A personal business plan consists of the process of putting your “business” goals on paper, while providing the steps to achieve such goals.  Some of you may think that this may sound a lot like standard goal setting, however, there are distinct differences in setting up a business that makes it a very worthwhile task in your own financial planning.

First off, your personal business plan should be related to your business only.  This is not to say that you shouldn’t make goals in other aspects of your life, but for this particular plan, it should be solely focused on your personal business efforts.  The plan applies to any line of work you may be in.  Whether you are a CEO of a Wall Street firm, a pet groomer, or a landscaper, you should begin every new year with a fresh business plan.

Your business plan should break down what it takes to be successful in your line of work and how exactly you are going to accomplish that.  Kobe Bryant did not wake up one morning randomly knowing how to shoot a jump shot.  It took years of practice and discipline for him to get where he is today.  The same goes for any other occupation out there.  In most cases, people did not fall in the positions they are currently there by luck.  They planned out what it took to get there and how they themselves were going to make that happen.

Lets take, for example, an insurance salesman.  After looking at his last years call log, he finds that he made a total of 1500 cold calls to new potential clients per month (18,000 per year).  Well, as a result, he made a total of of $180,000 in commissions for that year.  So technically, this salesman can conclude that every call he makes is roughly worth around $10.  Of course this is really not the case, but for most sales jobs, performance is merely a numbers game.  Knowing that he historically performs at this $10 per call rate, he can than adjust his daily call schedule to earn his next year’s goal of a $200,000 year.  This same principle can be used in a variety of different measures.

A business plan should also include desired characteristic traits you wish to possess around the workplace, as well as things you feel you need to work one.  Take note of people around the office who are succeeding.  What attributes do they possess.  The best way to become successful at work is by surrounding yourself around people who already are.

Be specific about your monetary goals.  If you want to earn $100,000 next year, write it down!  If you don’t, it will be hard to see how exactly you get there.  The above example showed our salesman that one way he could get to his new “lofty” income goal is by increasing his daily call amount.  While breaking down your business plan, you will visually see just what it will take to earn what your goal is.

Now some of you may be saying, “well I’m stuck in a salary position and have no way of making anymore money than my contracted amount.”  Nonsense!  Within your company there are ladders of salaries.  Most likely there are people around you making the money that you desire to.  What are these people doing differently?  If you are just as qualified and talented as these people then there is no excuse for them making more money.  If you lack certain skills that they have, work to sharpen those skills.  Come to work earlier and stay a bit later.  Remember, you set the goal so it is you that needs to make it happen.  If you do have the same skills and are not making the same amount, go see your manager.  You would be surprised about how many times you are worthy of a promotion and they just don’t know it or are waiting for you to say something.  If they feel you are not qualififed, ask him/her for feedback about what you are lacking.  Then, start this process over.

Also, we live in a day of age where you can make money in a variety of different ways.  Thanks to the internet, you have access to the whole world to try and make money.  You have certain skills and traits that people will pay money to learn.  See how you can integrate that on the web for some supplementary income.

Sure, we all like to have money and success, but strive to keep it within reason.  As I have always said, money is not the definition of “success” and more important things should not be sacrificed for it.  When making your business plan, consider your other “life goals.”  If doing what it takes to earn you’re desired income only happens at the expense of acheiving your long term life goals, it is not worth it.  Consider thinking a few years out on how you consider to reach these goals, thus not burning yourself out all in one year.  Why work to make a good living, when at the end you cannot enjoy the fruits of it.

After completing a business plan, always keep it where you can see it daily.  Why spend time on this intensive document if you’re not going to reflect on it?  I keep mine in the top drawer of my office, so that when I do get frustrated, I can see what exactly I’m doing wrong.  The business plan doesn’t lie.  If done correctly, it acts as the Holy Grail of successful business practices for you personally in your business.  If you’re not seeing success, you’ve most likely waivered from your plan.  Take it out every week to make sure you’re living up to your goals.  If you are doing what you set out to do and are still not seeing success, revise your plan in way that points you in the right direction.

The power of a business plan is great.  When just asking how can I earn $100,000 a year?, it can seem distant and unattainable at the moment.  However, when really breaking it down, studying your current circumstances, and implementing a plan, you will be surprised at just how easy that road can be.  This combined with other principles discussed on the site can help you.

