How Personal Financial Planning Fails

Most people have a sense of the idea of planning, but it does not always translate into an effective plan. Too often the turn it over to others and then file the resulting report in the depths of a cabinet.

Let’s be real. Planning is not trivial, it is not often easy, and it is possible to be taken advantage of.

Everyone has a plan of some sort, otherwise they could not get along month to month. The purpose of a more formal plan is to be sure all the important pieces are included – effectiveness, and the tools used to implement provide answers at the least cost – efficiency.

There are two groups of parts.

The first part is the strategic part. The second, the tactical part. They are fundamentally different and thinking either is complete is a recipe for failure, at best mere inefficiency.

Group #1 -The Strategic 

Who are you, what are you values, and what do you want from life? Most of us take this for granted. We think we know what we value, how we see our lives unfolding, and who will be involved. Most of what we take for granted is received wisdom. Things our parents, teachers, friends, and strangers on the internet, have imparted. They are not complete. Conceivably not even right for you. They are, at the very best, fuzzy.

It’s difficult to do anything without targets and technique.

Part 1 – Vision

  1. Are you progressive, liberal, classical liberal, or libertarian? How does that limit your options.
  2. Are you committed to a religious belief?
  3. How do you see yourself changing in the future?
  4. What do you want to achieve in your life?
  5. When?
  6. Who will be involved. Not necessarily a particular person. Could be a placeholder. E.G. —  A business partner who is good at marketing.
  7. What strengths, skills, and experience do you have to support those ideas?
  8. What skills can you acquire?

Part 2 – Specifics

The specifics are found as answers to “W” questions. When you assess these, they can help you see conflicts in your vision and sometimes voids – things you have not thought about at all.

The usual list includes the conventional “W” questions we learned about in high school.

  1. What do you want? There could be several of these. Organize them around your vision of yourself. That will help create priorities and tradeoffs if they become necessary.
  2. What do you have or will you have to help you get what you want?
  3. When do you want them? Some are more urgent than others. Time was invented so everything did not have to happen at once. Again helping with priorities.
  4. Who will be involved? There are two group here. People who help and support you and people who see you as their supporter.
  5. Where will you be as these things come to pass?  Could be where you are now? Could be somewhere else. Understand the conditions that will help you decide where to be.
  6. Why do you want these things in particular. There are other choices that could fit. What personal needs would they address.
  7. Why not? Knowing the things you will not do or try is helpful. It saves time. Things that don’t fit are dismissed nearly without effort.

The why questions have an important use. They are where motivation lives. If you know why you are doing certain things and not doing other things, you can sustain the effort for much longer. Long enough to see results, even.

That’s where fuzzy planning breaks down. Without sustained effort, nothing will be discovered, and an assumption of failure will be easy. Then something else looks good. Off on another adventure.

Group #2 – The Tactical 

Tactics are the tools, techniques, and methods that apply your resources to achieve your goals. Tactics answer just one question – How.

The tactical space

You will choose specific tactics to manage debt, savings investments, income taxes, and risk. If you know their purpose clearly, you will be able to decide among the choices available. You will know why you choose one of them and you will be able to tell if it stops working or if a better option develops in future.

The problem with tactics. Most of them are complicated. Tools like insurance have evolved over centuries. Same thing for debt instruments like mortgages, banking, and investment choices. Agreements and documents you may use are based in law 800 years old. Contracts, wills, trusts, powers of attorney.

You will never learn as much as you might like to know about any of them because you don’t have time and have other talents to apply elsewhere.

You have a choices. You can learn enough to be good enough, or you can engage people who do it all the time to help.

The risk in involving another. Many of these people see themselves as the planner and you as the client. You are always the planner. Never give that up. The planner exists at the strategic level, tacticians are highly skilled helpers finding ways to deal with a specific part of the strategic vision.

How to have tacticians help.

  1. Share your vision. Be sure they understand the strategic goals and their priorities.
  2. Ask them for help in quantifying some of the pieces. How much should I save this month for educating children? Whata re the assumptions>
  3. Ask them notice things you have overlooked or areas where they see conflicts.
  4. Reassess based on their observations.

