Two truths:

  1. Without a doubt, financial plans are essential drivers of complete financial wellness,
  2. Financial planning is a good thing. Period. 

A strong financial plan is the product of solid client discovery sessions conducted by a competent, experienced financial planner. Understanding your most important goals in life, estimating what the goals will cost and determining how to attain them, or if you can attain them, is collaborative work for you and your planner.  

The process begins with a client discovery session. The ultimate physical product of these sessions, the published paper plan, tends to be an immense publication. A comprehensive plan can run into the hundreds of pages. The running joke is that if planners charged their clients by the pound they could retire early, but I guess that might only be funny to planners!

Most experienced planners know how to break the voluptuous volume down into a handful of pages that outline a number of manageable action steps: things to tackle now, things to do later, and so forth. This is good practice.

Early on in my career, I walked into client meetings armed only with the slimmed down plans which triggered similar reactions in all cases: “Is that all I get for my money? My friend’s plan was ten times that size!”

I learned a valuable lesson. From then on, I theatrically struggled my way into client meetings with the big, fat, heavy trophy binder in a heavy duty shoulder bag designed for power tools, palming my aching lower back to further the point. If I needed a dolly, all the better. Apparently, good theater and giant binders really enhance client satisfaction!

After slamming the paper boulder onto the table top, I would then pull out my three page analysis of the monster publication, a lean, mean intelligence machine, which may have served to make me appear smarter than maybe I deserved!

I’ve helped people make smart choices with their money since 1983. I’m a Certified Financial Planner and Certified Coach, and I’ve lost count how many financial plans I’ve prepared and delivered to clients over the decades, and here’s the point: The big trophy binder is not your plan. The relevant and powerful actions you take that will help you attain your goals and improve your financial life are your plan.

With me so far?

As we age, or more accurately, as we move from one financial phase of life to another, we will be well served to have new and updated plans that serve our new or revised objectives. Too many times I’ve seen anxious clients get excited to undertake financial planning, but when their enthusiasm waned they simply called it a day. The fat binder was assigned to collect dust on the shelf, the clients didn’t execute the recommendations, and they never revisited the plan again. This is sad.

Financial plans are groovy…like a ripe banana.

Financial plans are groovy, but they’re only as good as executed recommendations based on the most current client information, the most current economic environment, the most current objectives, the most current analysis, the most current…well, you get the idea. If you picked up on the operative word here–current–go to the head of the class.

A good plan is like a ripe banana; it starts out fresh and appetizing, but after it turns fully brown it’s likely headed to the garbage. Today’s great plan can turn into tomorrow’s garbage. A bunch of words and numbers that no longer have the same relevance, unless and until the planning process is revisited and revised  based on the new current factors. Planning is not a one and done.

Financial planning has to be both current and forward looking, so to be effective, financial planning must be a recurrent exercise that reflects the changing phases of your financial life.

Targets on the Horizon

Financial planning is about the future. 

You don’t necessarily need a plan to tell you what to do to fix urgent problems today. Your current investment strategy is either right or wrong for you. You can fix that today. You don’t have enough life insurance coverage. You can apply for a new policy today. You’re drowning in debt, you can stop stupid spending today. I think you got the point.

You may need actionable advice today, but tomorrow is planning’s correct target. Adopting a long term perspective is essential when you start planning, with the realization that as time marches on you will be required to revisit and revise your plans periodically.

Further, good financial stewardship is a personal responsibility that must reflect the distinct requirements presented during each of the three phases of your financial life–wealth creation phase, wealth accumulation phase and wealth preservation phase. Life is busy, life is full, and today becomes tomorrow before we realize it.  

Let’s take a quick look at how corporations do it. Corporate planning takes a company’s resources and capabilities into account and then maps out strategies to leverage those resources and capabilities to meet it’s overall objective to improve the company.

Now go back and substitute the word “company” with the word “family.”

To further the analogy, both corporate planning projects and personal financial plans are crafted to achieve long term goals and create forward momentum through the various projects that support the mission. While companies work for strong quarter-to-quarter performance, make no mistake that the best companies work for long term viability and maximum shareholder value.

Project planning enhances the traditional financial planning strategy by emphasizing both long term timing and transitions. Each of the three wealth phases occupy a certain period of your life and operate until they transition to the next phase, each earmarked by the strategies that are most effective for that particular phase. Structurally, plans and projects are based on the wealth phases and the transitions that occur between them. 

Planning and projects are not separate; they coexist on the same plane of time. The development of both plans and projects require a bifurcated approach, that is, thinking far into the future, but never neglecting the needs of the day. 

To achieve project success you must understand that there is no harsh, visible line of demarcation between the wealth phases; rather, you will likely cross the wide, fuzzy line between the phases without knowing it. Project planning helps you anticipate and plan for these crossings rather than leave them to randomness.

Planning and wealth projects require persistence and dedication over a long time line. It takes patience and flexibility to respond to necessary, inevitable course corrections, and sometimes complete reversals. 

They require a high degree of self-trust and self-sufficiency, a willingness to learn, the willingness to be wrong and the fortitude to push past mistakes. Ultimately, it takes the wisdom to know when conditions dictate, you should be occupying the next phase with a whole new set of rules, conditions and expectations.

Plans and projects are not for wimps! 

It takes emotional toughness to stay on plan over long periods of time. You will want to waver, you may want to vacate your project, especially in tough economic times and bad markets, but it is at those times that your forward thinking and informed actions mean the most to your financial viability.

So what’s in your binder?

Never. Lose. Money.

Leave a Reply

You have to agree to the comment policy.