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It’s the Plan! February 10, 2009

Posted by shaferfinancial in Finance.
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One of the main reasons people are so fearful at times like this is because they have no plan.  The evidence is pretty clear that if you don’t have a plan, then the likelihood of success are slim.  Personal finance is the same.  By a plan I mean much more than a general idea about what you are doing.  Details. Details. Details.  A plan is the first part of managing risk because a good plan will force you to think about risk and how to behave when the worse case  possibility becomes a reality. 

Exactly how are you planning to grow your income (cash flow)?  What are you going to invest in?  How are you going to get the money to invest?  What investment strategies are you employing?  What are the historic based expectations for your investments?  Where are your risk points?  How does your plan manage your risk?  What are the expectations for yourself in the plan?  What are your key competences?  How is that ingrained in the plan?  What are you doing to expand on your key competences?

See what I mean about building a plan!  It needs to be created from ground  zero.  All parts need to be correlated.  It needs to be evidence based.  And this is how folks manage risk, by planning for it.

I know this is harsh, but what most people do; cut costs, invest a monthly amount into a mutual fund inside a 401K, hope for the best, is not a plan!  It is a delusion.

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