Planning is a multi-part process. Most people start in the wrong place and become confused, hostile and unhappy. Usually starting in the right place leads to a more successful journey.
Step one is establish a strategic overview. This usually has two parts.
The first is to establish who you are, what are your emotional strengths and weaknesses, what are your standard? How patient are you? How organized? How vigilant? It does not take long and identifies who shall be responsible for what. One partner may be good at organization but hyper-vigilant and fearful. Another partner might not even know what financial tools are being used. Sharing helps. In the end, the pilot must be someone who knows how to fly the plane.
The second stage of strategy is to answer many “W” questions. What do we want? When? What can we use to get it? Who is involved and what can they contribute? Where will we be? Why can be interesting. Why we are doing it and why this choice instead of another. Why the future, is useful for motivation and help with priorities. Why the past, is not useful. Why did we do that is debilitating.
When you know strategy in a general way you move to tactics. Tactics are the way you impose your will on your strategy. Tactics answer “How” questions. Many tactics are pre-designed and pre-built tools. Like a registered retirement savings plan. Like life insurance. Like an educational saving plan. They are packaged. Others require more input. Things like your cash flow budget, the decision around how to finance your home, the allocation to various saving obligations. In every case though, The questions are how does this help me achieve my goals and why do I choose this method over others available.
Many start with tactics. That is not smart. How can you tell what it does…. FOR YOU?
Most of the time an advisor can help with tool selection and fitting to the strategic project. Tactics are different from strategy. Strategic details tend to be reasonably constant but tactics depend on many factors and change regularly. It is very difficult for an individual to have enough knowledge and access to be complete. Advisors have much larger inventory of possibilities.
The last stage is logistics. Logistics are the most important part. I know no one tells you that, but they help sort out tactics to use and help redefine strategy and its priorities. A perfect plan that you cannot afford to implement is not better than no plan. A perfect plan that relies on access to a particular tool will work only if you have access. A good idea poorly implemented fails and usually not right away. Do it yourself trusts and wills are a waiting nightmare.
Assume that you develop a good plan and actually implement it. That is not the end. Emphasis “NOT.” Things change. You change. The world around you changes. The tools change. No perfect plan stays perfect.
The second stage of logistics are the 3R’s of financial planning. Record, review and revise. If you do all the rest well and ignore these, you will do less well than you could have. An advisor helps if they keep you objective. You cannot be objective by yourself and should not try.
Planning is how you get what you need efficiently. No planning means things are left out or overpriced or over-emphasized. Planning is about the best allocation of scarce resources to the past, the present and the future. The order is always the same but not always fully addressed. Strategy then tactics selection then logistics. That is how you find the meaning.
Never start with how. Start with what.
Good plans are not created, they evolve. But they all begin the same way. As Nike says, “Just do it.”
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. firstname.lastname@example.org 866-285-7772