Building a Dynamic Financial Plan

Years ago I was involved in a software development company.  Our organizing principle for the program was “simple and robust.”  It was an encryption program and it was very strong and easy to use.

Financial planning should be simple and robust too.  How hard would that be?

As it turns out, very hard unless you follow a process that leads to the answer.  Financial plans have many parts; each them a study in themselves and each changing over time.  If you get caught up in the product swamp, you may not reach simple.  If you do not reach simple, robust is impossible.

The ideal arrangement is a person who recognizes the need for a plan.  Everyone sees the general need but few understand that efficiency is available too.  They begin to see that when the fracture the problem along three lines.  Strategy, tactics and logistics.  Strategy must come first.

Strategy encompasses the questions that only the client can answer.  What do I want, when and what do I have to get it with are the three fundamentals.  Who and where matter too.  Why will provide motivation and help you prioritize and choose among alternatives.

Tactics are the answers to how questions.  Investment methods are how questions.  Tax plans are how questions.  Insurance is a how.  Budgets, wills , powers of attorney and a career path are how questions.  They are all ways to help you get something you want.

Logistics is the implementation and follow-up part.

Most tactics are nuanced and ever changing.  Tax law for instance, or investment techniques, or the right insurance plan are all very detailed and while they look simple, they are not.  These and the other factors change often How would a non-specialist keep up?  That is what advisors are for.  They are all tactical.  They can find and implement solutions that address your strategic goals.  Only if you have those goals.

Developing a clear strategic plan offers you several values:

  1. You can choose among proposed tactics based on what attaches best to your plan
  2. You can understand and rely on regular reviews to keep the parts up to date and working together.
  3. You can easily dismiss tactics that do not fit your plan.
  4. You can delegate details to an advisor who understands what you are trying to accomplish.
  5. You can notice which areas of knowledge are still under-developed and work at filling them.
  6. You will understand what the plan means

In the end it is like driving a car.  I need not know much about fuel-injection to drive. All I really need to know is when it is not working properly and who to take it to for repair.  Like a sound plan. I can tell when it is off course.

When driving I need to know where I wish to end up and I must be prepared for unexpected developments.  Construction on my preferred route, for example.  I must be prepared to buy fuel and have a general idea where to find it.

And most of all, I must make tiny adjustments as I drive.  Watch your hand on the wheel for a little.  In a financial plan, that is the record, review and revise part.  Even if I don’t change the destination, I will make many adjustments along the way.

A sound strategic plan gives you the power to assess tactics, to assess progress and to effectively delegate tasks that are too time consuming to do yourself.  A strategic financial plan is dynamic and evolves towards a gradually more visible goal.

Know generally where you are going before you start out.  Understand balancing conflicting ideas.  If you measure just one parameter you run this risk.

“Speed is useful only when you are running in the right direction.”  – Joel Barker

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com 

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