balances and interest rates. You have a choice: You can begin with the debt with the highest interest rate first, so you aren’t throwing your money out of the window, or you can begin with the lowest balance. Paying the lowest debt gives you a sense of accomplishment and helps you become motivated to keep going. If seeing your debts disappear keeps you motivated, it’s worth paying a little extra interest.

5. Start building your W.E.A.L.T.H. fund by opening a high-yielding interest account and having money automatically deposited into it each month.

6. Take advantage of your retirement plan up to the amount your company matches. If you’re deep in debt, skip this step for now. But if your debt is manageable, meaning you have a clear plan to pay it off reasonably soon, take advantage of employer matching in your 401(k) or other retirement plan if it’s available.

7. Fund a Roth Individual Retirement Account (IRA). This is an incredible tool. You’ll get at least 20+ years of compound growth and then get to take that money out tax-free!

After you get your strategy set up and going, continue to follow it no matter what. Don’t let current events (and the emotions surrounding them) interrupt your plan.

Following are a few other key things to consider:

Start a college savings account. If you already have a child, the clock is ticking on their education savings. Consider using a life insurance policy for your child, Section 529 plan, Coverdell Education Account, or even Roth IRA.

Create an investment strategy to determine how much money you’d like to invest for the future. Remember that you never invest with money you need to live or meet obligations.

Explore where you can cut expenses. Look at services you don’t use often, call creditors to ask them to reduce interest rates, and shop for the best insurance rates annually.

Pull a copy of your credit report at www.annual-creditreport.com at least one time a year to include this in the plan.

Negotiate the best rate to eliminate old debt.

Keep your affirmations as a part of your plan.

Review relationships often to determine if you have individuals in your database that can help you reach your goals quicker.

There is definitely a right way and a wrong way to do this, so make sure you’re educated to take advantage of your financial future. Be sure to never buy into the idea that you need to save tons of dollars before you start to implement this plan in your life. Just start where you can with what you have.

Remember to first know exactly where you are in life to determine ideal timeframes of your season of life and risk tolerance.

Ultimately, your financial priorities and plan of attack can be decided only by you. But having a step-by-step financial plan can help you stay on track when you’re tempted to go rogue and freestyle with your financial life. Your goals must be bigger than your vices or wants to achieve the success you seek. It’s time to replace “I’ll get to it eventually” with “I’m doing it right now.” It’s time to build the financial house you desire that is built on a solid foundation of W.E.A.L.T.H. instead of straws that blow in the wind.