Personal Finance Planning: Integrating Strategy for Life Balance
A personal finance plan encompasses an individual’s planned income and expenditure allocated over time.
This plan relies on a financial strategy, which defines time-balanced, long-term financial management actions aimed at optimizing the financial aspect of life and increasing the likelihood of achieving personal goals.
Creating a financial plan cannot be done in isolation from personal strategy. Otherwise, you risk pursuing false or externally imposed goals without considering the bigger picture.
While there is an abundance of information available on personal finance, including courses and articles that explain how to manage and plan finances effectively, there is a fundamental problem with these skills.
None of these resources teach you how to choose the right goals. As a result, there is a high chance that you may solely focus on pursuing short-term consumerism or neurotic dreams without considering the broader perspective.
Imagine an accountant teaching you about business and a financier telling you how to make money. Do you feel the catch?
Most courses on financial planning and personal wealth miss the most crucial aspect – personal finance and its health are not the root cause of success or life goals. They are nothing more than a financial reflection of your fundamental decisions and actions taken in life.
Personal finances are a monetary measurement of one’s lifestyle, behavioral patterns, decisions, and actions across all areas of life. Therefore, a financial plan reflects the ideas, decisions, projects, goals, and desires we plan and implement. It goes beyond numbers and delves into the essence of life goals and aspirations.
Table of Contents
Quick Strategic Intelligence Quotient Test
To get the most out of this reading, we recommend taking a quick self-assessment. This will help you apply the new knowledge more effectively and achieve better results.
Unlock your potential with 5 essential metrics:
- Strategium Personal Score – track 20 key areas of life.
- External Trend Impact – assess your environment.
- Personal Enhancement Mode – level of effort required.
- Strategic Planning Horizon – advised planning period.
- Strategium Intelligence Quotient – your new benchmark.
Your Lifestyle and Personal Finance
If you have taken the test above, you may have realized the interconnectedness of different areas of your life, many of which affect your finances. In this article, we will delve into the principles of personal financial planning and how they relate to other aspects of life.
It’s important to note that all current approaches to personal finance focus on achieving tangible goals. These methods help you calculate how to efficiently and expeditiously achieve your financial objectives, such as saving money to purchase something, building capital for future use, acquiring expensive possessions for enjoyment, or attaining a particular lifestyle.
While many educational programs focus on how to build capital, they often overlook a critical aspect: the underlying purpose for creating wealth. However, we need to reach a higher level of understanding and find out what drives wealth accumulation and what it is for. Unfortunately, this issue frequently gets left out of the equation.
For instance, capital accumulation provides an avenue for a desirable lifestyle in the future, where a person can sustain a livelihood by not relying on wages alone but by living off income from investments or other forms of capital. Financial goals related to property investment, such as building a house or generating rental income, are also prevalent.
I propose that we delve deeper into this question and elevate our level of awareness to a whole new level of personal financial planning. But before we do that, let’s first discuss some key terms and definitions.
Understanding the Difference between a Financial Plan and a Strategy
The distinction between a financial plan and a strategy is significant. A strategy typically encompasses general information and principles, whereby a personal finance plan is more specific and covers a shorter planning horizon.
A financial strategy can span your entire lifetime and even beyond. In contrast, a personal financial plan may have a horizon of just a few days. These two components, the strategic and operational aspects of your finances, are integral parts of the whole. However, integrating them can be challenging for companies but feasible for individuals.
Let us take advantage of this and integrate our plans into a cohesive whole. To achieve this, we should align our economic plan with our financial strategy, for example, by using tools like Excel or Google Sheets. One sheet can be dedicated to long-term issues, while another can focus on short-term planning.
A financial strategy should align our day-to-day economic activities with our long-term goals. This comprehensive approach helps us avoid wandering and being swayed by emotions or external influences. In today’s world, we are under pressure from myriad factors, from overt advertising to subtle marketing tactics and societal expectations, which can distract us from our strategic goals.
So, how do we effectively deal with these external interferences? The key is to develop a personal strategy. When we have a clear strategic plan and understand the relationship between our long-term and short-term goals, we can easily create a financial plan that aligns our life with our strategic objectives.
As part of our financial strategy, we may have multiple financial plans that reflect our planned endeavors. These plans may focus on different aspects such as income, expenses, savings, and investments, although linked, supporting, and reinforcing each other.
The Relationship Between Personal Financial Planning and Real Life
It’s important to understand that every financial transaction results from actions. What does this mean? Any decrease or increase in your bank account stems directly from your decisions, such as purchases, transfers, interest, dividends, salary, and more.
