Andrew McCulloch is an adviser, investor and Non-Executive Director, based in London. 

Entrepreneurial Spirit was created as a creative outlet to share stories and lessons learnt from over a decade in investments and working with entrepreneurs. 

#HowToInvestWell Stage One - Planning

#HowToInvestWell Stage One - Planning

In war, there is a saying that "no plan survives first contact with the enemy".

This highlights an important lesson in any undertaking - that no matter how meticulously your plan something, it can often be rendered obsolete by an unexpected outcome. This reflects that there is risk inherent in all aspects of life, whether it is in business, sport, managing your finances, or in life.

It is fair to say that many people spend more time planning their holiday than they do their finances. Why is that? It is probably because there is too much focus on having a highly detailed plan in place at the beginning, which means individuals find it hard to commit time and resources to putting one in place - instead delaying or leaving it to chance.

Plans are nothing, planning is everything.
— Dwight Eisenhower

It is important to look more closely at what Eisenhower meant by the quote above. The full quote reads: “I tell this story to illustrate the truth of the statement I heard long ago in the Army: Plans are worthless, but planning is everything. There is a very great distinction because when you are planning for an emergency you must start with this one thing: the very definition of “emergency” is that it is unexpected, therefore it is not going to happen the way you are planning.”

The key to success on the battlefield is not because of a brilliant leader in isolation, it is down to how well the leader prepares all his troops to understand the following:

  • what the key objectives are
  • the options for how they might be achieved
  • when they need to be achieved by

When everyone involved understands and buys into the outline plan of what is supposed to be achieved and what is expected of them, it is down to the ability to be able to adapt on the go as things change which produces the desired outcome. 

Is having a plan worthless then?

War is an extreme example of risk, so let's look at something a bit more down to earth - investing. 

A common adage is: the only thing you know for sure about a forecast is, it is wrong. Since a forecast is a prediction about the future, it is merely an indication of what could happen. Does this mean that we should ignore the forecast as being worthless? Not at all! The plan establishes a goal and provides an outline and a starting point for allocating resources. When actual conditions change, the best plans are ones that are built around managing this change.  

Whether you are an entrepreneur or an investor of any sort, investing money, time and resources in any undertaking, be it in business or personal finance, is unthinkable without having a plan. It is even more important to build flexibility into the plan and not restrict yourself to one path to your goal.

Planning your finances

Before investing any of your own money, spend some time thinking about what it is you want from your finances and write down answers to the following questions:

  1. What are my key goals for myself and/or my family?
  2. What money do I/we have currently to put towards achieving these goals?
  3. What money can I/we allocate on a regular basis to put towards achieving these goals?
  4. When do we need to achieve each of these goals by?
  5. Which of these priorities is most important?
  6. How much of this can I do myself without outside help?
  7. Do I have time to manage and review all the elements properly on a regular basis? 
  8. Am I sufficiently knowledgeable and experienced to manage these?

This could be saving for your retirement, protecting your money against inflation, investing in a business, long term care needs and a whole range of other specific goals.

Armed with a clear picture of what you want to achieve will make the process of putting a plan in place much easier and mean you are much more likely to stick to the plan. The important thing is being able to change the plan as you go.

You might not know all the answers and even if you do, it might well highlight that you need to seek advice from professional advisers such as a lawyer, accountant, financial planner or investment adviser. By going through that process before you start to look for help, it will make your search for the right advice much easier.

The importance of the family unit in planning

In a world where younger generations will not be able to rely on the state for their retirement in years to come, it is important that schools and parents are teaching them to start planning as early as possible and giving them as much financial education as possible. 

The importance of the family unit is therefore increasing and working together to meet the needs of all generations is becoming much more accepted as the investment landscape changes.  

The questions outlined earlier should be applied to each generation in the family to ensure the needs of all are coordinated properly, thus using the available resources more efficiently by allocating capital and income where it is needed, as well as other considerations like borrowing.

With a good plan, we can all move forward with confidence. 

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#HowToInvestWell Stage Two - Assets

#HowToInvestWell Stage Two - Assets