How Solid Is Your Financial Plan

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There’s a lot of crazy stuff in the news. If you’re old enough, you’ve experienced these crazy times before. The investment markets’ economies go up and down. These kinds of things happen.

With all the craziness going on in the markets and the world, what news—financial or otherwise—are you concerned about? In this episode of the Finance for Physicians Podcast, Daniel Wrenne talks about how to make sure your financial plan is solid.

Topics Discussed:

  • What are I Bonds? Savings bond earns interest based on fixed and inflation rates
  • Financial Plan:
    • What is it? Foundation to going in good direction, making good decisions
    • Why is it so important? Aligns values and goals for living out your ideal life
    • What does it provide you? Clarifies your values, goals, and risks
    • What does it not provide you? Path to getting rich
  • Balancing Act: What’s most important? Think about today vs. tomorrow/priorities
  • Components: Have/write a plan and clarify values to make progress toward goals
  • Values Exercises: Every few years (at minimum) review your values
  • Are your finances organized? Strive for balance, not perfection
  • Awareness: Where’s your money going between saving, spending, and giving?
  • Uncertainty: Be aware by knowing when you’re drifting from values and goals


Financial Vitals Check

What Should You Do About Inflation

Is Money A Tool Or The End Goal

3 Exercises To Help You Clarify Your Values

White Coat Investor

Dave Ramsey

Contact Finance for Physicians

Finance for Physicians

Full Episode Transcript:

Hello, everyone. Hope your day is going well today. We’ve gotten a lot of questions lately that revolve around a lot of the craziness going on in the markets and just the world in general. There’s a lot of news out there that people are fearful of, concerned about, and that sort of thing.

Today, I wanted to talk about your financial plan and how that ties into this. I think having a really good financial plan is the key defense against some of this fear. We’ll help you navigate a lot of these questions that come up.

I wanted to talk about the concept, explain what I’m talking about a little bit more, and go through that today. Hopefully, it’ll help you in general, especially when things get a little hectic like they are now.

There’s a lot of stuff coming up in the news. It’s a little bit of a crazy time. If you’re old enough, you’ve seen these crazy times before. The investment markets’ economies go up and down, so these kinds of things happen.

By day, we’re financial planners, we get to talk to people one-on-one, and we hear a lot of the concerns. The questions we often hear are like, well, should I change my investments? How do I deal with this inflation?

We talked about that in the last episode. I’ll link to that in the show notes.

Should I buy into these XYZ investments? Lately, people are asking about I Bonds. Those kinds of questions are normal. They’re good questions. Even not in scary markets, there are a lot of questions we get like, how am I doing? I want to make sure my investments are efficient.

The challenge we have with questions like these and even other types of questions—you might think of a simple question like how much should I be saving, how much should I spend on a house, or those sorts of things—is if you ask a good financial planner, they’re going to be like, well, it depends. I’m not sure. Or they’re going to dodge the question.

The issue with answering those kinds of questions is it really needs to be based on your financial plan. If you have a rock-solid financial plan, it is pretty easy to navigate these kinds of questions. I don’t know about easy. Straightforward is probably a better way of looking at it. The answers to these questions can be very straightforward. I think that is the key to helping to address these sorts of questions.

We’re going to talk about what that is, why it’s so important, and the outline of it. We talk a lot about it. I know you’ve heard us talk about a financial plan and the importance of it, but I want to focus on why it’s important, what it provides you, and that sort of thing.

I’m sure you know that in general, everybody acknowledges that a good plan is worthwhile. It’s for anything, like a business plan or whatever. Having a plan is a good direction, but I think it’s especially important with your finances. A lot of people agree with me. I’ve said it many times.

If you look at the big financial voices in the world of medicine, […] is a pretty popular voice in personal finance. If you read enough of his stuff, you’ll get the sense that he agrees it should be the foundation. More than general personal finance, Dave Ramsey is a pretty popular voice. He definitely says you should have a solid financial plan and it should be the bedrock foundation of your decision-making.

All of us agree on that, but why is it so important? Like I said, in general, with planning, if you don’t have a plan, you’re going to tend towards meandering and not knowing which direction to take. But before we talk about why it’s so important, I think it’s good to look at what we are not looking to do. What is a financial plan not going to provide you?

A financial plan is not about showing you the way towards getting rich. It’s not about the path to becoming rich and wealthy. That path is actually pretty straightforward. Basically, it’s work and earn as many dollars as you possibly can in the hours that you have to work. Make as much as possible and as long as possible. Start work at an early age, make as much as you possibly can, work as long as you possibly can, spend as little as possible along the way, and invest as much as possible, and you’ll be rich.

