“Average people have wishes, confident people have plans.” -Anonymous
We live in a culture intoxicated by the use of the terms financial plans, financial goals, financial goal plans, and comprehensive or integrated financial goal plans. If we doubt that, take a listen to any financial television commercial on the subject and they’ll most certainly promise some version of it.
We can do better. It starts with a less flippant attitude and more integrity in regards to delivering on the talk. Let’s define what a plan is and why we need to have and utilize one.
What a plan accomplishes. Done correctly, its ultimate purpose is to be a roadmap, a guide, the central piece in financial decision making. It increases accountability drastically the same way a trip to the dentist would increase the odds of you brushing your teeth. It allows us to run what-if life scenario tests to see how we’re doing and how things may play out. It increases peace of mind and reduces stress. The plan prevents us from seeking advice from historically well intentioned, but not well-informed sources (i.e. family/friends, google searching, work colleagues, etc.). These sources base their advice on “rules of thumb” and not what fits our specific lives. We can’t blame them, they don’t know our personal financial situation. They can’t see and don’t know our plan.
A plan’s attributes. It must be dynamic, flexible, subject to editing as life changes and progresses (best served by an online financial planning software). At the very least, it would be written; preferably, typed. The plan should grant online access. It should be part of our ongoing life, not a one-time visit. If we hire an expert to assist our planning process and develop our plan (a highly wise and mature action), we should be able to see a sample plan and fully understand it before committing.
GOALS = Where we start (and finish). Re-frame the concept of goals. Let’s look at goals as a pursuit and not a finish line. It’s ultimately about who we become in pursuit of the goals, not the result of achieving the goal, which endures. Yes, we do need to put descriptions to goals, prioritize and define them in terms of bottom-line dollars. Get those goals on paper. Realize they will change. But, be ok with that. Again, it’s who we become in the process of heading down the track. We become enlightened, empowered, action-taking machines. If and when our goals shift, we’ll be closer to that goal having started down the path. Get going.
RESOURCES, don’t be a financial ostrich. Let’s stop burying our heads in the sand. Take the time to define current resources: income, expenses, assets owned, liabilities owed, etc. Doing a full accounting exercise of our resources significantly increases odds of success. Don’t remain financially ignorant. It’s a choice to take responsibility for where we are now and where we are headed. Stop viewing resources in a vacuum. Get all of these resources defined in one location, the plan. There is no reason to procrastinate our future any longer.
The PROCESS, defining the connection between our goals and resources. Most prevalent in this phase of the plan is having a research back, principle-based, and time tested investment process; not an investment solution, an investment process. We need to implement the plan. We take the proven concepts of asset allocation, diversification, rebalancing, and monthly automated savings and powerfully combine them. As we work through these areas, let’s not forget to protect with adequate insurance (but not over insure), minimize our tax payments and liabilities, and establish our ultimate wishes at the end with proper estate planning.
The best plans, the ones we need, do all of these. They start with goals, define the present, and establish an ongoing process as we move from resources to goals and continue revisiting that process. All along, we’re taking into account what could and will impact the plan. We consult the plan. A proper financial plan is a friend, a guide, a lighthouse in our stormy seas.
We need to simplify the planning process in our minds. Too many of us are not making plans. How then will we create the life we want? Significant achievement always starts with a plan. Get the first draft of your plan built. Fight the desire to get everything perfect, which inevitably leads to procrastination. Besides, there’s no such thing.
The principles of having an integrated financial goal plan are universal. Do you have a plan in place? If you don’t, how much higher would your odds of success be if you did?
“A good financial plan is a roadmap that shows us exactly how the choices we make today will affect our future.” -Alexa Von Tobel
