Many people have a plan that is not more than a collection of tactics.
A life insurance policy, a group disability plan, some health and dental coverage, fire and car insurance, a pension at work, a personal retirement plan, some investments, an educational saving plan, a will, powers of attorney, a mortgage, a car lease, some credit cards, an emergency fund or line of credit, a budget and a rough idea when the education funds will be needed and when retirement will happen.
No collection of methods makes a plan. Methods are what drives the plan, not what makes the plan.
The plan should be strategic. It should address what I want, when I want it, what I have to get it with and why this choice. When I have defined these in at least a general way, I can go looking for efficient tactics to make it happen. Without the “W” questions, I have no way to judge efficiency or even the reason to own a particular tactic. Certainly I have no way to assess one versus another. Invest versus pay down debt for example.
Hungarian mathematician Paul Erdos pointed out that a good proof does two things. It proves the required hypothesis and it provides an insight into why the proof, must be true. A good financial plan does that too.
Strategy provides a way to assess tactics and it provides “organizing principles.”
Organizing principles support efficiency. Organizing principles permit assessment of timing and priorities. Organizing principles enhance understanding and permit useful review.
An effective plan includes an ability to see the value of and need for helpers. That is part of the efficiency decision. Things you do only once in a while are things you do not do well. Things that are likely to change by the next time you do them, should be delegated to those who keep up their skills.
The individual is the planner and should seek the most efficient way to achieve their life goals. Delegations skills are an important part of that process.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.