Recently I was in a meeting and the thought occurred to me; why do people even attempt to have a financial plan? What is the purpose of having a financial plan? Why take the time to create a financial plan and put forth the effort to implement it and follow through with it? The answer to these questions may sound obvious, but as I have studied financial planning and worked in the financial industry for the past 30 years, I have concluded that people have an innate desire to be self-reliant. However being self-reliant is a learned trait while we may have the innate desire, we have to act on it, and learn self-reliance.

What does it mean to be self-reliant? According to Dictionary.com, the adjective originated around 1826 and means, “relying on oneself or on one’s own powers, resources, etc.” Another definition, one that is a little broader is this: The ability, commitment, and effort to provide for the spiritual and temporal necessities of life for self and family. Both definitions explain the necessity to provide for one’s self.

The second definition is more comprehensive. My thinking is; how can you be self-reliant if you are not mentally or spiritually in the game? Can someone provide for self and others without that inner strength that comes from being mentally or spiritually prepared? I believe that self-reliance is more than just a good job and a fat bank/retirement account(s).

Self-reliant people not only have a good source of income, they have money in the bank, investments, as a friend of mine would add some food storage, debt free, and they are spiritually and mentally able to care for their own. This is a challenge in todays world where people are pulled in every direction, often wasting time and money. In some cases, children don’t have a complete understanding of what it took to earn the money they are now spending. 

With the challenges of providing for one’s self and family, may I submit that it would also include the necessity to continue to learn and improve one’s self. Consistently learning and integrating new concepts of truth, would help a person accomplish a goal of self-reliance. For example read good books, work with a mentor, be a mentor, help someone else reach their goals.

How does someone become self-reliant? Here are six ideas that will help you become more self-reliant:

1. Pay yourself first: Take some money out of each pay check and send it to savings (savings accounts, retirement accounts, investment accounts). The discipline of saving money and living on less than one’s income is a critical part of self-reliance.

2. Using a family budget: Using a budget is one of the basic principles of good money management.

3. Risk management: Risk management is taking care of the risks we are exposed to on a daily basis. There are four things that can be done with the risks: Keep the risk yourself and personally pay for the things that may happenControl the risk through behaviorPrevention - don’t engage in behavior/activity that would enhance the riskTransfer the risk through some means of insurance.

4. Be prepared: Things happen in life that cause great pain or financial difficulty (loss of a job, divorce, death of a loved one, business reversal, etc.) These trials may cause us to stretch and grow in ways we never knew we could, so finding, and developing coping skills is critical (developing the mental/spiritual side of self-reliance).

5. Daily improvement: Find something to do on a daily basis that will help you improve various aspects of your life. For example each morning, I spend time, praying, reading, writing in a journal, exercising, and meditating. 

6. Become debt free: Debt is truly a bondage that never sleeps, never eats, is always your companion where ever you go; becoming debt free is a blessing of self-reliance. Get out of debt!

These steps towards complete self-reliance take time and work. Don’t be too hard on yourself if you are not self-reliant in the next year - keep working towards it. “Claim progress”, as my wife would say. Map these things out how you personally might implement them in your own families’ and measure your progress. And then realize that life happens and each of us can experience a reversal.

Reversals that can cause a person to be completely wiped out and they have to start over, some people go through life with no issues at all (at least not that we see), so be patient with people around you as we are all be on the road to self-reliance, we aren’t at the same level, or we may have just suffered a reversal.

Finally, remember that there is always hope; keep the embers of hope alive by working on the above six items in some manner, as part of your financial plan regularly measure and keep track of your efforts, and you will become self-reliant.

REMEMBER:

"Strive not to be a success, but to be of value." ~ Albert Einstein

I have an uncle who, during his professional career, was a very well respected city manager. Periodically he would come and visit us in Los Angeles. On one such trip during my high school years, we all went to dinner and he told us about a developer in his community who was planning to build a shopping center of some sort. My uncle was really excited about this project because it looked like it was really going to happen, and would be a great addition to his community. 

He commented that he had seen many development projects come and go across his desk and they would get down the road a bit and the developer would pull the plug. Upon investigating the reason, he found the interest rate had changed a quarter or a half a percent and the project would no longer cash flow at the new rates.   

That was the first time I remember learning about cash flow. I had known something about interest rates and how if you borrow money you are charged interest. I knew that if you put your money in the bank or owned bonds you earned interest. But cash flow was a different story. He went on to say in these projects “cash is king.”

At this time I had a job, I had been working for the Los Angeles Daily Journal running their dark room, developing film, and printing photos to be published in the news paper (great gig for a 16 year old). I had a bit of cash flow myself, but I never thought of my income as cash flow. And yet that is exactly what it is: Income = Cash Flow.

In financial planning, cash flow is key. It is the basis of all financial decisions. What is the total cash flow? How will this expenditure affect cash flow? Will this investment improve cash flow? Managing cash flow, for some families, can be incredibly difficult; it starts with the goal of self reliance.

Every dollar earned goes in some manner towards self-reliance, which is usually a goal most families have. In today’s world, a large part of that is earning an income. Self-reliance is the sum total of the ability to provide for the necessities of life for our family. 

Spending money always has an effect on our cash position. Unchecked spending will destroy a family’s hard earned resources. I have seen families destroyed because one spouse will not give up the unchecked spending, racking up debt in the process. In counseling with these couples, and helping them understand the difference between needs and wants, can be a challenge, especially when they are set in their ways. I maintain faith that a person can change. 

Needs vs. wants is a tricky thing, simply be cause people can alway justify their spending. After all that is what good marketing is about, “creating the need.” Marketers help us justify spending and perceived needs will always grow to whatever the income is, again justifying the spending. Every spendthrift clearly justifies their spending!

To get an understanding of the most basic needs, a starting place is to list all the places where money is spent, then prioritize that list based on the simple fact if they don’t have that item someone in the family will suffer physically (I realize physical suffering is extreme, but you have to start somewhere). While many people may think cable T.V. is a need, millions in the world get along just fine without it, food and water on the other hand are essential. 

Growing a stable cash flow or improving cash flow is important to the family’s self reliance. As people manage the cash flow for asset growth, self reliance becomes more of a reality. Putting some money aside on a weekly or monthly basis from cash flow is critical to becoming self reliant. The only money that will be in the future is what is sent on ahead. 

One of my financial planning professors use to say, there are only two things you can do with cash flow, to make things balance, increase income or decrease spending. Decreasing spending only works to a certain point, at some point cash flow or income must be increased. To the extent a person can increase or maintain a decent cash flow and keep spending in check they can enjoy the blessings of self reliance.  

Self reliance does not only come to people of great wealth, it comes to people of all income strata; the basic level is simply to live on less than the cash flow that comes in. Diverting some of that cash flow as it comes, into some sort of savings vehicle is how to start becoming self reliant and properly managing income. It is true what George S. Clason said in his world famous book, The Richest Man in Babylon, “part of all I earn is mine to keep.” This is great advice - always keep some of what you work so hard to earn!