I know that’s not everything. Your profession and income is important, but you can have some control over that. By educating yourself and selecting a higher-earning profession, you can amp that up as well. That’s a pretty straightforward route to building a ton of wealth, but if you take it to the extreme, you’re going to just die with a bunch of money. Most people, if you peel back the layers, don’t really want that out of their life. On the other hand, it’s not about living in the moment completely. It’s not about just spending as much as possible either, of course.

Really, the financial plan is your plan for living out your ideal life. The purpose of it and what it’s for is to help you identify what your values are. Your values are what’s most important. They should shape your goals. Ideally, your decisions around money and life are in alignment with those goals and values. Your financial plan should help you be more in alignment with your values. Ideally, your values are driving the ship with your life in general and particularly for your finances for the sake of a financial plan. It should help you view money more as the tool to reach those values and to build out that best life.

I talked about that as well. I’ll link to that show on using money as a tool to live out that best life.

Ideally, your plan is that mechanism for helping you to better do that, and on top of that, just being, in general, efficient with your money along the way and thinking about some of the risks that might come up that you might not always think about.

A good financial plan is all those things. It’s helping you align your values with your actions. It’s helping you better use money as a tool to build out that best life. It’s helping you be efficient with money. It’s helping you think about some risks along the way and address those. You’re going to be able to—by going through that exercise—start thinking about balancing today versus tomorrow or priorities.

There are a lot of values people have. They’re going to be competing with one another, so it’s like, how do I balance all these important things? Which one of them is most important? Balancing today and tomorrow and also balancing which of these things are most important.  Which one is the highest priority versus the lesser?

For starters, when people ask me these questions and I’m not their financial planner, if they’re asking me what should I do with my investments, should I buy I Bonds, should I change my investments, and all those sorts of things, the question in my head I’m always asking is well, do you have a financial plan? Let’s look at it.

That’s a weird answer to give somebody without some context, so I typically just brush off the question and have a surface-level conversation about the pros and cons or something like that. But a good solid financial plan, first of all, needs to be written. Maybe not on paper but in a document online or whatever. It needs to be documented and very concrete.

Let’s talk about the components of it. Some of you might be like, well, I don’t have a plan. That’s straightforward. It’s going to be worthwhile for you to start there. Have a plan. Write a plan. You need to have a plan. That’s step one.

Others of you might be like, well, I think I might have a plan, I kind of have a plan, or I probably have a plan. Maybe you’re not exactly sure if your plan is solid. Whether you’re one or the other, I think it’s good to understand what are the components of a good financial plan and what does it address?

As I mentioned before, the big thing is, first of all, it needs to help you clarify those values, iron out your goals based on what’s most important, and start to route out the specific steps to making progress towards those goals. Then, it asks you to also consider life especially if the future is not completely predictable and there are uncertainties. We got to address the risks. Ultimately, your plan should round out with a concrete action plan for executing the steps to get you on track.

I think it would be good to just think about some of these questions. This will hopefully help you to assess where you’re at in regard to a plan.

Before I go through the questions, this is a lifelong thing. Nobody’s perfect at planning. It’s something that you oftentimes will do a really good job with, and then life changes and it gets stale and needs to be updated or things don’t go as planned. Or maybe it’s your first time and you’re not as efficient as you could be. Nobody’s perfect at this. It’s a lifelong thing. Errors and mistakes are inevitable. It’s more about are you working in the right direction?

Some questions to think about to help you assess how solid your plan is: are you clear on your values? Do you recognize what’s most important? That can seem like a weird or maybe an obvious question, but I think the ultimate would be you haven’t written it down or you’ve at least spent some time thinking about it and you haven’t written it down. Ideally, it’s in priority order. The same thing, are you clear on your goals? Do you know what you want life to look like in an ideal world in the future? Ideally, all those are written down—your goals and your values—and you can refer back to those because you’re typically going to be fine-tuning, adjusting, adding, or subtracting them over time.

If you don’t feel like you’re super clear on values, check out our episode. We go through some values exercises. The intent is to help you have some concrete steps to iron those out. If you feel like you haven’t done that in a while, that’s always a good thing. I think every few years at the minimum—maybe even more frequently—it’s good to just take a minute and go through that.

Another question to think about is are your finances organized? How organized are your finances? Maybe yours are perfectly organized, but we’re not going for perfection. I know I’ve said that already, but I’m reemphasizing that we’re not going for perfection. We’re going for balance.

