I recently finished Carl Richards’ new book called, “The One-Page Financial Plan,” and it was so clearly written, it inspired me to write up a summary.  Many of the people I work with are entrepreneurs or want to create a side business one day. They often like to get straight to the point with the question, “So, what should I do with my money?”  Even though the question is cookie-cutter, the answer will never be the same for two people.  It all depends on your goals and values.  This book provides some easy ways to get at the answers, and digs into some of the reasons why finances can be so difficult for people to understand.   

Choice can be crippling, don’t let it prevent you from taking action

One of the things Richards talks about is how choice is overwhelming. Don’t I know it! I prefer to grab groceries at my corner bodega and visit the big box store infrequently. I hate department stores and would prefer to shop in a small boutique. I also get overwhelmed when there are a ton of vendors offering a technology I need.  So, I usually seek out others’ opinions or reviews in order to limit the decisions my brain needs to process.

It’s the same with our finances. We would like to do better, but when we sit down to tackle it, we get overwhelmed by all the research we have to look into and how many statements we need to pull together.  We end up making poor choices, or doing nothing at all. God bless the internet age, but the media and Wall Street don’t help.  It seems like every other day the advice completely contradicts itself with various messages like,  “buy this now,” “never touch that,” “don’t forget to look into this.”  Carl Richards talks about it in this way:

“There’s an entire industry built around the idea that successful financial planning requires finding the best investment: if we just look hard enough or have the right contacts, we’ll be able to identify the next hot stock sector, or mutual fund. However the research is pretty clear that this strategy almost always leaves us disappointed. We simply aren’t great at picking the next Google.”

Focusing on finding the next Google entirely misses the point of good financial planning. Good financial planning involves creating a holistic view of your income, expenses, goals and values, risk management, as well as an investment strategy. Keep in mind, you have a day job that takes up enough time without having to decipher the multitudes of account types, products, tax treatments, and securities. Don’t let these choices overwhelm you and prevent you from taking action. Ask for help! 

There isn’t one financial plan that makes sense for everyone, but there are certain aspects of financial planning that are universal. In order to stay on track you don’t need a 100 page financial plan filled with exotic investment strategies, all you really need is one page — and it primarily involves ranking what’s most important to you.

Get in touch with what you value most in life

Here’s the thing you can’t skip out on doing — create some long term goals. Dig really deep here and think about what brings you the most joy in your life. These could be goals you want to achieve, priorities for right now, and/or goals related to your personal, professional and financial life.

Richards asks two key questions in the book:

“What are the top 3-4 things that are most important for you?” , and

“Why is money important to you?”  

These are powerful questions that help you let go of the desperation of “how should I handle this situation?” and get you focused on the bigger question of why you’re planning in the first place. Do your spending habits line up with your long-term goals? What about where you spend your time? What about where you live or how you commute?

If you find that the things you spend the most time/money/energy on aren’t brining you happiness or don’t fit in with your bigger goals and values, it may be time to make an adjustment.

“Why Is Money Important to You?” is the first question I always ask when I’m getting the financial planning process started with clients. 

What if my goals change?

I know I know, goal setting is for overachievers, what good is making a bunch of goals if they are going to change all the time?  I’ve been there. I never quite understood the “goals-based financial planning” realm either, for that reason. How can I make a plan for something when I don’t even know what’s going to happen next year with my job, my family situation, even my location?

The reason goal setting makes sense is a behavioral one.  I’ve come to understand that going through the goal setting process is still a vital activity, even if things change on a regular basis. Having concrete goals written down makes it much easier for your brain to stick to a plan and focus on achieving it. Get specific. It’s not enough to create nebulous goals like, “retire one day,” or “save more.” You have to create goals that are measurable and actionable, and make a plan to get there. For instance, you need to know when you’d like to retire, and more importantly you need to know what retirement looks like for you.  What will you do? What kinds of things will you spend money on? Do you see yourself pursuing projects in retirement?  Will they bring in income? What brings you happiness when you’re retired?  Definitely take a minute and think about the answers to these questions, start jotting down some thoughts. Once you’ve got these down, then you can begin making a plant to get there.

What’s the worst that can happen if your ideal retirement date/location/spending changes?  You update your plan! The fact that you had a plan in the first place makes it more likely that you’ll be able to pivot and reach your new goals, especially compared to someone who wasn’t focused on goals and let choices overwhelm them.

I highly recommend reading all of Carl Richards’ book. It takes you through the financial planning process step-by-step in a very approachable manner.  His primary message is simple — above all else, keep your goals in focus and it will help guide you later when financial decisions arise.  So now it’s your turn — what’s preventing you from creating some specific long term goals and dreams?

Feel free to tweet questions to @cadynorth. Follow me for more financial tips like this!

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