Keeping It Simple--Building a Financial Action Plan
(4 of 7)
Keeping It Simple--Building a Financial Action Plan
A note about writing your goals: it’s not enough to say something like "I want to have some extra spending money." Goals like this fail because they are not specific; to really work, they should specify three things:
- What the goal is
- How much money is needed for it
- When the goal is to be achieved
In our example, we should say, "I want to save an extra $40 at the end of every month to spend on what I want." That is not only specific, but it can be measured at the end of every month. Of course, it should also be realistic and attainable.
Here is a sample financial action plan:
MY PLAN
- Goal: Save $40 at the end of every month to spend on what I want.
- Task 1: Make a budget.
- Task 2: Look for less-expensive alternatives to existing expenses. For example, eat out 2 fewer times per week and save $10.
- Task 3: Divert the amount of money saved into a separate place.
- Goal: Save up $1000 for a different car by 10 months from now.
- Task 1: Make a budget.
- Task 2: Cut out unnecessary expenses; perhaps $100 per month.
- Task 3: Take on a part-time or temporary job to raise the needed money.
- Task 4: Divert the amount of money saved into a separate place.
- Goal: Pay off a $1000 balance on a credit card in 12 months.
- Task 1: Determine the amount that must be paid each month (online calculators can help with this).
- Task 2: Set aside that amount each month by cutting out unnecessary expenses.
- Task 3: Take on a part-time or temporary job to raise the needed money.
- Goal: Create an emergency fund of $5,000 in 24 months.
- Task 1: Reduce the phone bill, cable bill, eating out bill, and other bills by $208 per month.
- Task 2: Divert the amount of money saved into a separate account, such as a savings account.
The owner of this plan should monitor it at the end of every month to make sure it is on track.
These examples are simple, but they are the kinds that millions of people struggle with. As long as you make your goals specific enough to be measurable and you set specific actions down in writing, you have a working financial action plan.
As the time frame of your plan goes on, you will want to review and revise it, based on how well you are sticking to it. If you are not sticking to it, perhaps you were unrealistic, or perhaps there were interruptions that prevented you from reaching your goals. In that case, you can revise your plan and continue with it.
Consider using the example above as a template. If you wish, you can and should embellish it to include how you will measure your progress. You can even add a reward at the end.