A one page financial plan
Updated: Aug 2, 2019
You know when you read those financial articles and they say blah blah blah your financial plan blah blah blah? Well every time I have read those words I have thought to myself “right my financial plan”… “I know what that is right”… “I sorta know it in my head”. Well I have been one of those people writing personal finance content saying you need to know your financial plan, you need to understand your financial plan, you at the very least should have a financial plan!
I didn’t have one…
Well not really, it was sprinkled across many spreadsheets (my budget, my balance sheet, other planning sort of documents), my blog and my mind. Until now.
I decided it is about time I have a one page document which I can A. refer people to when they want to know about my approach to my money and B. Ensure that I completely understand my own approach to my money. How can I truly hold myself accountable if my goals and my approach have been sitting in the clouds somewhere.
So why is a document like this important?
It helps to develop approaches, strategies and goals
It helps you to understand yourself better
It helps you to understand what is important to you (your priorities) and guides your decision making
It helps you to share your approach to money with someone else
So without further introduction, here is my financial plan:
This document will be shared on the "My Portfolio" section on my website – click here. Although it is not necessarily an easy document to personalise, it is my hope that anyone can use this as a guide or starting point to developing their own financial plan.
Main purpose and plan:
This section of the plan describes the main purpose of money in your life. To me, yes money is there to buy things with and of course to enjoy but the main that I want to achieve with it is freedom of choice and time. This means that I have the flexibility to decide what I want to do and when I want to do it.
How do you plan to do this? Do you plan on inheriting a fortune or winning the lotto? The best way that I know how to do this is to build income generating assets over time.
Focus of the plan:
This part of the plan details the focus on how you intend to achieve your plan. My plan is about accumulating and investing in assets, so I have broken down the three major assets I will invest in or accumulate to achieve my plan. The priority asset in this plan is ETF's, therefore there is an added layer of detail for these assets describing the main vehicles that these investments will be held in.
The green layer underneath each asset is what I have in place to protect my assets. Protection of assets is particularly important in the early stages of accumulating assets as they can become susceptible to external risks. For example, in the case of my investment property, the bond is insured with a life insurance policy and the structure of my flat is insured with structural insurance. In the case of my death the bond will be paid off and the property transferred to a beneficiary, and in the case of a fire or a structural failure, I will not be held liable.
How to achieve the plan:
The final part of the plan is about describing the details about how you intend on achieving your plan. In my example I have done this by detailing my approach to investing, savings and spending, the three factors that I feel have the biggest impact on me achieving my plan. These are also the three factors that I have the most control over.
I have made an effort not to include details that are short-term in nature. For example there is no detail about what companies I am using or what products I am buying because this is an ever-changing and evolving world. As new products come into the mix every year, my mind might change over time (hopefully not thought).
This plan is an important part of my relationship with my money as it is a way that I can hold myself accountable to a standard and a few important targets. It's important to review a document like this each year, I will probably do this at the same time that I set specific targets on my budget and balance sheet (end of the year), but if the plan is based on a thorough critical analysis of your own ideas and approaches it truthfully should change very little over time.