Imagine a big yellow bus arriving in your neighborhood.  This bus is not here to take the kiddos to school, nope it’s here to take you and your neighbors to financial planning and strategy class.  So, do you get on the bus with your significant other?  Do the Joneses get on the bus?  They’re the family in the neighborhood everyone is attempting to mirror and keep up with.  I’m guessing they probably don’t, things always seem to work out so perfectly for them, why would they need to attend class?  You and your spouse decide to board the bus and pick up other professionals and couples as you bounce along towards school.  Once you arrive, you exit the bus and head to class.  What do you most hope to learn or accomplish as you wait for the teacher to arrive?

The teacher walks in, it’s me, here to share what it takes to build and sustain wealth from strategic planning.  I pull up the syllabus on the smart screen and walk through what we’ll accomplish together this semester.  Some in class are disappointed on the topics they see.  Unfortunately, trading virtual currencies and options, investing in SPACs, and day trading on your device are not part of this curriculum.  There are students (there always are) who are convinced that there is a shorter process to building wealth.  They grab their backpacks and leave class convinced they can do it better on their own.  A smaller group now remains in their seats, and we proceed with the course.

We begin by sharing a process all students, regardless of age and wealth, may use to get financially organized.  This includes listing out every account they own on an excel spreadsheet alongside its location and current value.  Once this is complete, they list out debts, including current interest rates, monthly payments, and years to a zero balance.  Next, the students are free to label each account with a job description and purpose.  Retirement, education, cash reserves, fun money, big ticket purchase, travel, etc.  It’s their money and they choose what to do with it.  What do you think they see?  Any redundancies or overlap?  A major cornerstone in getting financially organized has just been accomplished.  A light now shines on all that is owned and owed, highlighting the student’s priorities by simply following the math.  What grade might you give yourself as a student relative to your financial organization and readiness?

The next assignment is to think about what really matters to you and those you care about.  What do you most hope to accomplish with your time and financial resources?  Do you have any fears or worries?  Three years from now you’re back in class, what has transpired personally and professionally for you to feel great about your progress?  How do you define what enough means to you?  These are not easy questions and often you can’t accurately answer them in one sitting.  It takes reflection and life to play out for you to gain clarity and ownership around what’s most important.  Take your time, there is no rush.  I’ll be here when you’re ready.

What’s been outlined above are the first steps to creating a strategic plan for your family.  It’s noteworthy in this 100-level class we didn’t’ begin with investment strategies and trading.  I believe there is tremendous value in personal financial organization and creating free space to think through all your possibilities first.  Slowing down and setting aside time deliberately to strategize is one of the largest value propositions a teacher may offer their students.  Many investors may make the mistake and open investment accounts without consideration to how their decisions tie back to other financial and life priorities.  Our approach, as counter initiative as it sounds, is planning and possibilities first, portfolios second.  Why is that?

Without reflecting on the full picture how can you successfully invest for the long term?  The answer is you cannot.  You need to understand cash reserves, liquidity, and rank your goals before a dollar is to be invested.  Without a plan in place first, how will you know how you are doing?  All these themes and more are like a wool sweater, sooner or later, all the threads connect.  Pull on one and you are pulling on them all.

The problem that investors experience as they sit in class is that this approach is really boring.  It’s easy to tune out and ignore the homework, putting it off to a later date.  Then something happens, good or bad, opportunity or threat, and an important decision is necessary.  Relating this decision back to your plan (that already exists) may reduce stress and provide choices as you contemplate your next steps.  All of this is made possible by having a plan (and planner) and doing your homework along the way.  This homework consists of thinking and talking out loud on a periodic basis with someone you trust.  This dialogue overtime allows you to clarify in your own words what you want from your investments and more importantly life.  It puts all events in perspective and leads to not reacting to the latest fire drill.  Rarely are any reactive decisions good decisions that stick long term.  You need time to process and think about where you are and where you most want to go.

Next week, we’ll integrate planning and strategy at a 200 and 300 level course.  Pulling this all together so you have the knowledge and understanding on what matters.

Continue to Part 2

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