In other words, you can’t effectively plan your finances without considering your desires and actions. That is where the fundamental principles of economic well-being or ill-being come into play, with long-term implications.
For instance, the amount of money in your bank account on payday or dividend payout day depends not only on your current employment contract or stock portfolio but also on the educational and career choices you’ve made in the past and even the job offers you’ve accepted or not.
The trajectory of your career, your qualifications, your life decisions, your chosen educational and career path, and other factors unrelated to finance, in general, determine your financial future.
So, it’s not just about technical knowledge of credit cards, deposits, stocks, funds, cryptocurrencies, PAMM accounts, REIT funds, and other financial tools. These tools apply to just a portion of the income you manage to keep and allocate to savings. However, the priority should be to improve all income and expense items, not just what’s left over. This task is crucial in ensuring financial success.
Crafting a Personal Finance Plan and Strategy
The first step in improving your personal finance life is changing your mindset. Instead of focusing solely on managing your finances, it’s vital to approach it strategically by developing a clear strategy.
Addressing Financial Issues through a Personal Strategy
As you work on developing your strategy, there are several components related to personal finance that you need to consider:
- Create and analyze your income and expenditure model: This involves thoroughly examining your current income and expense traits to understand your financial situation clearly.
- Form a new model or trajectory of models: Based on your current financial situation, you’ll need to create a realistic plan that outlines ways to achieve your financial goals.
- Incorporate new goals into your strategy: Once you’ve identified your financial goals, you integrate them into your overall strategic plan to ensure they align with your long-term vision.
- Develop a personal financial strategy to support your goals: This involves crafting a comprehensive financial plan that encompasses your savings, investments, budgeting, and other economic activities to support your goals.
- Align your financial plan with your strategy: It’s crucial to ensure that your financial plan is in sync with your overall strategic plan to ensure consistency and effectiveness.
These components are vital to creating a solid personal financial plan and strategy. Let’s now delve into each of these tasks in more detail.
Building a Personal Income and Expenditure Model with a Closed Value Cycle
The first step in crafting a personal finance plan is understanding your current income and expenditure pattern. One powerful approach is a closed-loop value cycle business model, which we will delve into in a separate chapter for more details.
Once we have identified the components of our revenues and costs, we can input this data into a table and project the expected values for each income and expenditure item over several years.
By calculating the difference between our projected revenues and expenses, we can determine the financial outcome we would arrive at if everything remains unchanged. This information gives us a glimpse into our future based on the current model.
To make our estimates more accurate, we need to conduct an in-depth analysis of income and expenditure trends over several years, considering changes in consumer preferences, significant acquisitions, investments, and most importantly, our expected career path and associated financial flows.
The result will resemble a personal financial plan but reflect the inertia scenario of our future. However, we can visualize and calculate where this trajectory may lead by estimating our life expectancy.
This long-term pattern of our cash flows, along with our balance of debts, assets, and savings, also known as Net Worth, becomes the foundation of our financial plan.
If this model satisfies us, we can leave it unchanged and focus on other non-financial goals. However, if we identify issues, the most creative stage begins: developing new models of income and expenses and exploring new career paths and business projects. In short, anything that refines our financial strategy to adjust our long-term finances.
Crafting a Personal Financial Plan in a Strategic Workshop
In the personal strategy workshop, we consolidate all the work from the previous chapter into one stage called the business model (Module 3). Take this specific lesson if you focus solely on personal finance and not pursuing a comprehensive strategic plan.
We do not offer a separate course on creating a personal finance plan, as isolating financial goals from your overall strategy is not logical and can lead to problems. We do not want to contribute to exacerbating an already challenging situation. Therefore, at the very least, taking the third module of the course is essential.
However, I highly recommend taking the first module, which raises crucial questions about your past and future. The second module on personal strategic analysis is also helpful. These lessons will prompt additional questions and help you eliminate unnecessary illusions.
With a clear understanding of yourself, your capabilities, and your limitations, you can create a strategic plan and set ambitious but realistic financial goals.
Empowering Personal Finance: The Criticality of Strategic Constraint Analysis
After completing the second module of the workshop, you may uncover limitations that hinder your goals. However, instead of bitterly diminishing your aspirations, you can set more ambitious goals because now you can take actionable, practical steps to eliminate these constraints.
