Michael F. Kay
Aug. 20, 2019
Let’s begin with the most important question: What is a financial life plan?
I define it as a roadmap that accounts for, first and foremost, your highest values. It considers the transitions you will likely encounter along the way. Think job change, marriage, children, health challenges, college costs, divorce, death…Are you getting the picture?
A financial life plan is quite different from just knowing the numbers in your accounts and your investment portfolio. A successful plan factors in your money mindset and where it came from. For example, if you grew up in a wealthy family with a lavish lifestyle, high living feels “normal”’ to you. If you grew up in a home where bill collectors called constantly and money pressures were evident, these experiences might have instilled you with a nagging fear of running out of money even if you now have millions.
A successful financial plan is informative, enlightening, and highly sensitive to what you care about most, as well as your level of resilience.
It’s easy to find information and advice about the assets you should hold, the insurance you need, the investments that might make sense. But something I’ve observed is that even in this DIY world, you won’t find any YouTube videos or computer programs that will walk you through a financial life plan that helps you figure out what messages you learned about money growing up, or which of those messages have led to blind spots and biases that make it harder for you to take a truly objective approach to managing your money.
That’s why I say it depends. I’m not going to lie; whether you can build a successful financial life plan depends less on how much money you have than on how willing you are to “know thyself,” recognize your internal money messages, and adapt as life changes. But if you steer yourself in the right direction, you can do it. Here’s how:
Become an expert on your own values .
Our media-centric world is built around distraction. We are constantly logged in, tuned in, plugged into the cyber world and tuned out to self-knowledge and introspection. In order to get down deep to the stuff that really matters, you might need to wade through a whole lot of experiences or beliefs that bump firmly up against your true values. It’s pretty tough to do if you keep your earbuds blasting all day or spend most of your free time diving into Twitter rants. What is really important to you?
Practice self-awareness, especially when it comes to biases
Why do you favor chocolate ice cream over vanilla or a white car over a silver one? Why do you go shopping when you’re feeling tense? Why do you think it’s essential to buy a new car instead of a low-mileage pre-owned one? Or take your family out for burgers when you could afford a five-star restaurant for special occasions? The answers lie in our past experiences, which create our beliefs, behaviors, and habits in adulthood. Ask yourself where these traits come from and whether or not they serve you well today. It’s not about blame, shame or judgment; it’s just about awareness so that you can adjust your responses when appropriate.
Be willing to talk about money messages.
Money is a very sensitive subject; often even more of a hot button than politics or religion (or certainly neck-and-neck). By breaking the yoke of the taboo around money conversations, you can learn more about how others have grown up around money—especially your spouse/life mate/significant other –and how they make their decisions. What experiences inform your life partner’s beliefs, behaviors, and habits around money? Are the two of you in synch?
Try talking to friends about their money messages, too, especially those who seem to be good at managing their finances. You might learn some helpful new behavior patterns.
Build a team.
A DIY approach to a successful financial life plan is nearly impossible. You need experts who can provide knowledge, experience and most importantly, objectivity. So find a financial planner who can act as a coach, rather than a “parent”. The right professional invests time in educating you. In addition, you will want a proactive CPA who will assist you in making sound decisions, and an estate and trust attorney who specializes in this area and knows what to do as your children grow and come of age, or as estate laws and document requirements change.
Other team members might include an insurance agent, a banker, and a mortgage broker. They should all be on board with your values and working for you, rather than just trying to make a profit from you. Ask them how they’re paid, whether they have any conflicts of interest and what you can and should expect from working with them. It needs to be clear, decisive and in alignment with what you want.
Take time to monitor your actions and your plan.
Anything that has to do with taking more time out of your busy day is a challenge. Right? But taking time to monitor whether your actions are aligned with your plan is essential to make sure you’re not veering into a ditch.
For example, if your plan outlines that you have to keep your spending within a certain level, and you’re not watching, you might be destroying your chances of achieving your successful financial life plan. Set up a system that allows you to set targets and check them monthly.
If you’ve gone off-budget, analyze why and what you can do to adjust going forward. Also, be keenly aware of any external issues that might require an adjustment to your plan. For example, a job loss, or unexpected medical costs that require a shift in goals. These need to be brought to your planner to rerun the plan based on new information.
Life is never tidy, and change is inevitable. Be prepared to adjust your mental outlook and your actions to a new paradigm in your life, or a shift in the economy. Consider how a change impacts your plan and what you need to do in order to live your values.
Can you build and live a successful financial life plan? It depends…on you, your mindset and your determination. I absolutely believe you can!