Editor’s note: This column is the first in a three-part series focusing on planning. Today’s column is about developing a personal plan.
Most of the remodeling work you do starts with a plan, a drawing of work to be done. Preparing this plan is key for the success of a project. Without the plan, the work will be done incorrectly, cost more, and take more time to build.
Seems obvious, right? So why do many businesses get started without a plan? Many remodeling businesses start because a carpenter gets more work than they can handle on their own. Then they hire an employee or two, and then by default are in business.
What would planning look like? Why do it? Where would you start?
A Personal Plan
When Nina and I were in our twenties, we kept track of our expenses. Done on a lined pad with a pencil, we noted what we spent on pretty much everything.
Why? We had limited funds, were working steadily at jobs without great compensation, and did not want to overspend. Staying within our means was our immediate goal.
That tracking of our expenses led to the creation of a personal budget for the coming year. We have done this for more than 40 years. We use the budget as a point of reference for making decisions about how to spend our money while not being 100% constrained by it. Monthly, we look at actuals-to-budget and talk about what changes we need to make in either our spending, our budget, or both.
In “The Wealthy Barber,” David Chilton points out that not everyone likes to budget. That is fine. However, to be a successful business person, budgeting is a good habit to have. In fact, it is essential to a business surviving.
And if you want to accumulate wealth, such as savings, real estate, and equities, you must budget. Absent a budget, money touches your hands for a minute and is gone.
A good habit that Chilton mentions is to “Pay Yourself First.” That means to take 10% (you pick the actual percentage) of every paycheck you get and put into savings. Then you live on what remains. Sounds harder than it is, like many good habits do.
We wanted our business to serve our personal goals, not the other way around. We got clearer about our personal goals with the passage of time. Working my brains out did not allow for good personal goals. It seems obvious, but…some of us take a long time to see what is in front of us.
Things to keep in mind when setting personal goals include:
- You;
- Your significant other;
- Your children;
- Extended family;
- Friends; and
- Your communities.
One December, Nina and I laid out 1-year, 5-year, 10-year, and 20-year goals for us personally and as a couple. The goals were different in scope and cost.
A 1-year goal that was repeated annually was to see a movie every two weeks. A long-term goal was to travel internationally before our 25th wedding anniversary. When we met to review our actuals-to-budget, we would also review our page of goals.
We agreed we wanted to have our mortgage paid off by a certain date. I wrote that goal on a piece of paper that I kept in my wallet so I could see it every time I was taking money away from it. I wanted to be reminded of that big goal, as a motivator to not spend too much and prevent us from paying a little bit more than just the monthly mortgage payment.
The mortgage was paid off one year ahead of the date set. And we traveled internationally the year of our 24th anniversary. Personal goals and a personal budget are essential in doing your business plan.