Without strategic analysis, you may never truly understand what prevents you from seizing new opportunities. Let me illustrate this with a personal example from my past. As a schoolboy, my initial ambition was to become a pilot. I even managed to learn to fly sports planes at the flying club. However, after analyzing a flying career from the inside, I decided to shift to the second option and enrolled in an engineering academy instead of a flying school.
It turns out that I changed my intended flying career path to engineering. But now, when rethinking(!) my strategy while creating this course, I retained that experience and realized there are still new flying opportunities. So, theoretically, opening a second wind to my flying practice could be pretty affordable.
Some planes are not too expensive, so with the proper circumstances and opportunities, I can retrain and resume flying. Not such a poor plan will likewise encourage me to maintain a healthy lifestyle. That sounds like a great insight to me.
This realization made me understand that in a financial strategy, it is not enough to list material possessions like a house, a flat, a car, and all those things that signify well-being. These are all just the base of Maslow’s pyramid of needs. There are many more things in life, and it is crucial to delve into the essentials and understand our true potential.
Therefore, strategic constraint analysis is paramount in identifying and overcoming obstacles hindering us from achieving our goals and uncovering hidden opportunities. It allows us to set more informed and ambitious goals aligned with our potential and priorities to pave the way for a more comprehensive and effective financial strategy.
Balancing Your Financial Plan: Understanding Short-term Aspects
If you have savings, it’s likely because you’ve made sensible choices with your money. Saving is not necessarily a financial decision but a reflection of your internal motives, conclusions, actions, and goals in balancing income and consumption.
One of the ideas behind creating a financial plan and strategy is to align specific moves with your overall economic well-being. Your finances reflect your life decisions, actions, and choices. Therefore, it’s not just about how much you spend but also what you spend on and why.
The only conclusion from these assumptions is that to plan your finances effectively, you need to plan your life and find a balance between income and consumption. Balance is the keystone here! Even with a significant income, some people struggle to maintain this equilibrium, as evident from the history of private bankruptcies.
For instance, if you plan to buy a house with a mortgage that doesn’t align with your income, you may risk losing both the home and the money. Similarly, if you build a house without considering the maintenance cost, you could land yourself in a difficult situation. Such mistakes can lead to you not having enough money for the necessities of life if you make rash life decisions that affect your finances.
Therefore, you should consider long-term trends and factors influencing the financial outcome.
Understanding the Impact of Asset Ownership Costs on Personal Finance Planning
Let’s consider another crucial aspect that directly affects your financial well-being: the cost of ownership. TCO includes the expenses related to the maintenance and management of assets or property, such as time, labor, and money, which can sometimes be pretty high.
Take, for example, the popular idea of investing in property to earn rental income. However, in reality, rental income may not always translate to profit. If you own multiple rental properties, you know very well that it requires significant time and effort. There are frequent rent issues, repairs, refurbishment, utility bills, and other responsibilities you cannot avoid. If you decide to delegate these tasks, this is unlikely to change the profitability of this ‘investment’ model. It is just that another person will get paid for the work instead of you.
Similarly, the idea of a good passive income from renting is not always the case, as demonstrated by the example of cars in the graph below, which presents data from a study on the cost of car ownership by GoBankingRates.
Data from a study on the cost of car ownership by GoBankingRates.
This example highlights the importance of considering not only the purchase price of an asset but also the long-term costs associated with owning and maintaining it when making consumer decisions. Understanding the total cost of ownership and aligning it with your long-term financial plan is essential before making significant financial commitments.
Age and Personal Finance Planning: Understanding the Correlation and Strategic Considerations
Recently, a gentleman asked me why he needed a personal strategy at 70. He had taken our test, which recommended a plan for the next 40 years, and was stunned and expressed his disappointment. However, the results were indeed accurate. There is a correlation between age and the recommended planning horizon, though not a direct one. Age does significantly influence the ideal planning timeframe for an individual.
But why is that?
As people age, the opportunities for correcting financial mistakes become limited, and a personal financial strategy can help. With advancing age, it becomes even more crucial to look beyond one’s life expectancy and plan within the family and future generations. This responsible and strategic approach considers the legacy one wishes to leave behind.
It’s also essential to consider how the ownership of assets may impact those who will inherit them. Take the example of Japanese real estate in the 1980s, where many people bought properties for rental income to supplement their pensions. However, the subsequent real estate value index decline over the next 20 years provides a cautionary tale. Therefore, it is crucial to consider long-term changes in asset and property values in your financial plan.
In conclusion, age does play a significant role in shaping an individual’s financial plan and strategy. Considering the correlation between age and the recommended planning horizon, being strategic, responsible, and forward-thinking in financial planning becomes paramount. Just think beyond the present and consider future generations.