First, a key principal, that if you live by, you will be better off than your peers.  Live Within Your Means. Human nature begets a competitive spirit.  Many times this can result in a “better than your neighbor” mentality.  Some are constantly trying to keep up with their friends by constantly having the nicest and most expensive goods on the market.  Whether it is trying to have the nicest car out of the bunch or the biggest boat.  Whatever the case may be, it is important to try and tune those impulses out and focus on living a way of life you can afford.  By doing so, you will be able to save more money, minimize your debt and make it a lot easier for you to accomplish your long term goals.  Can you give up a Mercedes in your early twenties for your dream house in retirement.  If you were to bypass paying $60,000 for a luxury car when you were 25, and instead put it into a CD yielding 5% amortized interest, at 45 you would gave $162,758 to spend.  This amount is with not even contributing to the account over time or accounting for the additional money saved from maintenance costs and repairs that the vehicle would need.

The point is to try to limit yourself in what you choose to use debt for.  They should be NEEDS, not WANTS.  Now of course, we all get compulsive sometimes and can find ourselves in a spending frenzy.  So what do you do if all of a sudden you realize you’re swimming in a pool of debt.  Don’t panic, just analyze the situation:

Organize your debt

You may find yourself in debt in 10-15 different vehicles.  An auto loan, a credit union, two or three credit cards, a friend, etc.  The point is  to organize all of your debts into one document and find out your total amount owed.

Plan your debt payoff

It can seem like a monumental task when looking at all the money you owe to creditors and thinking of having to pay it all back.  However, it is amazing of how fast debt can be wiped out just by planning to pay it off the right way and deciding who to pay off first.  Organize a debt calender much like the one below to help plan your time line in paying off your debt.  Start with allocating as much money as possible to your higher interest rate debt like credit cards.  By setting up a table you are able to see exactly when you plan to be debt free.  This can be very liberating.

Consolidate your debt

If you find yourself in a sleu of credit card debt, you may want to consider a home equity loan (if you own a house).  A home equity loan is a secured loan, which in turn yields a much lower interest rate.  If you are getting eaten alive with interest payments, you may want to consider receiving an equity loan to payoff your credit card debt.  However, remember, failure to payoff your home equity loan could result in losing your house.  So make sure to change prior spending habits to allow you to payoff this debt.

When times get tough, always seek debt negotiation with your creditors to see if you can alter your terms of your loans.  You may be surprised to see how easy it can be to get a lower interest rate, or smaller monthly payment.  There are loan modification sites that have lists of agencies who can assist you in modifying your loans for your house or other debt.

Bankruptcy

Lastly, you can consider legal action, or bankruptcy.  Bankruptcy has become quite popular in recent times as it can free you from a deep burden to creditors.  However, bankruptcy is on your record for 10 years and can be a huge burden to you and very much restrict you from accomplishing your goals.  Bankruptcy should be considered as an absolute last resort.  Avoid it as much as possible, but if severely needed, bankruptcy can be a help in getting you back on track.

When studying bankruptcy, they find three major trends that influence it the most: Unpaid medical expenses, a loss of primary source of income, and divorce (separation and death).  By trying to avoid these, you can be able to better your chances of avoiding this plague and better your path to financial freedom.  Consider organizing your debt today, as the earlier you start, the earlier it is paid off.

Clean and Professional

Some people get the wrong idea of “standing out” amongst competitors and feel that using colored paper or an enlarged styled font will somehow give their employers the impression that they should be chosen over their competitors.  This couldn’t be anymore wrong.  Although it may seem plain and boring, a simple, clean resume is important in maintaining a perception of professionalism to your employer.  Your name should be the biggest word on the paper.  You can freshen your resume up with bolded headers, bullets, and indentation, but keep the appearance of clean and professional.  Doing so will give your resume a good impression to your employer.  The content of your resume will distinguish you from the rest.  Below is an example of a clean and professional resume.

