Keep It Personal

Personal Financial Planning is just a buzzword for most people.  It should not be that because it matters.  It does not matter the most of all things in your life plan, but if you fail to do it well, it is a serious limit to achieving what does matter.

Many people fail to do it well because they have the emphasis wrong.  It has three parts:

  1. Personal
  2. Financial
  3. Planning

The planning part seems difficult because there are so many elements.  Most people have all the intuitive tools they need, they just need to trust themselves a little more.  People get the idea of the past, the present, and the future, but they usually focus on them one at a time.  Good plans work on all of them together and look for a balance of spending, saving, debt reduction and yield to balance all of it.

Life has risks that most people assume will only happen to someone else.  Pay attention and deal with them. Sometimes, you are another person’s someone else.

The financial world is arcane and often obscure.  Most of the things people notice are the tools.  Insurance, investments, tax shelters, tax sheltered savings, pensions, group insurance, credit cards, mortgages, lines of credit, corporations, trusts and tax rates.  Tools are always secondary to purpose.  Tools are how you get what you want.  They are improperly used if you get to them before you know what you are trying to do.

Since the planning and financial elements are difficult, many people approach a “financial planner” for assistance.  That will work sometimes but only if the planner retains a strong bias towards the personal part.  If the planner merely arranges product the personal part disappears.

Recall the order.  1) Personal, 2) Financial, 3 Planning.

The client is the planner and the advisor(s) are merely assistants.  Never let an advisor spell out the plan for you unless you are certain that they know the personal part in some depth and how the tool attaches to that.

You can tell when the advisors are doing it well.  All the recommendations come something like this  form.

“Given what you are trying to accomplish, I think either of these solutions will work for you.  Here is how they work.  I recommend “A” because it is less costly now and we need the money for other important things.  We can implement the better solution later.”

If you do not know and emphasize your own version of personal, you will tend to get generic plans that suit others.  In the worst cases, the tools are the ones the advisor wants to sell because they suit their personal plan.  The ideal plan has meaning and you can see why the pieces exist and why others do not.  When it all fits, it will be just organized common sense.

While this looks like it should be just business, it is not.  Keep it personal.

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.


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