Understanding the Long-term Aspects of Personal Finance Planning
Personal finance planning involves much more than just setting financial goals. It reflects projected activities, whether it’s for individual or business purposes.
For instance, consider your paycheck. It represents the monetary value of the labor you have put in. It’s the result of your work for which you receive money as compensation.
Let’s delve deeper into another aspect: creating capital to achieve a certain level of wealth. Before you can build up capital, you need to have money and transfer it into an investment account.
Let’s take a simple example to understand this concept better. Most people receive a paycheck for their work, let’s assume, a thousand monetary units. But it’s not as simple as it seems.
In fact, behind this seemingly straightforward labor/money/capital equation lies your entire life trajectory. To receive that paycheck, you have to go through various stages:
- You went to school.
- Perhaps you went to university.
- Starting your career, you probably got your first job, even as a volunteer or on a low-paying internship.
- Gradually, you acquired experience and professional skills, becoming more valuable to your organization and society.
- As you improved your skills, you started receiving payment for your work, and now you see a sum credited to your bank account.
It’s a long journey, as you see.
Here’s another example of a shorter path, just within one industry (credits to Blockchain Training alliance).
What is essential to understand is that your current income depends on long-term processes in the past. At the same time, it is not easy to change your trajectory. However, there are quick changes you can make, as we will discuss in the next chapter.
Essential Tools for Crafting Your Personal Finance Plan and Strategy
Let’s delve further into the process. As we have learned, it is not just the money you need to plan but how you earn, save, and spend it.
Everyone should equip themselves with the right tools to create a sound financial plan. A business model is one such tool, although unconventional and often overlooked. This approach has proven compelling in shaping the company’s strategy and is deservedly part of our comprehensive strategy development methodology.
This closed-loop business modeling framework also works remarkably well for individuals. The approach provides an in-depth analysis of how you generate income, manage expenses and create savings.
Now, let’s examine a few excerpts from our lesson on business models, which is an integral part of our personal strategy method. These insights will guide you in creating a robust financial strategy or plan that aligns with your overall well-being.
Evolving Personal Business Models throughout Life’s Phases
Personal business models mustn’t be static but somewhat dynamic and subject to change. Consider the example of your business model as a child, where you drew resources from your parents, giving only the priceless fact of your existence in return.
During that stage in life, your business model was straightforward: just being a child. This fact alone enabled you to receive the necessary resources for growth and development.
While this business model may continue for some time, not all parents can indefinitely provide for the increasing needs of their adult children. Lifestyle changes may arise, and your family situation might not fully cater to all your requirements. At this point, parents may be unable or unwilling to finance all your needs, so you start to consider how to earn money, which is normal.
Some individuals may choose to work while still in school; others may rely on scholarships or even borrow money to pursue higher education. These are different personal finance models.
Now, let’s delve into our tool, the business model, which comprises various components that require careful study. We’ll begin with one of the most crucial sections: income.
Planning Your Income: Understanding the Shifting Landscape of Income Generation
You earn income when providing value to others through physical or intellectual work. However, different individuals may have distinct income models based on their circumstances. For instance, disabled or retired individuals may rely on pensions as per social contracts or standards, which many people eventually encounter at the end of their working lives.
To generate income, you invest time or money in training or work; in return, you receive payment. However, in the unpredictable realm of capitalism, there are no guarantees. As witnessed during the recent pandemic, many people had to entirely retrain due to changing industries and business models that rendered their previous work irrelevant.
Companies, too, may operate within the same business model for an extended period, yet, they are susceptible to competition and crises. Similarly, your profession may change over time, and it’s prudent to anticipate and plan for such changes in your career trajectory.
I strongly recommend devising a personal financial strategy for your entire life, including retirement age. As not everyone can rely solely on pensions, which are often inadequate, it’s crucial to build up reserves for unforeseen circumstances. In some countries, retirement benefits may not even cover basic living expenses, leading to financial hardships for many.
Furthermore, even in affluent countries, catastrophic events can disrupt social and pension systems, potentially jeopardizing expected wealth. Therefore, it’s vital to consider long-term factors that impact your income, which have an inextricable link to how you shape your career path.
Understanding the Link Between Career Path and Personal Finance
The graph below is from a comprehensive “Career Path Dependence, Strata, Scale of Thought, and Time Horizon” lesson. It illustrates the relationship between salary and age, revealing a sobering reality: earnings of employees who have not pursued a corporate career are likely to decline significantly at some point.
