No financial plan is ever finished. You change, the environment of your life changes, and tools and technique change. You must keep up or gradually lose efficiency and even effectiveness.
As Field Marshall von Maltke pointed out nearly 200 years ago,
“No plan survives first contact with the main body of the opposing force.”
In our case, the opposing force is the real world.
Keeping up involves three parts. Know what is happening. Compare to what you thought would happen. Using the new information change your plan or your tactics. The three Rs.
Record. Good decisions rely on good information. You should know your expenditures in a general way at a minimum. Most lifestyle things should be summarized with the key being how much variance could occur before you have to act. Other information is handy too. You can keep downloads about things that interest you, statements from your financial providers, and your expectation. Expectations matter because information is useless in isolation.
Review. The process of comparing what has happened with what you expected to have happen. Finding the meaning. Review is a context thing and context is king when it comes to making decisions about what you should do next. For some parts of your affairs annual is not enough. Examining lifestyle spending quarterly will probably help you stay inside you plan. Ignore anything close to expectation and apply different rules to anything you cannot change in the short run. You can decide you have been eating at restaurants too much and change effective immediately, but you cannot change your municipal taxes if they go up 10% over budget. You must find that elsewhere.
Revise. What do you revise? There are three approaches:
Most people don’t like the 3Rs, but over the long run, they matter. They clarify and refine your purpose. They provide insight into the future that can give you advantages. They help align resources and priorities. They gradually educate you with both facts and experience.
They improve your ability to achieve your goals. What is that worth to you?
Tomorrow, we will revisit risk.
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. email@example.com 866-285-7772