Managing money well doesn’t have to be complicated. We’ve included 11 simple yet powerful sketches below, and commentary around what each sketch can teach us.
The sketches below are akin to laying your foundation. A lot of people have the image of a castle in their mind yet they’re unwilling to start laying bricks.
“We think it can't be as simple as making a little bit of progress each day, so we look for ways to make a lot and make none.” - Jack Butcher.
Laying the first brick is the hardest part. Day one or one day, we get choose.
RESOURCE: The One-Page Financial Plan
Learn the steps to implement and start making smarter choices with your money, today!
Click here or the book cover to download.
Your financial plan can be as short as a single page.
People worry about money for a lot of reasons.The amount of time we spend worrying seems to go up exponentially when we don't have a plan. Enter the One-Page Financial Plan. Instead of getting bogged down in hundreds of pages and financial details that won't be relevant in a year, a one-page plan offers a snapshot.
You list the three to four things most important to you with specific action items that support your goals. It can take a little time to set up, but investing in a one-page plan will save you hundreds of hours of worry each year.
What we’ve realized over the years is that our clients don’t have the time, expertise, nor the desire to dig through a 60-page financial plan. Why? A plan will never be perfect, it’s not supposed to be. It’s the ongoing process of planning that matters. Our lives are constantly changing and so too will our plan.
You can't make a plan, though, until you've pinpointed why you care about money.
Why is money important to you? It's a simple question, but it's not always easy to answer.
It's also a question that feels more appropriate for a therapy session, not financial planning. However, this question helps reveal your values.
Those values then become the checkpoint for your financial plan because you can't make a plan if you don't know why you're planning.
Plus, without knowing your "why," financial decisions can feel incredibly complex. But once you have your answer, you gain the clarity to know which strategies will work best for your particular situation.
Saving without a purpose isn't going to work.
When you plan a trip, you decide where to go first.
Then, you weigh your travel options, like whether to fly, take a train, or drive. After all, driving won't get you to Paris if you're starting in New York.
You need to use the same logic with money. Yes, you may want to save money, but for what purpose?
Your one-page plan reminds you of "why" you're saving money, helps you weigh the different options, and makes it easier identify the best path for getting you where you want to go financially.
Let's talk one-on-one. Schedule a Call.
Your net worth is your starting point for everything you want to accomplish.
Where do you stand financially? You're not alone if you don't know the answer. But you need this information to make other financial decisions.
Luckily, finding the answer only requires some simple math and a piece of paper. You're going to create a balance sheet.
On the left side, list all your assets in detail: bank accounts, the fair market value of your home, and any savings.
On the right side, list all your liabilities: credit card debt, mortgages, and school loans. Then, add up all your assets and subtract your liabilities. You now know your net worth.
We’ve included a tool that helps you get organized and understand your finances before making important decisions:
A budget (or a cash flow/spending plan) tells you how much money you have to spend the way you want.
A cash flow plan and flossing: both insanely important, super simple, and for many of us, nonstarters.
There's a reason for that. Many of us view budgeting as a punishment. Plus, we think it's boring, and we're sure we already know how we're spending our money (or we don't really want to know).
A cash flow plan isn't about punishing ourselves, and it's not just about tracking numbers. When we have a cash flow plan (track our cash flow), we build awareness, and awareness helps us know if our spending leaves us with enough money for the things that matter most.
There's no single answer to how much you should save.
When it comes to saving money, people get hung up on the number.
Should you save 15% of your paycheque? Five percent? Twenty percent? The number matters less than you might think.
Start with saving as much as you reasonably can. Your definition of reasonable may not match your neighbor's and that's O.K.
Instead of stressing about a random percentage, focus on what you can save given your commitments. What's reasonable in your thirties probably wasn't reasonable in your twenties.
Giving yourself permission to save reasonably means continuing to save for the future without denying yourself the things that keep you healthy, happy, and sane today.
It's never too late to get smart with your money.
It's never too late to start saving or investing.
Maybe you never started saving because you were paying down debt. Maybe you never started investing because you were searching for a "perfect" investment.
Whatever the reason, what matters most is starting now. Stop dwelling on what you didn't do in the past and focus on what you can do today. Stop waiting for perfect.
Instead, start by saving as much as you reasonably can. Spend less than you earn, and don't lose money. You'll be better off tomorrow than you are today, and even better the day after that.
Let's talk one-on-one. Schedule a Call.
It doesn't matter what everyone else does.
People forget something incredibly important when they invest: It doesn't matter what everyone else is doing.
The only investing goal that matters is yours. But that doesn't seem to stop us from comparison shopping. When in doubt, return to your one-page plan.
Do your investments still support your "why?" If the answer is "yes," what everyone else is doing loses some of its urgency.
Even if the answer is "no" and you need to make changes, your neighbor's portfolio still doesn't matter. The best investment decisions are about your goals and not anyone else's.
