Context In Financial Planning

Plans include the environment in which they operate

Understanding reality is a clear priority in any plan. People often do a budget based on their income, living expenses, savings, debt payments, taxes, and more. That is a valuable tool and yet it is incomplete.

Planning involves attaching resources to obligations and desires.

Objectivity comes in two parts.

  1. What is a realistic context. It includes an inventory of resources, wants and needs, and people involved. As well there is the external environment including taxation, economics, and law. The plan must join all of those in a productive way.
  2. What will the context be in the future? Resources are the only easy part, and even that is subject to considerable variation.

To be effective, planning and planners must understand the elements and take pains to specify them. Surprises are nearly always something that someone else may have anticipated. Problems with the present are nearly always the result of weak inventory skills, poor anticipation, or wrong tactics some time ago.

What changes

There are clear changes in people. Part of it comes from physical and chemical change. As you grow older you will be less strong and some of the aggressive chemicals may reduce. If you want to keep up the drive you had as a 25-year-old you will need to work at it. If you don’t, you should anticipate that working 70-hour weeks may not be a choice.

Values change too. Time spent with friends, family and children may be more attractive than working and making money. Volunteer work and charity may rise in value.

The environment will change. As long as governments remain profligate, taxes and fees will increase and services will decrease. Laws may become more detailed and more randomly enforced. An increasing portion of the population may not be able to cope with the changes. Opportunities will arise as the structure changes and new inventions and techniques propagate.

Individuals, families, communities, and nations have a life-cycle and it is reasonably predictable. Recognition of those life cycles and the changes needed to accommodate it are part of the context for current planning. Risk as it appears and is managed should include the wide range of possibilities in the future. Every plan must permit, even seek, change.

Think balance.

Economists talk about consumption smoothing as an important factor. What is the lifestyle that can be sustained over all time? Once the described lifestyle is known, it must fit with servicing obligations, the tax burden, and savings to provide cash flow to meet lifestyle needs in the future. That is the art of planning. Making it fit with reasonable assumptions about the future.

Things to assess about the future include, potential future income, health, potential yield on investments, expected taxation, inflation, and changes in preferred lifestyle. The past is more easily known. Debt obligations have term and price specified. You might be aware of potential renewal costs. Children are expensive and education is a consideration.

When you know your obligations to your past decisions and your saving obligation to continue a given lifestyle in the future, you can compare with income and see if your current lifestyle demands a reduction in savings. If so that particular lifestyle is not sustainable. You could reduce it or find a cheaper way to achieve it.

Planning helps you achieve balance in your financial life.

The plans you will develop will usually change as circumstances change in ways you do not anticipate. Planning gives you a template to use as a resource for growth and learning. To devolves to just three things.


  • your plans and why they are the way they are.
  • Outcomes


  • Compare outcomes to expectations
  • Compare anticipated conditions in the plan to observed reality


  • Decide what must change.
  • Seek tools and techniques that may assist.
  • Amend allocations of money and time resources
  • Create new, documented decisions

The 3Rs must be part of any plan.

Change is the only constant. The 3Rs help you keep on top of that.

I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have 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. 705-927-4770

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: