Four years ago, I interviewed a hero of mine called Carl Richards, a financial planner and New York Times columnist who is famous for his simple sketches he uses to illustrate profound financial truths.
That conversation was to promote his book The One-Page Financial Plan – listen back to it here. I hope I’m not treading on Carl’s toes too much, but I wanted to nick his title at least, and provide you with my own version of what a one-page financial plan might look like.
Everything You Need to KNOW
1. Progress Comes in Daily Actions
We can have grand ideas of what our future will look like – walking along deserted beaches at sunset, offering our time to the causes we love because we don’t have to work, or just helping our kids buy their first car. But all those goals will only be met if we take action consistently, week in week out, day in day out.
Whether we make progress towards our goals or not will be determined very often in split-second decisions. Shall I buy those new headphones or save the money instead? Should I lease this shiny new car, or keep running the old thing I have now?
I don’t say this to guilt-trip anyone, because life is a balance. But if the balance is too often tilted in favour of short-term things, then the long-term will stay long-term – we’ll never get there. So those daily actions are important, and as such it’s essential to keep them in mind for when those decisions have to be made.
2. Plans Should be Visible
The way to keep those daily actions in mind is to keep them visible, where possible. The picture I have is a kind of cap with a stick pointing forward with a sheet of paper on it with our goals and actions written on it, so it’s in front of our eyes at all times, although that’s not practical!
The one-page financial plan should help us to distil our goals and our actions into a format which we can keep accessible for when we need a reminder about what it’s all for. Whether you keep it with your monthly budget, or on your computer desktop or wherever, just having a simple, written plan will really help.
Apart from the goals and the actions, our plan should also include something about our motivations for pursuing our goals. There’s no better way to stay on track than to remember the reasons we’re taking those actions.
3. Plans Should be Reviewed
Any plan is, by definition, wrong, the second we complete it. We’re not creating a battle plan, or a game plan for a football match. What we’re planning doesn’t generally move that fast. But we will need to change our plans and our actions as life unfolds, and we may also need to make changes as we go along. They may be temporary, perhaps if we need to dip into our emergency fund for something unforeseen, or more long-term, like a relationship change.
Having a one-page financial plan means that it can be nimble enough to cope with such changes for the simple reason that it isn’t a big complex beast with lots of moving parts. It’s distilled – none of the fluff or detail, just the pure stuff we need to know and do.