With organization, a lot of you probably have a lot of stuff. Really what we’re going for is a general understanding of where everything’s at and making some progress along the way, especially if you’re feeling like you could stand to get more organized. Do you know where everything is? Do you know your balances for stuff? Do you know what your insurances are or who the contact people are? Do you have your logins handy?

Like I said, I have struggled with this in the past. It’s a work in progress. Perfection is not the goal here, but it is good to assess this every so often. It’s like, how organized am I? What can I do to be better organized?

That’s going to be critical. It’s really impossible to have a solid financial plan if you’re completely unorganized. If you have no idea where you’re at, what your financial stuff is, what you’re making, generally where your money is going, and what type of accounts you have, it’s going to be very difficult to have a good financial plan.

Now, if you work with a financial planner, you can lean on them to some extent, so it is good to make sure they’re keeping you organized, but that is one way to take a little bit of weight off your shoulder. If you are working with a financial planner, they should be able to produce a summary of, for example, your assets and liabilities. That’s not to say you should not pay attention, but it is a way to shortcut a little bit, especially with organization.

Another question asked is do you have a good awareness of how things are going? This overlaps with being organized, but day-to-day, do you have an idea of what you’re saving versus spending versus giving? I think that’s one that’s easy to let fall by the wayside.

The same thing with being organized, we’re not necessarily going for perfection necessarily. General awareness, I think, is good. Maybe you don’t know exactly where every penny is going, but do you know maybe rough percentages of how much you spend? Say you know your lifestyle is $10,000 a month and you can back it up through looking at a credit card statement, checking account statement, or something. Having a general awareness of some of these things that are happening in your finances is healthy and good. It is really necessary to have a good, solid financial plan.

Are you addressing some of the risks along the way? Have you thought about worst-case scenarios and made plans to address those? It’s not human nature to think about worst-case scenarios, so you have to sometimes force yourself to think about what is the worst-case scenario? Have I made a plan to address those things? The worst-case scenario examples are if I were to pass away unexpectedly, have I considered that in my finances?

Another question is do you have an investment plan that ties into your goals? Ideally, with your investments and really with all your assets, when you have a good plan, what it does is it helps you equate or tie in assets to goals because that’s really what it’s about. The assets are not in themselves providing you anything. A good financial plan helps you map up where you want to go in life with the resources that you have. An investment plan is saying, okay, these accounts are for this purpose. Here’s how we’re going to manage them to help us move towards that given goal.

A huge part of having a good financial plan is that you have a specific investment plan if you have investments. If you don’t have investments yet, that’s a different story, but having a concrete investment plan is key.

Then, being able to answer the question, are you on track is a common question that people naturally think of. If you aren’t sure of the answer, that’s a sign that you probably don’t have a solid financial plan because the plan—the exercise of going through it—is going to help you see how you’re tracking basically.

I mentioned awareness of things. In particular, I mentioned where your money’s going between saving, spending, and giving. Let’s assume you have good awareness. If you have awareness, it would be good to ask yourself, is that in line with what my ideal would look like? Ideally, your saving, spending, and giving—in other words, where your money is going—is in perfect alignment with your values and goals.

Now, that’s not realistic. It’s more of let’s work towards that, but it’s worthwhile to ask yourself how close am I? Am I way off track? How am I aligning there?

Once you have that awareness of where your money’s going, ask yourself, is it in alignment with my values and my goals? You can see that a lot of this stuff intertwines together. Everybody’s going to be in different phases within this. Maybe you have a good awareness of values and goals and you’re pretty organized, but maybe you’re not sure exactly where your money’s going, maybe it’s not going in the right places and you need to make some changes, or maybe you have all that going on, but you just haven’t thought about some of the big risks that come into play.

On top of that, it’s worthwhile to look at how well you are following that. Whatever given plan it might be—let’s use the investment plan, for example—the question I asked a minute ago was do you have an investment plan? Oftentimes, we have investment plans, and sometimes, we don’t follow them exactly. One of the most valuable times to have a good investment plan is when markets get crazy.

Going back to the question, should I change my investments, well, it depends on the reason. If you have a good, solid investment plan, you should do what it says and you should not change your investments because of external market factors. It’s having a good investment plan and then following it. Are you doing a good job following that even when the market is scary?

Just in general with all this, another good question is are you following through on some of these activities that come up as a result of going through these questions and going through the exercise? Did you buy the insurance you thought you needed or realized was important? Have you completed a will?

