Financial Planning

There are 4 main differences that set H M financial planning apart from other types of financial planning. These are:

1. We are always planning for the future. When we do a financial plan we are not calculating what has happened. What has happened is “set in stone.” It is an historical fact. No amount of planning will change what has happened. When we do a financial plan we are projecting into the future (at least one year) to see what is likely to happen. Since the future has not yet occurred we can plan & re plan as often as necessary to achieve the results we desire. Once we achieve the results we desire, we implement the plan.

2. We set our profit before the year begins. So often in agriculture we operate for a full year & then “hope” that we will be profitable at the end of the year. We are far too important to operate in this manner. When we do a financial plan we set our profit before the year begins. Profit is defined as an increase in net worth. This increase in net worth is achieved while holding assets that we are not likely to sell very often (cows & land) at a relatively low constant value. By using this method we avoid the trap of simply measuring inflation. Living expenses are usually included along with our other expenses. Profit is now a return on our investment & a return to our management skills. What the profit level should be is entirely up to you. It could range from a few $1,000 to several $100,000 of dollars. What’s important here is for you to set a profit level that you are comfortable with. Once this is done we use our creativity & skills to “make it happen.”

3. We spend our expense money as wisely as possible: We determine the weak link in each of our enterprises. This allows us to sort our expenses into 3 categories: “W” or wealth generating expenses fix the weak link. These expenses are like an investment in our business. The more money we can allocate to these expenses the stronger our business will be. “I” or inescapable expenses are things we must do. To be an “I” expense the expense must be necessary & it must be a set amount of money. The list of “I” expense will be short. “M” or maintenance expenses are all the expenses that don’t make the “W” or “I” list. It is here that we use our human creativity to reduce or eliminate “M” expenses. By strictly controlling “M” expenses we free money up to invest in “W” expenses & to help create profit.

4. Monthly monitoring. Monthly monitoring is essential. Twelve times a year we monitor to be sure that our plan is on track. Knowing that it is on track allows us to be confident that we will achieve the profit we desire. It there are small deviations in our plan we try & control these. If there are major deviations we do a re-plan. It is fine to re plan. In fact, it is essential to re plan when conditions change. What doesn’t change is our goal of achieving a profit.

Financial planning is powerful process. It can help you achieve the profit you desire. It can reduce the stress & worry in your life. It has the potential to reduce the stress & worry in your marriage. It can lead to peace of mind & an increase in self- confidence.

The only difficult part to financial planningis that you have to do it.

I encourage you to start now. Commit yourself to doing your best ever financial plan in 2015. When you do this you can be confident that you will do an even better plan in 2016. This will happen because your discipline, knowledge & skills will all have increased as a result of the work you did in 2014.

Do you have children? Would you like to give them a precious gift? You can give them a gift that will benefit them for a life time no matter what career path they choose. Teach your children how to do a financial plan. They may not be too keen at the time but in the future they will benefit immensely.

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