Step 4: Generate a financial plan with specific milestones

In this series, discover the four critical steps you need to take to achieve financial freedom with less stress and more certainty with the financial mastermind, Willie Hooks.

Before proceeding with step four in your journey to financial freedom, make sure that you read parts 1-3 in the series.

Download your FREE Journey to Financial Freedom Worksheet at the bottom of this post to complete each step in the Journey to Financial Freedom with your own data.

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Your journey towards a financial freedom plan

By completing your gap analysis, as outlined in Step 3 of the Journey to Financial Freedom, you now understand a new financial mindset, new financial strategies, and new financial practices. The next step is integrating your new knowledge and understanding into an action plan that will support you in achieving your financial goals with a higher degree of certainty.

“If you fail to plan, you are planning to fail.”

Completing this fourth step is arguably the most challenging because even though you have an understanding of the financial strategies and financial practices that are required to achieve your goal, there are many different variables to consider when coming up with the right actions to optimize your plan.

The optimization of the action steps you need to take to change your financial trajectory is where financial technology comes in. Advanced financial technology, such as I.R.I.S. by Fynanc, can assist by conducting the hundreds of calculations necessary to identify the optimal path to get to your financial goal date faster, easier, and with more certainty.

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Developing your gap analysis action plan

You can think of your gap analysis action plan as a series of steps, which, when finished, should result in closing the gap that you identified and taking you to your financial goal.

Now that you’ve discovered the measurable gap between where you are financially and where you want to be, it’s time to figure out the proper course of action to close the gap. Use the following guidelines to ensure the improvements you come up with are solid:

1. Work with an experienced person in your domain to make sure you are making the correct assumptions.

2. With your experienced advisor, set realistic steps and milestones that move you towards your goal.

3. Determine what assets and strategies you will be using to move you along and close this gap.

4. Consider and account for the cost of implementation for each solution.

The importance of correct assumptions

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When considering the above list, the first step is perhaps the most critical. You must work with someone experienced in your domain who can ensure that you are operating under the correct assumptions.

For example, many investors go to a financial planner to help develop their action plan. What they may not know is that most financial planners base all their projections and action plans on something called the 4% rule.

The 4% rule essentially states that you can safely withdraw 4% of your retirement portfolio each year. However, some critical assumptions are made in calculating the 4% withdrawal rate that many people, including financial advisors, are unaware of.

The 4% rule was developed in 1994 by financial advisor Bill Bengen.  Bengen was looking for a rule of thumb to give his clients on how much they could safely withdraw from their assets each year for retirement. He found that 4% was the magic number.

His hypothesis was that if clients withdrew 4% in the first year and adjusted their withdrawal based on inflation every year after that, their portfolio would last 30yrs or more. For most retirees, this exceeds the amount of time they are retired. Based on this assumption, investors using the 4% rule would have enough income to live off of in their retirement years, and still have something left to pass down to their heirs.

While this sounds great in theory, the problem is that several key assumptions determine whether or not you can successfully apply the 4% rule to a portfolio.

Unfortunately, in the current economic landscape, most people’s portfolios do not meet the criteria needed, so when the 4% rule is applied, the result is that their portfolio simply doesn’t last, and retirees run out of income with a decade or more left of their retirement.

The action plan

With the invention of computers and “intelligence” in computers, we were able to replace paper maps with computerized GPS systems for directions and are now dependent on GPS to help us drive anywhere new, as explained in Step 2 of this series, which you can read here.

With GPS, you can follow the optimal route to your destination based on hundreds of variables that are calculated using real-time data. The route is typically the fastest, safest, and most efficient route connecting Point A to Point B.

Most financial planners give investors plans based on the 4% rule. As stated above, this is an outdated solution for investors.

In order to successfully navigate today’s changing economic climate, you need to upgrade to the financial version of a GPS.

A great plan must include the following:

1. A clear financial goal that you will achieve as a result of implementing the plan.

2. The specific action steps that you need to take to achieve your financial goal on the desired date.

3. You must achieve specific milestones to ensure you reach your financial goal on the desired date.

4. Monitor your progress and take recommended actions if you find yourself falling behind.

5. Get recommended action steps that you can take to accelerate reaching your freedom date if your financial situation changes.

By the end of this step, you have four keys to open the doors to your financial freedom.

You have your journey’s destination, your current state, the measurable gap, and finally, the steps and milestones you need to implement to reach your desired destination.

Step 5: Implement the plan

Now that you have a financial plan that you believe in and are committed to implementing, you must take consistent action to achieve your goal.

In fact, just by having a documented financial plan built on winning strategies and best practices for achieving your financial goal, you are far ahead of most investors.

Once you have your plan, you must block off time in your schedule to take action, and when that time block arrives, you must take the action prescribed in your plan.

Planning your work is a critical step that most investors miss, which is the primary reason why they have poor execution and ultimately do not achieve their goals.

As you take action based on your plan, you will begin progressing toward your goals. Just as with a GPS system, your plan will be updated along your journey as you pass specific milestones and encounter challenges.

If, for some reason, you find yourself off-track, your ‘financial GPS’ will calculate a new route to get you back on track so that you can reach your destination on time. That’s why it’s important that you keep monitoring your progress in relation to your milestones. However, if you find yourself off-track, you need to recalculate a new path to get you back on the path to financial freedom.

If You Need Help, Contact Us

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This is what our company does, day in and day out. We work with our students to help build a plan for them to follow and help them along the way using our cutting-edge technology and advanced strategies. Reach out to us today if you would like to explore this further.

Make sure to DOWNLOAD  our FREE Journey to Financial Freedom Worksheet, and save it on your computer to implement each step in the process to ensure success.

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