Start with Strengths

In my past resumes, I usually use the following four main sections in the resume:

• Experience in (what job I am applying for) - This is the work experience directly related to the job you are applying for (doesn’t have to be prior jobs, could be volunteer work or other experiences.)
• Education – Your list of educational accomplishments, with your most recent degrees and accomplishments first.
• Other work experience - This is other work experience that may not be directly related to the current job you’re interviewing for.
• Other achievements/interests – This is your bragging section.  Any accomplishments, interests, personal core values or anything else that you think will set you apart from others.

Your first few resumes will not have a lot of previous work experience on it.  That’s not a problem.  If you do not have much work experience, than start with something else.  Employers are not just interested in your past work experience.  If education is your strength, start with that.  You can put your past work experience towards the bottom.  Some employers will be looking at hundreds of these, so you want to put your best foot forward and catch their attention as soon as possible.

Keep it Short, Aim for One Page

As you get older, you may have more to brag about in these documents.  However, it is good to aim to keep this document to a page.  If you do have to go over, consider printing on front and back.  A stapled, two page resume can be overwhelming on screeners and may just be that one little thing that puts your resume in the “discard” pile.  If you are running out of room, considering cutting your less relivant jobs or other jobs that have become outdated.  Sometimes you are asked to provide a “cover letter.”  If that is the case, than attach a brief cover letter introducing yourself to the company.  Cover letters are becoming less and less popular.

Preparing References

Many times employers will ask for references to use to get more information about you.  These can be very influential for better or for worse.  I am amazed at people that I get called to “refer” to new companies.  Some are people I barely knew, or sometimes, didn’t think much about.  Make sure you have a strong relationship with the people you choose.  It is also wise to call them before hand to ask permission to use their name.  This can also give you a chance to help prepare them of what job you’re going for and maybe give suggestions of what they are looking for.  Make sure they are good references!  Try to stay away from your family.  Although sometimes you may have influential people in your family, it is always better to use outside of kin references.

After generating a strong resume, use it.  There are many online resources that can help provide leads for you in your hunt for a career.  Sites like Resume Rabbit will take your resume and send it out to tens of thousands of employers looking for new positions.  This can be a great help and speed up your process for getting interviews. By bettering your chances at getting the job you want, you greater the chance of the getting the job that better fits your needs and, in turn, gets you closer to accomplishing your goals.

Like I said, a budget is a document that measures your incoming cash with your outgoing expenses.  These are usually referred to as Assets and Liabilities.  Assets are pretty much things that you own.  Cash, possessions, jewelry, etc.  Liabilities are things you owe.  These can be considered as bills, mortgages, expenses, and others.  The point of a budget is to make sure you have more on the Asset side than on the liability side.  In turn, by having more assets you should technically have more money coming in than going out in that time period which is being measured.  By forming a budget, you build a foundation of what to expect from month to month.  This is essential to know, as you move forward in personal financial planning to more advance concepts.  Without a budget, you have no plan of execution or building block to help you increase our gain.

Budgets are planning documents.  They look forward.  They do not reflect back.  So the numbers produced in a budget are “projected numbers.”  Your actual numbers may vary from the ones you projected in your budget, but it should be close to what you are actually spending.  Below is just one example of a format of a budget.  There are many ways to develop one, and you need not to follow the below format.  As long as you are measuring your inflows vs your outflows, you have begun a budget.

The above budget is based on a monthly period.  On the top half, you see that the person is measuring their income (ie wages, gifts, dividends).  On the bottom half, they are measuring their income expenses (ie electricity, gas, phone).  At the top it shows the formula of Income-Income expense=Net Income.  Your goal in setting up the budget is to hopefully make the Net Income number positive month to month.

It is important to review your budget after the measuring period is over.  If you find that the first month or two, your net income is negative, don’t worry.  Take another look at your budget and compare it to your actual spending.  See where you are off on your numbers and adjust.  Sometimes it can take a few months to get your budget positive.  It is very important to constantly review and revise your budget as your income and outflows will frequently change.

Developing a budget is an essential part of financial planning.  By reviewing your budget, you are able to see your strengths and weaknesses of cash spending.  Maybe you are great with not buying too many clothes, however you eat out too much.  Or maybe you go to the movies too much, but you are great at saving gas.  Either way, you are able to evaluate your cash spending and make adjustments to better your monthly savings.  The ultimate goal of financial planning is to have as much savings a month as possible.  If you have not developed a budget, do so.  You will quickly find how beneficial this document is.