Archives for June 29, 2015

My One-Page Financial Plan: Why Is Money Important To Me?

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onepage0I’ve already shared two nuggets from the book The One-Page Financial Plan by Carl Richards – the importance of getting started and the true value of a human advisor. But what about the title itself?

Before even reading the book, I was impatient and tried to make a one-page financial plan but it didn’t sound right. Even after reading it all the way through, I got a bit lost as besides “one-page plans”, it also tried to cover other big topics like budgeting, investing, and insurance. It took a few re-reads before things finally settled down in my mind. Here are the parts that helped the most:

Your one-page plan simply represents the three to four things that are the most important to you: some action items that need to get done along with a reminder of why you’re doing them.

Having done this with hundreds of my clients, I’ve found no more efficient strategy for solving the problem of how to handle our finances than asking “Why is money important to you?” […] If you’re doing this with a spouse, it’s important that each partner answer the question separately.

The reason I ask my clients this question is because it helps us understand their values. Often, the process of asking “Why?”—“Why is money important to me?” or “Why have I been so anxious about money lately?” or “Just why do I work so hard anyway?”—uncovers deep desires and fears that we are often too busy or too scared to think about. While the process can be uncomfortable, recognizing what really matters to you is the first step toward making financial decisions that are in sync with your values.

Recently, the author shared his own plan on his website – What Does a One-Page Plan Look Like?:

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There are many reasons why my plan (at the top of this post) will be different from the author’s and yours. Our current situation is different, our priorities will be different, our goals will be different.

Why is money important to me?

  1. I greatly value security, sometimes so much that it is irrational. I don’t want to have to rely on anyone else for money or favors. We cut back on work hours to spend more time with kids, but we still want to make more than we spend. It’s not time to touch that nest egg yet!
  2. I greatly value spending time with my family, both on a day-to-day basis and for extended vacations in new and strange places. I have to work hard to avoid getting into a rut where the days and weeks all start melding together. Even if it means lugging multiple car seats and strollers everywhere, I still want to stay curious, make some mistakes, have some adventures.
  3. I want to someday shift my activities such that they more directly give back to my community or some other greater good. I don’t like the idea of just writing checks though, so I need to find a more active and satisfying role. If I could make some money while doing this, that would be great, but otherwise I need to put enough aside that my investments will support me.

The overall point of both this exercise and the book is that improving your financial life doesn’t have to be done perfectly. Just by getting started and putting down your best guess down on paper, you’ll already be better than most. If you see something wrong when comparing your values and your actual behavior, then make some changes. Having done them, I recommend both doing this exercise and reading the book. If your library participates with Overdrive.com, it is available to borrow as a Kindle eBook.

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