The Difference Between Three and Four is One Great Financial Future
by Brian Picariello CPA/PFS, CFA, Traust Sollus Wealth Management
609-779-6700, [email protected]
You have chosen to open your own practice because you know that running a business of your own is the way to build your personal fortune. You are prepared to put in the time and take the business risks, because you know the rewards will come.
As a good doctor, you probably put in long days taking care of your patients, and then want to spend time with your family as well. Although revenue is coming in and you're taking home a good paycheck, do you know how to take to maximize the value of your business and use it to grow your own personal wealth?
This year choose to find the time to take the four steps that will help your reach your personal financial goals.
Rx: Clear Goals and a Financial Road Map
First, in order to build your personal wealth through your practice you need the structure of a financial plan for yourself as an individual and you need one for your business. Easy enough. However, as a financial planner I've found that in many cases what gets in the way of creating workable plans are what I call practical obstacles.
Let me help you identify the practical obstacles standing between you and your successful financial planning. The good news is, there are only three of them. Once you know what they are you will have a clearer path to achieving your personal financial goals.
The Three Practical Obstacles Against Financial Success
1) Lack of goals and numbers
Building your wealth is a journey, but it should not be an adventure. For those who lack specific goals and numbers, the journey is often aimless and there is a great risk that you will not arrive at your destination - that you will have to retire later than you wanted, that you will not have as much money when you retire as you wanted. To build an effective financial plan you first need to decide where you want to head and know where you are now.
Here are some questions to ask yourself that will help you define your goals and enable your financial planner crunch the numbers relevant to you and your practice.
- How do I visualize my future desired lifestyle?
- Specifically, how much money will I need to support it per year?
- Exactly how much wealth will I have to accumulate to live the lifestyle I want in retirement?
- How many more years do I have to work?
- To achieve my desired wealth, how much of this money could reasonably come from my business income or salary and how much from investments?
- What do I plan to do with my business?
- What is my business exit strategy?
By answering these questions you can start to construct a truly useful plan, and insure your odds of success for achieving your specific financial goals. Even medical professionals on salary can use some of these same questions to give their financial houses a good foundation.
2) No written financial plan
Do you have personal and business financial plans that are written down? Or do they exist only as ideas floating around in your head? It is important that you actually see your numbers and their relationships to each other. A written plan will give you a much better chance of achieving your dreams. Here is something that should get you very pumped up: Years ago, a famous HarvardBusinessSchool study found that only 3% of the population puts their goals in writing. Another 14% have goals, but don't write them down; 83% do not even have clearly defined goals. Which group do you think clocked in as having the greatest earning power? That's right, the 3% who have a written financial plan were found to earn an astounding ten times that of the 83% group. I don't know about you, but when I can stack those kinds of odds in my favor, the effort is well worth it.
3) No Road Map
How close am I to financial independence and what should my action plan be for getting there? These are two common questions I'm asked by new clients at my financial planning firm. When you lack a road map for building your wealth, you can't answer either question.
Do you know how close you are to achieving financial independence? Are you a quarter of the way there? Ninety percent there? Are you taking the most direct route? If you were planning a trip from New York City to Washington, D.C. you'd recognize that going through Ohio would not be an effective route. You need to select a sensible path to your financial goals, too. Unfortunately, that's not as simple as going to Mapquest.com.
Working with your financial planner - who should also be a CPA - map out exactly how far along you are on the road to financial independence. Together, you should identify and write down what actions you need to complete to build your wealth. These should be steps that are specific to both your personal financial situation and to that of your business. Your action plan should include counsel from your financial planner about what things you need to look out for - at home and at work - that may be a drain on your financial future. A competent planner should counsel you on how to plug these drains on your wealth.
The Four Steps to Financial Success
To recap, here are four steps to put you on a clear road toward financial planning success:
- Establish goals and determine your specific numbers.
- Put your financial plan in writing.
- Create a timetable to complete the action steps necessary for the business to achieve your needed numbers.
- Construct a road map in your financial plan that guides your wealth building journey and tracks your progress.
And there you have it, three practical obstacles knocked over the head by four easy-to-follow steps. By using these steps you won't get stumped by practical financial planning obstacles. Instead, you'll be able to focus your time and attention on the strategies and tactics at your business and at home that will help you build your wealth.
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