032 – 8 Steps to Creating a Lifestyle Financial Plan
Do you go to the grocery store every day? Every week? What is your shopping routine? We all have a favorite, but we don’t always adhere to our favorite grocery shopping routine. I like to go to the grocery store once per week and buy everything we need during that trip, and I prefer to go early Saturday or Sunday morning when no one else is shopping. I also like to plan my trip thoroughly. I go through the refrigerator and pantry to see what we are out of or low on. Planning all of our weekly meals before shopping allows me to get everything needed for each dinner. Making a list and organizing it per grocery isle provides optimal efficiency when shopping for my groceries. A grocery plan also helps ensure I don’t forget any of the items. With a plan, I know we are addressing all of our grocery needs for the week.
However, it doesn’t always turn out this way. Often the grocery trip is made at a moments notice after church during a time when the store is overflowing with shoppers, and I am hungry. A list is not prepared to guide the way. A meal plan is not prepared ahead time, so we aimlessly throw groceries in the cart. My hunger forces a five pizza purchase instead of a single pizza purchase. The kids are screaming for all sugary foods to enter the cart. As a result, it takes twice as long, and we spend twice as much, and a subsequent trip is required mid-week for all the missed items. Taking inventory of current food in the house allows us to know where we are, planning meals makes it possible to know where we are going. When we go without planning, we have no direction and end up not achieving everything we want out of the grocery visit.
Unfortunately, when it comes to our financial lives, we don’t have a plan. We have no idea where we are and don’t know where we want to go. We justify that saving up to the match in our 401(k) plan will take us to the promised land. I have news for you; this may not get you even close to achieving everything your want out of life. It simply is not a well thought out lifestyle financial plan.
There is another way. A way that will allow us to come closer to achieving everything in life that we want to. All of our goals, dreams and building abundance in the cornerstones that matter most in our lives. A way that allows us to be remembered by our actions and the legacy we leave behind.
Everyone deserves a lifestyle financial plan. A lifestyle plan is like a combination grocery list and meal planner but instead of acting as our grocery store guide, it serves as our life guide.
Eight Steps That Make Up the Lifestyle Financial Plan:
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Identify all your unique Goals and select the Importance of each.
The very first thing is determining the outcome we want to achieve. It allows us to focus on everything that is important to us. Some of our goals and dreams are not as important as others, so we rank them in order of importance. Examples of goals: A steady supply of income, health care, early retirement, car, college, travel, home improvement, gift or donation, wedding, major purchases, leave a bequest, hew home, start a business, celebration, provide care for parents or someone else. The list goes on a one. Each of us has a unique set of goals and dreams that we want to achieve before we take our last breath on this great earth.
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Educate yourself to make informed decisions.
We tend to purchase financial products before we realize what we need and do not need. Often is because a salesperson talks us into requiring a financial product, and usually it is out of fear that we make the purchase. If we educate ourselves first, then we won’t be caught off guard. It’s not time in the lifestyle financial planning process to buy any financial product. We still have a long way to go.
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Identify the resources that will help fund your Goals.
Identifying your resources is a process to determine where we are right now. What are all of the potential sources of income available at retirement? Do I have a completed net worth and cash flow statement? Knowing where you are right now is important because if we do not have a snapshot of where we are financially right now, how will we ever get to where we want to go. If you called your friend and asked for directions, the first thing your friend will ask is where you are right now. Otherwise, it is not possible to give the instructions.
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Determine the balance of risk and return that is right for you.
Never take more risk with your investments than needed to accomplish all of your desires in life. Actually, would you ever assume extra danger in any other scenario of life? Also, never take more risk than your appetite will allow or you may have to kiss your dreams away. Understanding risk makes it possible to go just the right speed to get to our goals.
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Create your personal Retirement Lifestyle Plan.
When we know where we are and where we want to go and the appropriate speed to get there, well, now we can create a personal retirement lifestyle plan. The plan should address any road bumps along the way including disability, death and job loss.
- Review and discuss plan results.
The lifestyle should address our probability for achieving everything we want to. If the plan has a 75% to 90% likelihood of success, we are in the confidence zone. If we fall below the zone of trust, well, then we need to tune fine our existing plan to get back on track. Fine tuning our plan may include retiring later than expected, sacrificing lower ranking dreams or getting motivated to save more or spend less. Step six also includes a detailed review of security social optimization and healthcare costs. Lastly, if we are above the 90% probability of success, then it is time to enjoy more of your money now or start adding more dreams.
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Implement your action items.
It is rare when one lands squarely in the confidence zone and so now is the time to implement the action items. What are the things you need to do to get in the confidence zone? This step most likely is the time to buy a financial product or service to help get back on track. We draw from step two (educate yourself to make informed decisions) when making any financial decisions such where and how to invest our money.
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Review the plan and adjust over time.
Reviewing the plan quarterly is the most important step of the plan. Lifestyle financial plans are fluid and change over time. More goals and dreams get added to the plan, and roadblocks are recognized so review and adjust the plan on a quarterly basis. We never stray too far from our destination.
The steps are not difficult, but they can be overwhelming. Sometimes we need a lot of education and sophisticated financial planning software to help build the plan. Work with a CERTIFIED FINANCIAL PLANNER™ professional who is also a fiduciary to accomplish your retirement lifestyle plan.
About the author, Scott Wellens
Scott Wellens, CFP® is an investment advisor and founder of Fortress Planning Group. After earning his Bachelor of Science degree from the University of Wisconsin-Oshkosh, Scott quickly ascended to become a Vice President of North American Sales at a major regional provider of telecommunications infrastructure. While financially successful in this role, Scott searched for ways to pursue his passion related to financial literacy and providing financial freedom for both his own family and others. During his search, Scott became curious about the significant gap he found in the financial services sector: he was unable to find a comprehensive financial planner that maintained a family stewardship lens without being attached to financial products. Scott decided to fill that gap by creating his own planning firm that maintains a strong passion for comprehensive, unbiased wealth planning that is genuinely client-centered.
Scott resides in Menomonee Falls, WI with his family. He is the father of three active and independent daughters who keep him on his toes. Scott is an active community member, serving on the Hamilton Education Foundation Board, serves as a Dave Ramsey Financial Peace facilitator and leads the All Pro Dad’s group at their local elementary school. Scott enjoys spending his free time visiting state parks with his family, reading, and watching the Milwaukee Bucks and the Green Bay Packers win ball games.