Your assets should fulfil your ‘why’

Financial planning, for most people, brings to mind a labyrinth of paperwork and the perpetual agony of tracking every dime and dollar. It’s no surprise, then, that this often leads to analysis paralysis. 

Author Carl Richards (mentioned in a recent blog) cuts through this complexity, suggesting that the core of effective financial planning can, in fact, be summarised on a single sheet of paper. According to Richards, this one-page plan can serve as your guiding North Star in the seemingly complex realm of asset allocation.

So what should this one-page financial plan contain? It all starts with your ‘why’—your underlying motivation that dictates how you interact with money. Are you investing for your children’s education, or is it a dream home or perhaps early retirement that you’re after? Your ‘why’ should be the foundational element of your financial strategy, and it should inform your asset allocation decisions.

Simply put, your financial assets should become the tools that help you fulfil this ‘why.’

One of the key aspects of Richards’ methodology is the importance of emotional serenity in financial planning (explored in a previous blog). When we are tranquil and focused, we’re far less likely to be swayed by the volatility of the market or the financial rumour mill. We remain grounded, ensuring that our asset allocation aligns more closely with our real-world objectives and values rather than reacting to market panic or overconfidence. 

In other words, serenity helps us to stick to our long-term strategy, thereby setting the stage for long-term growth.

So, how do you create this one-page financial plan? Begin by clearly stating your primary financial goal, the goal that closely aligns with your ‘why.’ Outline the specific steps you need to take to achieve this goal. These could include saving a particular percentage of your income, diversifying your investment portfolio, or setting up an emergency fund. Lastly, list the assets that will help you reach your objective. This becomes your blueprint for asset allocation.

Remember, every time you’re tempted to shift your asset allocation in a moment of fear or a flush of greed, revisit your one-page plan. Let it serve as a reality check, bringing your focus back to the long-term strategy you’ve set for yourself.

By adhering to this approach, you are not just laying down a set of financial dos and don’ts; you are crafting a financial compass. This compass is not just about numbers or specific investments; it’s about orienting all your financial decisions, including asset allocation, around what truly matters to you. In the complex, emotionally charged landscape of financial planning, a simple one-page plan could be the compass that keeps you from veering off the path, ensuring that you travel smoothly towards your long-term financial goals.

Convert the chaotic art and science of financial planning into a far simpler, emotionally balanced strategy, maintaining your sense of direction and purpose.

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