[This is the second of a multi-part post.]

Last time, we talked about the need for a life plan, and how to determine what your dreams are. Since dreams have a very fuzzy connotation to me, I like think of them in a more concrete sense, that is, as specific goals. In this post, we’ll talk about creating a plan around those goals.

My examples were:

• living life without having to worry about money, and ensuring that my family can have the same bliss
• working at something I love because I want to, not because I have to
• traveling to all the places on my ‘to go’ list
• not having to worry about unforeseen circumstances that could alter this state of independence
• having the time to enrich my life and others by spending time with people who matter to me
• having hobbies that make me happy, like photography, music, and outdoor activities

Let’s break these down and organize them a bit:

Some of the items on this list require time (spending time with loved ones, hobbies), some require money (not worrying about money), and some require both (traveling, hobbies). Also there is an odd-ball one, which involves some level of protection against unforeseen circumstances (we’ll talk about that later). Presumably, we can generate money, but typically this is done at the cost of time spending doing something that isn’t otherwise on the list (the jay-oh-bee). We can’t create more time, so the only way to add more time is to stop doing those other things - namely, working. And how can we do that, if working is what generates the money needed for providing for my family, lifestyle, travels, hobbies, etc…

The first option is to get a job that you love so much, it doesn’t feel like work. Unfortunately many jobs like that don’t pay enough to meet all your other needs. Well, who said success comes without sacrifices. Maybe you can work now, and save for later. If you invest those savings, you can grow them faster, and ultimately have more to put towards your dreams. Investment and saving will be main topics of this blog, check out those post categories for articles related to them.

The second is to create automated forms of income. While personal entrepreneurship as well as automation are interests of mine, I’m still working on ideas that equal real income - so I can’t pretend to offer help here. But it can be anything from owning and renting real estate, to online ads on your website.

The last option might sound like an accounting trick, but it’s no trick. It’s used by many large corporations, especially during market downturns or recessions. Consider this equation:

Net Income = Gross Income - Expenses

Decreasing your expenses has the same exact effect as increasing your gross income - it increases your net income. A corollary of this is less expenses = more dreams. This is different than saving - in this case we are spending wisely.

Which brings us back to protection against unforeseen circumstances. Using money towards anything you didn’t plan for can quickly derail your plan. The most catastrophic of these, the ones that most affect your plan and therefore your dreams, are sickness, injury, and loss of life. Through the magical power of statistics and the law of large numbers, you can efficiently protect against these circumstances with insurance. Insurance itself has a bad connotation to many people (due to nightmare customer service experiences and shady sales tactics). But as part of a financial plan, there is no other way to make sure your plan stays on track. Some future posts in this blog will discuss the right and wrong ways to buy all different types of insurance, the pitfalls and what to look for.

The last point I want to make is about time. Time is an absolutely finite resource. Even if you can’t quit your job, it is possible to save time by automating parts of your life, especially the things you hate (you know, paying bills, managing your finances day-to-day, sorting e-mail, etc etc). As a software engineer with a degree in operations research, I LOVE automation, so look for future posts on that topic as well.

To summarize, my goals (and therefore dreams) will be made possible by the following general plan:

• Increase life income by properly saving and investing
• Increase free time through filtering information and automation
• Decrease expenses though efficient and wise spending
• Decrease risk of loss through proper and careful use of insurance

Next time, we’ll create a to-do list based on this plan.

[This is the first of a multi-part post]

Do you have a plan to accomplish your dreams?

OK, so maybe you don’t like planning. You like spontaneity. After all, it’s the spice of life. Or, maybe you do like planning, but planning your finances or what you will do with your life seems too daunting, too far away to seem real.

Why is it that everyone has dreams and aspirations, but few people have a plan to achieve them? And I mean a concrete plan, not a ’someday I will…’ plan. Do you have dreams? What is your plan to realize them?

> When was the last time something happened because you kinda-sorta hoped that it would?

If you have dreams, but no plan - why don’t you have a plan? Well, first it takes work to create a plan. It takes thinking. But this is fun thinking, and important thinking - after all, it will help ensure you achieve your dreams.

Creating a Plan

OK great, you say. So how do I create a plan? How do I get beyond these roadblocks? Break it down into steps and then progressively smaller pieces - achievable pieces.

The first step in creating a plan for your future is figuring out what your dreams are. OK, so that’s obvious. But not easy. Many self-help books have been dedicated to this topic. I recommend “beginning with the end in mind” which is described in an excellent book by Stephen Covey. Or maybe try some dreamlining, according to Tim Ferriss.

Most people, including myself, have a goal like “be financially independent”, which is just a more well-thought-out version of “being rich”. For me, it’s not so much about having money, but about:

• living life without having to worry about money, and ensuring that my family can have the same bliss
• working at something I love because I want to, not because I have to
• traveling to all the places on my ‘to go’ list
• not having to worry about unforeseen circumstances that could alter this state of independence
• having the time to enrich my life and others by spending time with people who matter to me
• having hobbies that make me happy, like photography, music, and outdoor activities

You probably have many other smaller goals, which simply require a little planning and maybe some cojones, such as jumping out of a plane (done!). For these posts, however, we’ll focus on the more nebulous goals where a clear path to success isn’t immediately visible.

One recommendation about brainstorming your list: sleep on it. In my own experience, my current mood and other things going on in my life on a particular day or in a week change the types of goals I write down. My general test is one of time: look back at each item a month later, and if it still rings true, keep it. If not, adjust or remove it.

Next time, we’ll how to come up with a plan around your goals.

A ton of information exists out there about personal finance, especially investing. May I recommend the following items to keep in mind:

Be skeptical

Question what you read and hear. Trust only facts. Verify from several sources any information you come across. I wish I had invested $1000 to short every stock that a client called about and had to buy immediately despite recommendations against doing so. (Regular investors shouldn’t even be stock picking, but that’s a subject for a future post.)

Follow the money

Whenever someone suggests an investment or product to you, always follow the money. (”This particular insurance policy will not only take care of the ones you love if you pass away, but it’s a great vehicle for investing for retirement also…”) Figure out what’s in it for them, and why it actually makes sense for you. Who profits from the transaction? You’ll learn loads (no pun intended!) about the motivations of the person providing this information.

Follow your hunches

I’m not talking about hot stocks or buying and selling here! When you hear about a crazy idea regarding investing (or anything!) that sounds slightly off or too good to be true, it probably is. (”I just moved all of my 401k into emerging markets stocks because XX expert said that is the next hot sector. I’m gonna be rich and retire at 40.”) For those of you without spidey-sense, your gut reaction when analyzing matters of money is usually a pretty good start… why? Because it’s YOUR money!

Turn off CNN

OK, so most people have trouble fully checking out from market news, even if they have least bit of interest in finance. Turn it off. (For help, try Tim Ferriss’ Low Information Diet). Use the ‘follow the money’ principle above: CNN makes money when they sell news. Guess what they will do, no matter what? What you learn on CNN will not make you rich, it will make you question your strategy. Best to ignore it, and stick to your game plan.