February 2nd, 2023
First, a joke:
Why do cows use bells?
Because their horns don't work!
And now, a plea. Please consider the following question:
If you were to visualize your financial plan and transfer that image to a blank piece of paper -- what would it look like?
This question may cause the hair on the back of your neck stand up -- apologies if so!
Either way, it might be more productive to approach this question from 30,000 feet, so here's a framework that makes that a manageable task:
As you scan the key areas that make up a financial plan -- yes, even yours! -- try to resist diving into the weeds so we can keep things steady at a nice cruising altitude.
Breaking down each area in clockwise fashion starting from the top...
Numbers - this domain includes analyses of the balance sheet and of cash flow, as well as subjects like debt management and credit scores.
Estate - this is where you consider strategies for estate planning so that you can know what will happen to your assets if/when you lose the ability to make those decisions yourself.
Saving - this area includes strategies ranging from what to do for short-term emergency reserves, to investments geared for the long-term, like retirement or college planning.
Tax - distinct from tax preparation, this area is about having the opportunity to make proactive decisions related to your tax liability.
Risk - this area covers your insurance portfolio, including life, disability, auto, homeowner's, umbrella, valuable personal property, etc...
(Please remember that financial planning likely requires help from more than just one professional, and may require the services of an estate planning attorney, insurance professional, and/or a tax professional.)
And tying everything together in the middle...
Financial Purpose - this is where you give yourself the space to understand the attitudes and philosophies that influence the strategies among the other domains.
Even without a clear sense of what makes up your "financial purpose," it's important to know that all the areas are still very much interconnected -- pushing a button in one area will affect at least one of the other key areas.
Hopefully this framework gives you a helpful way to think about your financial plan, especially if you prefer visuals when considering abstract concepts like financial plans!
Anyway, please feel welcome to share your thoughts by sending a brief note to firstname.lastname@example.org.
Thanks for your time and have a swell rest of the day.
Cody L. Ward