Alice in Wonderland and financial planning

In ALICE IN WONDERLAND, WHEN ALICE ARRIVES AT A CROSS-ROAD the Cheshire Cat asks, "Where do you want to go?"

Alice replies, "I don't know."

"Then any road will do," says the Cheshire Cat.

These simple lines illustrate the consequence of no planning (financial or otherwise). If one does not plan for an objective or direction, then any thing will do. Before you know it, you will be like an octopus on roller skates. There's plenty of movement but you never know if it is going backwards, forwards or sideways.

Many people shun to plan for their financial matters for 2 main reasons. Either they find financial planning too cold a subject to deal with, or they simply lack the courage to face the sad state of their financial affairs. Let me share with you a simple method I use.

(*I am an average joe. I earn a limited income, have debts to service, and bills to pay to sustain my wife and mother)

Step 1: I prioritize what matters most, and budget my limited resources to the following 8 planning goals:

1. Prepare for money emergency

2. Protect my income

3. Provide for my family (if I die too soon)

4. Secure my home

5. Defend my business

6. Preserve my assets (improve asset value, reduce debt)

7. Plan my investments to produce passive income eventually (if I live too long)

8. Help others (Priority: 1st: family members; 2nd: close friends; 3rd: a cause I support)

Step 2: Have a measurement system for these 8 planning goals.

For each of the 8 planning goals, I attach a simple scoring system by asking myself this question at the beginning of every year: "on a scale of 1 to 10, where am I last year for planning goal ONE." (1 being lousy, 10 being excellent).

I will repeat the same question for each of the 8 planning goal.

In area where there is progression of the scoring scale, I am glad(and thank God) that I am moving towards the right direction. In area where there is no progress, I review the problem.

This system helps me to focus and plan my finances to what's important with my limited resoruces (financial or otherwise).