Investing is NOT the same as speculating.
When people talk about investing, they often confuse it with speculating or trading. This confusion isn't surprising.
The financial entertainment industry has convinced us that investing success depends on predicting what the markets will do next. But predicting the markets is easier said than done.
As a result, we end up frustrated, even scared, by what we "think" is investing. In reality, investing is about what we want to happen in the long term, not what happens day to day. Investors get to ignore the market's daily or even weekly performance.
Speculators, however, can't help but lay awake at night and worry what will happen tomorrow.
What investment strategy is right for you? It could be real estate, re-investing in your business, crypto, or the stock market. We explore 10 key questions to help you determine if our stock market strategy and beliefs are the right fit for you. >> Download: Key Questions for the Long Term Investor
If you have a financial advisor, it's their job to stand between you and your big mistake.
At some point, investors will face what I call the "Big Mistake."
It's otherwise known as buying high and selling low. The Big Mistake isn't uncommon. When the market drops, our instinct is to sell now and stop the pain. When the market shoots up, we tell ourselves it's time to buy, buy, buy.
However, our odds of avoiding the Big Mistake go up dramatically when we have an advisor standing between us and a decision we'll regret.
Advisors get us off the emotional roller coaster and remind us of all the reasons why we shouldn't buy high and sell low.
Setting up a financial plan minimizes the errors you can make.
Unless you got really lucky in the DNA lottery, the biases you're born with will inevitably threaten your ability to make good financial decisions. But that doesn't mean you're doomed.
It does mean, however, that you need a repeatable system with guardrails in place to keep on track. Start with your goals. Then, based on where you want to go, build a plan that gets you there.
Finally, pick investments that fit the plan.
Just remember: Life will happen, things will change. You'll need to repeat this process, but it will ensure that you behave better than everyone else.
RESOURCE: The One-Page Financial Plan
Learn the steps to implement and start making smarter choices with your money, today!
Click here or the book cover to download.
For a hardcover copy of the book, please contact us or purchase directly from: Chapters or Amazon
The One-Page Financial Plan - About the author
Carl Richards is a New York Times columnist, an author, and a mentor of mine who has graciously allowed me to share these sketches and this resource with my you. I hope you find as much value as we did reading his book.
An idiot with a plan can beat a genius without a plan.
Let's talk one-on-one. Schedule a Call.
As a seasoned financial expert with a deep understanding of personal finance, I'd like to provide valuable insights into the key concepts discussed in the article on managing money effectively. My extensive experience in the financial industry allows me to offer practical advice and shed light on the intricacies of financial planning.
The article emphasizes several crucial aspects of managing money wisely, and here's a breakdown of the key concepts:
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The One-Page Financial Plan:
- A concise and focused financial plan is highlighted as a powerful tool.
- It's emphasized that clients often lack the time or inclination to navigate lengthy financial documents.
- The continuous process of planning is deemed more important than striving for perfection in a plan.
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Understanding Your "Why" for Money:
- The importance of identifying personal values as the foundation for financial planning is stressed.
- Without a clear understanding of why money is essential, financial decisions can become complex.
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Purposeful Saving:
- Saving without a specific purpose is discouraged.
- Drawing parallels to planning a trip, the article suggests determining the destination before deciding on the mode of saving.
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Net Worth as a Starting Point:
- The significance of knowing one's financial standing through a net worth calculation is highlighted.
- Creating a balance sheet by listing assets and liabilities helps determine net worth.
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Budgeting and Cash Flow:
- A budget or cash flow plan is presented as a tool to understand and control spending.
- The article addresses common perceptions of budgeting as a punishment and emphasizes its role in building awareness.
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Flexible Savings Percentage:
- The article advises against fixating on a specific savings percentage.
- Instead, it encourages saving as much as reasonably possible, considering individual commitments and life stages.
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Timeliness in Financial Actions:
- Emphasizes the importance of starting financial actions promptly, regardless of past delays.
- Discourages waiting for the perfect moment and promotes a focus on present actions.
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Individualized Investment Goals:
- Highlights the uniqueness of personal investment goals.
- Stresses the importance of aligning investments with individual goals outlined in the one-page plan.
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Investing vs. Speculating:
- Distinguishes between investing and speculating.
- Highlights the long-term nature of investing and the need to ignore short-term market fluctuations.
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Role of Financial Advisors:
- Describes a financial advisor's role in preventing significant mistakes, known as the "Big Mistake."
- Advisors are positioned as a buffer against emotional decision-making during market volatility.
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Repeatable System and Guardrails:
- Advocates for a repeatable system with defined guardrails for making financial decisions.
- Stress the inevitability of life changes, requiring a revisiting of the financial planning process.
This comprehensive overview, rooted in my expertise, provides a deeper understanding of the key principles outlined in the article. If you have specific questions or would like further insights on any of these concepts, feel free to ask.
