Common Sense Questions to Ask Yourself About Financial Planning

Common Sense Questions to Ask Yourself About Financial Planning

Carl Richards’ new book The One Page Financial Plan was inspired by the common questions he’s been asked by family and friends on how to best manage money. Here are his simplest tips for getting what you want from your money.

1. Ask why money is important to you

Knowing what you want your money to do should guide every financial planning decision you make. Once you, and potentially your life partner, have identified those goals, your financial decisions can more easily align with them. If you hope to fund a retirement account, education account, or save for a vacation home, you have to prioritize your decisions.

2. Guess where you want to go

Figuring out where you want to go allows you to ask for directions to get there. Richards uses “guess” because people don’t always know what will happen, but can still make projections then change course down the line if need be.

3. Know your starting point

What is your net worth? How much do you have in assets and liabilities? It seems straightforward, but it might be tough to face failed ventures or unpaid loans. Focus on learning from those mistakes and moving forward, not feeling guilty or regretful.

4. Think of budgeting as a tool for awareness

People often base spending decisions on emotions rather than logic. Budgeting can help reverse bad spending habits as a tool for tracking spending. Tracking equals awareness, which in turn equals behavioral change.

6. Buy just enough insurance – today

Two common mistakes made regarding life insurance are putting off buying it (either because it doesn’t seem urgent or it involves a tough conversation), and letting fear drive the decision-making process. After all, life insurance replaces economic loss, not emotional loss.

8. Do you under the basics?

The basic formula for successful investing, Richards says, starts with a diverse portfolio. Regardless of what your financial goals are, focusing on diversification will help prevent tunnel vision and putting all your eggs in one basket. Next, Richards says to keep your costs low. The more you pay for an investment, the less you end up keeping. Third, recognize the correlation between risk and reward.

9. Are you working with a qualified financial planner?

As Richards explains, it’s difficult to be unemotional about your money. The reason to use a financial planner isn’t because you aren’t smart enough to find good investments, but because they have the necessary distance to give impartial advice. Look for someone who is open about conflicts of interest, but isn’t trying to sell you something.

10. Are you consistent?

The math side of investing is much simpler than the psychological side. Have a plan and stick to it. Richards recommends working with a financial planner, yet again, because they’re a great way to ensure that logic, not emotions, are guiding your decisions.

Developing good financial habits and finding experienced advice will put you on the right track. OptiFour Integrated Wealth Management has provided financial planning and implementation, risk management, and wealth management for the Washington, D.C. area for over 25 years.  For more information on our unique approach to wealth management, please visit our homepage.