There are various reasons for this decline, such as being laid off, facing unemployment, increased competition from cheaper labor, employer bankruptcy, downsizing of a department, or leadership changes.
This statistical data depicts the trajectory of many people’s careers, ending up on the right side of the chart. While becoming an unskilled laborer or leaving the labor market altogether is not ideal, it is a potential outcome that workers should be aware of.
Therefore, the first step in planning personal finance is understanding the potential consequences of maintaining the status quo. What will your financial situation be like in the future?
To gain clarity on this, you can follow these simple steps:
- Record your current financial circumstances in a dedicated table.
- Extend the projection for several years or even decades into the future.
- Make adjustments for potential changes in wages within your industry.
- Consider your age and make appropriate adjustments.
- Include your expected pension amount.
- Factor in your average monthly expenses and extend them based on your life expectancy.
- Calculate the difference between your projected income and expenses.
You don’t have to consider inflation in these calculations, as it will likely have the same effect on all items of income and expenditure equally. We can therefore operate on current prices.
By creating such a financial model, you can realize your long-term economic outlook and make informed decisions about your financial strategy.
Creating Your Personal Strategic Plan: A Step-by-Step Guide to Fulfill Your Mission Statement
Crafting an Effective Personal Finance Plan and Strategy
In our approach to personal finance management, a financial plan is an integrated part of a comprehensive strategy. Let’s delve deeper to understand how to create these crucial components to manage your future.
A personal finance strategy establishes the guiding principles for managing your finances, including how you will fund your life goals. A personal financial plan is built upon this strategy, providing and allocating specific figures to particular timeframes, income and expenditure streams, and your strategic projects.
Applying Business Principles to Personal Finance Planning
Personal financial planning can benefit from adopting financial management approaches commonly used in the corporate world.
A financial strategy for a company is one of several functional strategies that align with the long-term business strategy. It outlines the current and future business areas, transition patterns, and accountability for results over multiple years.
Similarly, a personal finance strategy mirrors the financial strategic plan of a company. It entails making specific decisions on cash, such as where to invest, which economic and investment tools to use, dividend payments, salary expenses, banking partnerships, borrowing or lending in different markets, and other similar considerations.
Unveiling the Components of a Comprehensive Personal Financial Strategy
Your life strategy encompasses various aspects, including
- the industries you choose to work in,
- how you spend leisure time,
- and your hobbies, among other things.
Similarly, a personal financial strategy determines how and where you acquire the funds to achieve your goals. It involves thoughtful decision-making on investing, saving, and spending.
You may even decide to utilize all your funds at once though it is crucial to make this decision consciously and with informed consideration. If you choose to save and invest, you determine what to invest in, where, and in which markets to participate while carefully curating your investment portfolio.
This approach mirrors the portfolio strategy employed by investment funds, where you determine the allocation of funds to deposits, stocks, currencies, gold, and even high-risk assets like cryptocurrencies. When planning for risky investments, it’s crucial to justify your decisions, considering potential losses against potential gains.
In your financial strategy, you can specify how often you will reallocate your portfolio based on investment performance or significant life events. Each decision in personal finance should align with a specific life goal.
Furthermore, it’s crucial to consider allocating a portion of your income toward education. To do so, analyze the competencies you need and their purpose, and make informed decisions on the courses you need to take and when. This approach will allow you to estimate the cost of such training and incorporate it into your financial plan accordingly.
Crafting an Effective Personal Financial Plan
Your strategy shapes your financial plan, determining which lines to include. Let’s delve into the structure of a financial plan, which typically takes the form of a spreadsheet.
This spreadsheet helps to translate your strategic decisions into tangible allocations of financial resources across different categories, such as income, expenditure, assets, and liabilities, organized by year, quarter, or month.
The period for which you plan depends on your convenience. Most of us track revenues and expenditures monthly, making monthly planning a common choice. This results in a substantial table to work with, containing multiple columns for each year of your plan. However, this volume of data is manageable as you can copy or calculate most of the information.
If you prefer a more concise view, you can plan year by year, and filling in the cells becomes straightforward by multiplying the monthly amounts by 12.
Here is a personal finance plan template for you to try filling in.
But what will you fill it with?
Are your goals driven by external pressures or neurotic impulses? Maybe your plan only consists of other people’s expectations of you. What if your plan is a product of manipulations by unscrupulous producers or corrupt states?
