The Four A’s of Finances

There is a process to wealth for the non-wealthy and we look to expose this process in this article.

The first step is arranging. Arrange your financial picture that is readable and understandable. You might want to speak with a financial advisor or your tax professional that will work with you to prepare accurate personal financial statements.

The next step is assessing. Once the financial statements are prepared it is now time to assess your financial situation.  How much debt are you carrying?  What areas are your revenue coming from? What opportunities are there to produce more income or shrink your debt?

The third step is set an aim.  After the assessment is done it is now time to create a plan and set a goal.  When you set your goals, be sure to work backwards, yes backwards.  Look at where you would like to be.  Make that your long term goal, three to five years out.  Determine the steps you will need to take from where you are now to where you want to be.  These will be your mid range goals.  What can you do right now (within the next 30 days) to move in that direction?  These will be your short range goals.

The fourth step is to administer. Now that there is a plan in place, the plan must be executed.  Life is full of obstacles therefore you will need to form a team of people to whom you will be accountable to with regard to administering your aim.  It is important that you do something everyday to push you closer towards your aim.  It is also important to select people on the accountability team who will be honest with you and those who are not jealous of your progress.

Your Financial Score Card

Reminisce back to exactly one year ago from today. At that exact moment, how much money did you have in the bank? What did your investment portfolio look like? Did it seem easy or difficult to meet your monthly financial obligations? Where you more determined to make financial improvements back then or not? What were some of your sort term goals? How many of them have you reached?

I would dare to say that many people walk around frustrated about their financial score cards. However, if we answer these questions truthfully, many of us are not worried that we haven’t improved financially. We are more worried that we didn’t follow the financial plans that we committed to at this time last year.

Today, I challenge you to sit down with your spouse or close friend and make some financial commitments today. Maybe the commitment will be to save at least 5% of your earnings. That commitment could be to stay on budget throughout 2010. Another commitment could be to constructively use your time. Be determined to not have any of your time wasted. Instead, use that time to earn additional income. Everyone’s commitment maybe different but it is definitely needed. Make your commitment today and stick to it tomorrow.