Swedroe: ‘The One-Page Financial Plan’

April 13, 2015

If you’re like most Americans, you may be confused, or even paralyzed, when it comes to developing a financial plan. In fact, most investors I’ve met—including many of those who have a relationship with a stockbroker—don’t have a written investment plan, let alone an overall financial plan designed to incorporate estate planning and risk management (insurance of all kinds) strategies.


Carl Richards, my colleague at The BAM Alliance and author of a new book, “The One-Page Financial Plan,” observed that, in his experience, even many people who have a shelf full of personal finance books haven’t created a financial plan—either because they don’t have the time to make sense of all the information in those books or because they feel overwhelmed by the challenge, and all the uncertainty, that can exist when it comes to contemplating the future.


If you happen to be one of those investors, Richards’ book provides a remedy to the confusion, as well as a prescription for getting out of the paralysis. In it, he supplies a specific road map, one that will help you to identify what’s truly important to you about money. Richards then guides you through the process of writing that “one-page” financial plan, first by getting you to focus on what I refer to as the “big rocks” in life.


Put another way, he helps you determine what you are planning for in the first place. He also delivers needed guidance for having good conversations with your significant other (if you have one).


This process allows each half of a couple to identify what’s truly important to them. And as Richards notes through his real-life experiences with clients and friends, and as we often will discover when we have our own good conversations, the things that are important to each of us individually are very different.


Making Friends With Uncertainty

Importantly, Richards also teaches you how to deal with all life’s uncertainty. In fact, learning to accept that life is uncertain is the key to the ability to take action.


We’re all uncertain about many things, such as how long we’ll live, what rates of return can we expect from stocks and bonds, how much we should be saving, whether we should spend money on a dream car or vacation, how much and what type of insurance we should buy, when can we retire and how much can we reasonably expect to withdraw from our retirement accounts.


Of course, many of these questions cannot be answered with certainty because there are many variables and unknowns. And working through these issues will require many assumptions, which will change over time. All that uncertainty is what can cause the paralysis that ultimately prevents so many from acting at all.


The solution that Richards offers is to accept the uncertainty: “It’s best to create a financial plan that takes uncertainty as a given—that sets you up to make adjustments as quickly and painlessly as possible so your disappointments won’t spiral into disasters.”


By describing many of his own experiences, Richards gives readers the antidote to investment-plan paralysis. He explains that it’s important to accept the uncertainty and understand that financial planning is an ongoing process. Thus, you must accept that your plan will likely go through many revisions and that adjustments will have to be made as life happens.


On Being Human

One of the things I like best about the book is that Richards, who is a financial planner, describes many of his own errors—errors he committed despite possessing the knowledge that should have prevented him from making them.


He explains how being all too human, and subject to emotional (instead of rational) decision-making, led to the kind of mistakes we, as humans, all make. He explains: “I’ve made mistakes that no rational financial advisor should make … but I’m also human.”



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