To create an impactful financial plan, you should start by building a comprehensive personal strategy. Begin with a concept, move on to an in-depth personal strategic analysis, and progress to developing a comprehensive strategic plan. The result of one stage of this work will be a financial plan that matches your current goals and is more than just a spreadsheet for income and expense planning.
Instead, it will be a well-thought-out and powerful tool for your personal growth and well-being, supporting you in realizing your life goals. So, take the step forward and consider developing a personal financial plan based on sound strategic planning. Make a choice that can have a meaningful impact on your life.
Ethical Considerations in Personal Financial Planning
You may be surprised, but ethical considerations are intrinsic to a personal financial plan. Let’s explore this topic in greater depth.
As we are aware, our spending habits have a direct impact on our lifestyle and the environment. Our bank account balance is the equivalent of the labor we put into society and reflects our earnings.
The type of labor we engage in and how we spend our money shape our future. However, our personal choices also have broader implications for society and the planet. The material nature of our income and expenditure influences how our lives contribute to our communities’ well-being and the health of our planet.
Let’s take a moment to reflect on the reality we are creating through our work and consider which sectors and activities we support with our spending choices.
For instance, size and location are usually the main focus when planning to build a house. However, it’s equally important to consider how environmentally friendly the construction will be and how it will impact the existing imbalances. Will this choice improve or worsen the world, the country, or the local region?
Ethical Analysis of Consumer Behavior Using Cars as an Example
Cars are a compelling illustration of the ethical considerations involved in consumer behavior. Many people view owning a car as a significant financial goal. But there are inherent problems associated with car ownership.
Firstly, a car is not an asset but a liability that can drain your budget.
Secondly, cars are emblematic of over-consumption, which inevitably contributes to environmental damage.
Thirdly, car manufacturing uses different technologies, including internal combustion, electric, or hydrogen engines.
It’s crucial to recognize that each technology has its environmental impact. While electric cars do not directly emit combustion products into the atmosphere, they may rely on power plants that generate emissions elsewhere.
Moreover, the overall environmental impact of battery production and electric cars compared to gasoline or diesel-powered vehicles is still unclear. Extracting oil for gas or diesel requires significant energy expenditure. At the same time, we can still generate electricity through cheaper technologies like nuclear power. However, the ethical implications of such choices are complex and not without concerns, as seen in events like Chernobyl and Fukushima.
Yes, we face the ethical dimension of production and consumption in the planning. Why production? Because it is you, through your consumption, who decides what to produce. The environmental impact is just one facet of this multifaceted issue. There are numerous other ethical aspects to consider.
Ultimately, how we choose to spend our money reflects our values and has a direct impact on the world around us. We must be mindful of whether our consumption choices contribute to making the world a better or worse place. Understanding this distinction is crucial, and you should be clear about it.
The Ethical Aspect of Personal Financial Planning: Making the World a Better Place
Let’s briefly explore the ethical side of income planning, which is one of the essential aspects of developing a personal financial strategy. As you may have noticed, my concept of the 20 Areas of Life includes a sphere called Value that reflects the usefulness of a person to society. And your worth to society is closely tied to how you make money.
For instance, if you earn money through cleaning, landscaping, treating people, teaching, or promoting wellness, you are likely using ethical means of generating income. On the other hand, if your income is from activities such as producing and selling alcohol, cigarettes, non-environmentally friendly products, or building materials, it may be considered less ethical. However, the ethical considerations of income generation are not always straightforward.
Take banks, for example. While they may invest in environmentally-friendly industries, they may also encourage consumer behavior harmful to society and the planet. Let’s take the construction industry as an example. Building houses can be a positive contribution, but developing facilities that do not improve the quality of life and contribute to urban imbalances may not be ethical.
When creating your financial strategy and choosing how to make money, it is crucial to consider the ethical aspect, considering how you earn and spend. These two aspects are equally important and are interconnected. The difference between them reflects your net debt or savings.
On the one hand, your income and expenditure are just lines in your financial plan. On the other hand, your micro-decisions about how you earn and spend your money significantly impact the world and its future.
Our micro-decisions eventually add up to collective macro-decisions shaping the reality around us. That is why being mindful of the ethical aspect of financial planning can contribute to making the world a better place.
Conclusion: Taking Steps towards a Green and Safe World with Personal Finance
In conclusion, I firmly believe that developing a personal strategic plan is the first step toward creating a new balanced, and safe world. It is an informed expenditure of your time and money, and investing in such a plan can set you on the right path.
If you are not ready to start today, I encourage you to include this exercise in your financial plan for the future.
The main image is made with ruDALL-E.