Those are some of the harder ones that sometimes are very easy to procrastinate, so it’s worthwhile to ask yourself, how well are you executing these follow-up steps, and in general, are you being efficient along the way? Sometimes, that’s hard to self-assess. In all of this stuff, educating yourself will be helpful because you will be able to better define what efficiency looks like.

It’s a worthwhile question for anyone. I think by asking these questions, it’s going to help you to better assess where you are today. If you don’t feel good about, for example, some of these questions, that’s probably a good sign that you ought to either do a financial plan for the first time or go back to the drawing board and reassess your financial plan.

Now, if you work with us one-on-one and you feel some uncertainty about any of these questions, it’s a good time to reach out to us and we can help you reassess. Maybe it’s time to revisit your financial plan, update, or that sort of thing.

It’s normal to have uncertainty. Like I said, no one is going to be having perfect alignment with all these things at once. It’s normal human nature to drift away from these things, but the key is having that awareness.

As you follow a good plan, some of the things you’ll feel as a result of that are very worthwhile. It’s hard to put a price on it. It’s priceless. What is it worth to live your ideal life depends on the person. It’s difficult to quantify, but everybody would agree that it’s a very worthwhile thing.

The results of having a good plan are going to be you feel balanced, confident, and on track. You feel like you’re being intentional with your finances. You feel happier. Greater happiness is going to be a result of having a solid financial plan. Maybe you’re not rich, but you’re moving in the direction of your goals. You’re going to tend to view money differently than what the world tells you. You’re going to compare yourself less to your peers or the world, and you’re going to compare more to your plan, which I think is a healthy thing. You’ll feel organized. You’ll be less prone to shiny objects.

Some of us are more prone than others. Human nature is to be enticed by some of these things, but you’re going to be better able to navigate shiny objects and less tempted to make huge changes based on FOMO or scary markets. You’re going to be less likely to view money as the end goal and you’re going to be more likely to view money as a tool.

When your money actions are in alignment with your values, doing a good plan will pull you towards that alignment of values and actions. If you don’t have a good plan, you’re going to be more prone to being pulled toward the world’s values, your peers’ values, or that sort of thing.

Some of you might be a spender tendency and some of you might be a saver tendency. When you don’t have a solid financial plan, the tendency for the spender type is to get pulled towards enjoying today and skip or not pay as much attention to saving for tomorrow. On the other hand, the saver type is going to be the reverse. You’re going to be less likely to enjoy your money today and more likely to just stockpile for tomorrow.

Ideally, you have that good plan to help you balance the two of those and you can lean more on it. Everyone tends to have a pull one way or the other there. All this stuff is not easy. It can be straightforward with a good financial plan, but it’s never easy.

Nobody’s perfect, but I think the end goal is to have a plan. It doesn’t have to be complicated. You can start small. In fact, it’s probably better if it’s not complicated. Ideally, it’s straightforward. Starting small is better than not starting at all. The key is to have a plan and have it written so that you can have that awareness. It’s going to pull you towards those values in an ideal life.

If you take away anything from today, the key is to make sure you have a fresh, written financial plan, and over time, revisit it, adjust it, and update it so that it’s fresh. Make sure you’re using it over time. I think that’s going to help you to navigate some of these normal questions that come up in life that can pull you away from it.

All right, as always, I enjoyed chatting today. Like I said earlier, the fact that you’re listening in is a huge deal. A lot of times, people will just bury their heads in the sand or not do anything about it, but as we all know, that is not ideal. The fact that you all are listening in, educating yourself, and working towards this tells me you’re the type that’s going to be down to having a plan. You’re already ahead of the curve there. Give yourself a pat on the back for that. It’s just a matter of where you’re at in the journey and taking those next steps to continue to make good progress.

All right, guys, we’ll catch up with you next time.

Hey, guys. I had one, quick announcement I wanted to throw out before we get off today. We have recently created an email series called The Vitals Check Series. The idea behind this is to help you guys have some concrete steps and tools to really have some concrete vitals financially.

Ultimately, this is foundational stuff to help make progress towards having a rock-solid financial plan, so I wanted to throw that out there. It’s at no cost. It’s just a quick email series to really give you some concrete steps. None of this is too intense. It’s not going to be extremely time-consuming but a quick hitter, high-level steps to start making progress towards having a rock-solid financial plan.

I’ll link to that in the show notes. I think that would be great for those of you that are not sure where to start on having a solid financial plan. It’ll give you, like I said, some of those key starting steps ultimately to get you where you’re confident in your financial plan.