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Strategic Thinking

20 April 2022

“If you don’t take care of your money, your money won't take care of you.” ― Mac Duke, The Strategist.

In our previous blog, we looked at a SWOT-analysis approach and how that helps us engage with what is going on in our lives to create a relevant and sustainable plan. It outlined the steps necessary to move from higher-level strategic thinking into something more tangible and executable. Strategic thinking is crucial if we want to regain power over our choices and highlight the things in our lives that we can change, rather than allowing life to distract us with loads of things we can’t change.

In its simplest sense, strategy is deciding where you want to be and how you’re going to get there, and then taking the necessary action. It is, essentially, what we do when we craft and update your financial plan.

So, what do you need to do to develop a strategy?

Step 1 – Assess where you are right now

Any step you decide to take can only be taken from where you are right now. Even the Grand Old Duke of York couldn’t move downhill until he moved up first. Knowing this will also help if you want to do a SWOT analysis; focus on where you are right now and how this affects your strengths, weaknesses, opportunities and threats. These will change as you move to the next milestone in your journey.

Step 2 – Identify where you’d like to be at a particular time in the future

Think about three, five or ten years down the line. Where would you like to be in life? This is separate from SWOT – it’s more about dreaming or “blue sky” thinking. How would you want your life to look if everything aligned in your favour? Here’s a great quote for this step: Aim for the moon; if you miss, you’ll fall amongst the stars. This is only the second step in strategic thinking, so the broader we can dream, the more we will have to work with.

Step 3 – Prioritise the goals you’d like to hit first

Life doesn’t always go according to our plans, so we will have to hold on to some of our dreams with an open hand. But the goals that feel most important to us, we can focus our energy and attention on those, and hope the others evolve into something better than we expected.

Step 4 – Establish milestones

If you have a three-year strategy, you can look at what you need to accomplish every three to six months for the next 36 months. For example, if you want to reduce your debt, you can set yourself a monthly milestone to pay down (and not spend extra) on your credit facilities. Or perhaps you want to ensure that you and your partner go on at least one date night every month, working on keeping your relationship healthy.

If it’s a longer strategy, like a ten-year plan, you might want to set annual goals. When it comes to long-term savings or tax efficiency, these kinds of timelines and milestones make a lot of sense. You might want to put a portion of your annual bonus aside or stay on target for promotional opportunities at work.

Step 5 – Laser-focused actions

Where the previous activity identified key milestones, this final task is to articulate the actions that need to take place at a daily level that will help you reach those milestones. If it’s spending less, you might want to keep your credit cards at home, so you’re less tempted to buy that snack or item on the way home. If it’s about keeping date night in place, make sure you have it in your calendar every month to phone your favourite restaurant and make the booking.

If it’s about reducing tax and maximising your savings, make sure you have an appointment to meet with your financial adviser in January, ahead of the tax year-end.

Ultimately, all of these actions will be connected with your finances, whether spending money or saving money.

It’s worth taking a bit of time to review your strategy. Sit down with a cup of tea or coffee, and look at where you wanted to be and how you thought you’d get there. Is it all still valid, or do you need to tweak it a bit? If you don’t take care of your money, your money won’t take care of you.

Sanlam Life Insurance is a licensed financial service provider.
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