I recently came across a recipe in The New York Times for Catalan stew with lobster and clams. As I looked at the picture and the list of ingredients, my imagination began to work. I saw steam rising from the bowl, filling my nostrils with the sweet scent of fresh seafood. The dish was slightly thick from the tomatoes and fragrant from the red chiles and ground nuts. Big chunks of lobster and wide-open clamshells beckoned. All my senses were engaged and I wanted to eat!
It may sound crazy, but financial planning is actually a lot like cooking. The recipe is your plan, outlining each step needed to create your ultimate dish. Envision the outcome, take stock of the resources you have, and list those you need to buy. Get in touch with how much things cost and make choices about how much you can afford to spend. Try the steps below to whet your appetite for planning the future.
Step 1: Imagine the outcome.
This is the beginning of the planning process, imagining what it is you want to create. Do this first and the pieces will begin to fall into place. In fact, this is the most wonderful and underappreciated part of financial planning — discovering what is important to you. Where do you want to live? How will you spend your days? Whether it is a cabin in the mountains or a place by the ocean, the dreaming and imagining stage is where you begin to formulate a vision for the future. The key is that you must see it with enough clarity and detail that it’s genuinely exciting. (Like the lobster stew, only more so.)
Step 2: Take stock of what’s in the pantry.
With your vision as inspiration, a number of decisions and actions are required before heading to the kitchen to cook. First, take a look at what you already have and what you need to shop for. Similarly, with your finances, look to the pantry (the pantry here being your resources) for what you already have to work with. This includes things like sources of income, savings, investments, insurance policies, etc.
Step 3: Choose your ingredients.
The ingredients chosen reveal something about your values. Will you buy the organic ingredients and the freshest live lobsters and clams? These ingredients determine where you’ll shop and how much you will likely need to spend. Do you want to make do and live on as little as possible or reach for your dreams? Whether it’s caring for an aging parent, funding college, or saving for a beach house, begin to clarify your values and prioritize what is most important.
This is also where you begin to take the numbers into account. Given what you can afford to spend on dinner, maybe you invite six people over instead of 10. Likewise, the second home on the coast may be out of reach, but an extended overseas vacation or two are possible. By matching your values and priorities with the numbers, you’ll see there are tradeoffs, and good decisions become more apparent.
Step 4: Follow the recipe.
Your financial plan is like a recipe, outlining what to do and leading you through each step. Before you can create the plan, take into account your resources and determine what you’ll need. Assess what things cost in relation to what you want. When you get in touch with your values and priorities, spending decisions become clearer. Remember to follow your plan to create a future worthy of accolades. I bet you can almost taste it!
Jeffrey Stoffer is a member of the DailyWorth Connect program. Read more about the program here.