Resubmit the specific purpose to the specific technician who will deal with it. Ther eis little expectation of success on solving a debt question by talking to an architect. Keep the subject narrow and ask for help. The tactician will need to know the description of what you want to to do, how it fits in the bigger picture, what are the available resources, the duration of the problem, how success is measured, the limit of flexibility, and personal values that may limit.

The helper will ideally come back with options for you to choose among. “the presentations should be, “I have addressed your purpose and other factors and can offer three options. Any will fit but there are differences you will want to consider.”

The presentation follows this pattern

  1. Describe and agree on the problem to solve, or the opportunity to address.
  2. Present options.
  3. Explain the options.
  4. Present a recommendation
  5. Get a decision
  6. Go away

The logistics part

A brilliant strategic plan, wise tactical choices, and a huge stack of resources, make no difference until you do it.

Do-it-yourself is a trap. It looks less expensive in the present, but the potential problems have very high costs should they occur. Lawyers know how to create a will. What if your effort turned out to be invalid? What if you buy life insurance that could be denied on the basis of an undisclosed pre-existing condition. You don’t have to know about it either.  How does a high volatility investment match your risk profile?

Logistics are very specialized and someone who has already done 200 wills will do a better job than you will. If they tell you should have more than one will, would you be surprised and ask why?

Financial planning is never finished, so the last part of logistics is keeping track.

There is a multipart process which aims at evolving the best possible plan over time. The 3Rs

  1. Record the decision – The decision and why it is the way it is. What other options were available. What do you expect it to do, and when.
  2. Record the outcome
  3. Review the outcomes compared to expectations and alternatives.
  4. Revise as necessary

The third rail

The hardest part for both the planner client and the tactical professional is learning how to act together. The plan is going to develop on the border between the two spaces. An edge problem. Like chemistry, or electronics, it’s what happens at the edge of the connection that matters. An experienced professional can help with this.

To become proficient as a planner you will want to learn  reasonable expectations of dealing with professionals. The key will be to communicate clearly and expect them to discover or invent potential methods for your decision. Skilled planner know enough to stay out of the detail thickets. You should recognize how hard it is to keep up to date with tactical tools. You don’t want to be detail bound. You should have a general idea though.

Most people have trouble with allocation to resources to most urgent or most productive situations and finding ways to temporise the other things that must be done. The first time is difficult. You’ll be better lated. Most people build towards a pyramid of needs.

  • The first layer is to acquire assets you will use. Car, furniture, a wardrobe for work, maybe a house or condo,  These normally entail debt and that makes you vulnerable. That leads you immediately to layer 2
  • The second layer and one that will always be there is to control the unpredictable. Insurance of many kinds, a will, powers of attorney, a liquid safety fund to deal with surprises.
  • The third layer is to control debt. This removes some of the future commitments and provides flexibility and immunity to rising interest rates.
  • The fourth layer is to provide capital for future needs like education and retirement. While it is tempting to invest for high returns, consider how long until you need the money. If it is in the distant future say more than ten years some stock investments, possibly a balanced fund would work. If you will need the money for sure, the unpredictability of the stock market in the next year or two should make you avoid it.
  • Layer five is where the fun lives. With a predictable education fund, and a sound basis for retirement, people can invest for growth. Money that may alter lifestyle or allow them to buy use assets that exceed their original purchases. Maybe a cottage, maybe a farm to play with and hold as an investment.
  • Layer six If this works out and future living costs at a higher level have been provided for in the conservative layer, people move toward aesthetic investments. These could be anything. Helping children and grandchildren, art, antiques. travel, charity. Things that you own or do because they feel good.

The takeaway

If you plan with just a little attention to the process, you’ll get a better plan.

Do not let anyone else be in command of the plan.

Evolve a better answer by keeping track of how it is going.

Find advisors that will work toward your goals.

Being organized and disciplined is far easier if you have a fuzzy template.

Most people don’t get to that point and miss many opportunities, or cost themselves money and time resources.

I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email

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