"It's Easy as P.I.E.E" (Part 1) - Planning

I. Introduction
Many great works of arts, corporations and accomplishments all started out as ideas. However, great ideas are just that, ideas. They give you an "idea" of what the finished product should be like, however they are not by any means the end products such as the Mona Lisa, Microsoft Empire or a flight to the moon. None of the previous examples would have been accomplished without a plan. The definition of a plan is listed as the following:

Plan - a scheme or method of acting, doing, proceeding, making, etc., developed in advance (Definition of Planning)

There are many types of planning. Some specific types are:

• Financial
• Project
• Life

The scope of this article will deal primarily with financial planning, however some of the same principles can be used to other variations of planning.

II. Importance of Planning
Everything in life has an order. Of course there are questions like "What came first, the chicken or the egg", but other things are a bit more obvious, such as instructions to bake a cake, or the process in growing a vegetable in a garden. There are clear steps that need to be take in order to get to a final finished product and whether a person remembers those steps from memory, or reads them one by one out of a book, there is a "plan" in order to get the job done. A plan is necessary because it gives you the following benefits:

• Benefits of planning
• Allows you to have a better chance to accomplish your goal by having something to "stick" to
• Allows you to adjust accordingly in the case of the unexpected
• Road map/Guide to Follow
• Saves time in the long run to know how to execute rather than having to figure out something new
• Small goals allow you to have small successes along the way to the final goal

In addition to that, it also helps you avoid some common shortcomings that is experienced by those who do not plan:

• Things that planning prevents
• Giving up prematurely
• Jumping into a situation blindly

With this information, it is easy to see why planning is such an important step in a the process to your financial freedom. Now all you need is a template to follow to build your plan.

III. Methodolgy to Planning
Planning does not need to be a very long and tedious process for most people. However, the amount of time you invest in your plan will more than likely reflect the final product that you want your plan to accomplish. Below are the steps that I use to develop my plan:

• Set apart dedicated time for the planning process
• Research what you are planning for
• Identify the best order of steps to get to the final product
• Organize the resources needed to accomplish the plan
• Identify different scenarios
• Plan for the worst case scenario
• Always have a "way out"
• Write down the plan

IV. Short financial Planning example
Below is a scenario and example of a simple plan that can be used for the scenario:
Current Age: 25
Current Income: $35,000
Current Monthly Income: $2,900
Current Monthly Expenses:$2,000
Discretionary Money (Month): $900
Marital Status: Single

Financial Goals to Accomplish in 1 year (and approx cost):
New floors ($3000)
Money contributed per month to accomplish goal: $250/month
New TV ($1000)
Money contributed per month to accomplish goal: $83.33/month

Financial Goals to Accomplish in 5 years (and approx cost):
New Car ($20,000)
Money contributed per month to accomplish goal: $333.33/month
Masters Degree ($10,000)
Money contributed per month to accomplish goal: $166.66/month

Financial Goals to Accomplish in 10+ year (and approx cost):
New House ($25,000 for downpayment)
Money Contributed per month to accomplish goal: $208.33/month (for 10 years)
Retirement ($20,000/year from 65 - 90 [approx $500,000])
Money Contributed per month to accomplish goal: 395.50/month (Financial Calculator)
[Interest Rate approximately 8%]
*Unrealistic as $500,000 today is going to worth less than $500,000 40 years from now*

Total Contribution per month for the first year: $1437.15/month

The person who uses this plan will either need to find a way to get more income or allocate funds properly to more immediate goals and reallocate after immediate goals have been accomplished.

V. Tools to use to assist in planning As mentioned before, plans can be as complicated or as simple as you wish. However, in any case, there are great tools to use to aid in this process. Some of the tools are listed below:

• Project Timeline Software (Microsoft Project, Spreadsheets, etc)
• Brainstorming (write out ideas)
• Mind dump (thought web)
• Outline
• Advisor

VI. Summary on Planning
Planning is a necessary step in obtaining any goal that is laid out by one to accomplish. Not only does it help to provide a clear view of what the end product should be, it gives the road map to getting there. Please let us know your thoughts on how to plan and share with us any of your personal tricks to planning.