Keeping in the life balance theme, I thought financial planning might be a good idea especially in the midst of the current economic turmoil.

  1. Plan – identical to business, start with a plan. It doesn’t have to be complex. Where are you now? Where do you want to be?
  2. Cash flow – also identical to business, revenues (what you earn) isn’t most critical during the recession; what you keep and have available (cash) is king. Write down what cash comes in and what cash goes out – it’s as simple as that. Then, you can begin to predict it.
  3. Adjustments – if you are not satisfied with your plan and cash flow, make changes. In essence, there are only two choices – increase income (earned or passive) or reduce expenses. Start simply – it is always possible to scrutinize your expenses to find a new baseline. On the other hand, the largest impact will always be focusing on increasing income (identical to business, cost savings is fundamental and important, but you cannot cost cut your way to success).
  4. Trends – again, identical to business, watch the trends. Don’t become completely distracted with a one-time anomaly but scrutinize a trend.
  5. Remember insurance – as annoying as insurance can be, it can become your most important asset in a heartbeat. Mitigate risk.
  6. Passive income – from my perspective, the key is how to generate passive income (owning assets that produce cash flow). Although a lofty goal, the ideal is to generate enough passive income to cover baseline expenses. Now this would be the ideal life balance…..choice!