America's traditional optimism about the country's continued economic progress seemed very well-placed in the late 1990s. The economy was expanding rapidly, unemployment reached record lows, and the stock market seemed to hit the stratosphere on a regular basis.
But as we saw during the first decade of the new millennium, you can't expect a favorable climate to continue indefinitely. Common sense tells us that at some point, we always have to prepare for the inevitable slowdown. What's more, even if the economy is doing well on a national basis, there's no guarantee that the local economy in your area will follow suit, or that your personal economic conditions won't be subject to ups and downs due to individual circumstances.
Before starting your small business, you may have had painful experiences with some or all of these personal-wealth-draining situations:
- stagnant wages (sometimes accompanied by a longer workday) that didn't keep up with inflation
- corporate downsizing, reductions in workforce, forced early retirements: a firing by any other name still smells no sweeter
- reductions and terminations of employer-supplied health and retirement plans
We all know that the time to prepare for a rainy day is when the sun is still shining. Because you're reading this, chances are good that you've taken the first step that may enable you to rise above these stresses on your personal financial wealth: starting your own business. Small business ownership is not for everyone. However, U.S. government statistics show that about two-thirds of the country's economic growth in the last decade has occurred as a result of small businesses. So it seems like you're looking in the right place. A successful small business can provide you with the source of money necessary to plan, and bring about, your financial security.
The second step, which many small business owners fail to take, is to diversify your wealth so that not all of it is tied up in your business, and so that you can reduce the risk of not meeting your financial and personal goals.
The process of translating a stable and adequate income supply into the achievement of your economic goals begins with financial planning. Through the development of your personal financial plan, you will be able to identify and reach your monetary goals by deciding how best to pay yourself, spend and invest your money, and take advantage of tax-saving opportunities.
Through this financial planning system, we'll guide you through five steps to allow you to create your own individualized financial plan:
- Identifying what you have now: the first step is taking stock of your wealth, income and expenses, and existing planning documents.
- Deciding what you want: next, you have to set your goals and quantify them in terms of dollar amounts, and the time you have to achieve them.
- Determining how to get there: this is heart of the financial plan. You need to figure out what you must do to achieve your goals, or readjust them so they become attainable.
- Implementing the plan: this may be the most important step for you to take. Many plan, fewer implement.
- Monitoring the plan: even a good plan can sour with age. You need to keep your plan up to date by making sure you investments perform as expected, and by adjusting your plan for changed circumstances.
- What if you need help: we offer a few words about using professionals to refine your plan.