As the year ends, taking time to step out of the day-to-day grind can provide many advantages. The holidays have a good way of slowing (some) business and can allow us to look at our lives more broadly. Many times, this is also a good time to revisit your financial plan. Reflecting on the progress from 2024 and updating your plan for 2025 can be a game-changer for your finances.
Your Current Financial Plan
Small business owners (and really everyone) should have some version of a written financial plan. Having a tangible reference to your financial standing can significantly improve the anxiety or fear you may have around money. I just met with a business owner and her husband this week and at least 3-4 times they said they “don’t understand all of that financial stuff”. Most owners are like this, they have so much going on and then they look at their finances like a deer in the headlights.
Financial plans are not the holy grail, they will not solve all of your problems. Financial plans require planning. You cannot know where you are going if you don’t know where you came from. Take budgeting, for example, one financial task that people hate. Whether it is personal budgeting at home or your P&L for the business, no one enjoys it (except probably just me!). The secret to budgeting is not to have God-like discipline or restraint. The secret is that budgeting gives you awareness of what is going on.
Once you become aware of your financial situation, then you can start building a solid financial plan. This is one of the reasons why more people are seeking financial advisors like myself. Awareness is the first step to building the financial life that you want. Once you reach clarity on where you are, then you can start to strategize on where you want to go. Pick strategies that align with your personal and business goals and start progressing toward achieving them. It is so much easier said than done, but just because it is simple doesn’t make it easy.
Looking Back on 2024
How did 2024 turn out for you this year? I hope the answer is positive. Life is too short to let years go by and not accomplish your dreams. I mean that with all seriousness. A lot of financial planning can help organize your money, but the whole purpose of doing so is to give you a better life. If your company is keeping you from growing personally and professionally, it may be time to change gears.
At the core of financial planning is data. Without data, educated decisions cannot be made. If you have not already, take some time in the holiday season and look at where your money went in 2024. You will quickly learn (awareness!) how your financial life played out in 2024. Here are some questions to get you started:
- How much did your company grow? How many new customers/clients/employees did you bring on?
- How much did you save for retirement? Did you max out your retirement accounts?
- How generous were you this year? Did you give 10% away? 20%? More?
- How much debt did you take on? How many investments did you make?
- Who did you spend your money on? If you counted every dollar by who it benefited, would you be at the top? How many people are on the list?
I think it is financially wise to focus on who you interacted with in 2024. Money is a tool to interact with other people. The more we can direct those interactions for the good of others, the better. This can also include professionals who help you as well. Advisors, attorneys, accountants, real estate agents, brokers, bankers, and more can multiply your financial growth if you can use them correctly. Creating time for yourself to focus on what you’re good at could mean returns multiple times larger than the investment to hire these professionals.
Looking Forward to 2025
Planning is always about preparing for the future, not predicting the future. There is a great proverb that helps here: “In their hearts humans plan their course, but the Lord establishes their steps.” 2025 will certainly not go as planned, and there will be changes to make. The goal of a solid financial plan is not to have 2025 exactly planned. The goal is to create a direction you want to go, and then see what happens. Progress towards your goal is the key to financial planning, not predicting exactly what will happen.
What will you change in 2025 to get closer to your goals? Maybe it will be a new growth strategy, getting your finances organized, or hiring more staff. Whatever it is, make sure to build accountability into your plan. Having someone who can push you and hold you accountable to what you want can become a superpower. Create a mastermind, tell a business partner, or work with an advisor who can help you achieve your goals in 2025.
If you need more help with this, there is a great book by Gino Wickman called Traction that needs to be your next read. Traction, and the EOS framework, help break down and organize business goals into actionable steps. With a bit of luck, you can translate business strategies into business and personal wealth.
Work on Your Business
Ultimately, it is always good to both work in your business and work on your business. Take time to reflect on 2024 and uncover what the data say about the year. Don’t turn this into an attack on what you should have done, but instead take the Winnie the Pooh approach – “I always get to where I’m going by walking away from where I’ve been.” Create a financial plan that will take advantage of the lessons of 2024 and opportunities of 2025, and work with the right people to ensure they come to fruition.
TC Falkner 