The Softer Shades of Financial Planning

My job is not to convince investors that they need a plan and a planner. Instead, I believe investors arrive at this conclusion on their own. Sometimes early, sometimes later, and for some, sometimes never. Timing is everything as money and investing are personal. In my experience, seeking professional advice is usually triggered by an event.

It’s a life event that affects taxes, income, liquidity, and spending that nudges an investor to reach out for an opinion. Other times it may be driven by age, typically by those who see their retirement approaching faster than expected.

Today, I’d like to discuss the softer shades of planning.  Subtle themes that a financial planner/friend can help an investor recognize and address. These themes are often less visible but of equal importance through the planning process.

Let’s begin with the suggestion that all investors need to learn how to spend their money. Between debit and credit cards, digital apps, cash and writing checks, there are countless ways for money to exit your accounts each day. All of this is personal and customized around who you are. Spending habits aren’t often top of mind for investors in planning conversations. After all, they’re reaching out for advice, not cash management help, right?

The thing is, you must systematize how you spend and manage cash flows before becoming a successful investor. It’s so easy to overlook and skip this step. Understanding the how and why in your approach to spending is a necessity to holding investments for the long run.

To be clear, I’m not talking about budgeting. I’m talking about what cards, apps, and tools allow you to spend your way through the day. Do you have a repeatable system or are you winging it? Cash reserves, cashflow, and spending must be synced so the money arriving and leaving from your accounts is spent with purpose.

April’s volatility was another reminder that excessive selling of companies to create liquidity is avoidable. Why else would investors sell through the Tariff Trauma if not to inflate cash reserves for safety and spending? Investors who have a handle on how cash flow moves through their accounts can ignore the headlines and not react to the crisis. A personalized spending system allows you to keep your investments invested.

Another understated theme is minimizing distractions. There is no shortage of ideas and products when it comes to choosing investments. New ventures and alternative investments often arrive with buzz to capture investor’s attention. 

A better story with fewer distractions is the simpler one—owning boring passively managed portfolios that are rebalanced and directed by your financial plan. Accomplishing this with exchanged-traded funds allows an investor to own the entire market at proper percentages. This isn’t new. In fact it’s rather dull. But keeping an investor from jettisoning a carefully crafted portfolio takes patience and discipline, both by the investor and their planner.

It’s easy to get sucked into FOMO—the fear of missing out—with so much change and pricing movements during any given trading session. Investors who understand what they own and why are more likely to stick with their plan and avoid distractions. Ongoing chats with a planner allow questions to be answered and knowledge to be gained. An educated investor has a better probability of success by hanging in there regardless of what’s trending in the moment.

Spending money on fun is another elusive theme that deserves attention. IMO, there is no sense planning for tomorrow if you must skip having fun today. It’s just not worth it. Delaying gratification so you can accumulate more? No thanks. Investors should prioritize spending on fun with less worry and guilt.

This is easier said than done. It can feel awkward spending on a big-ticket item or experience while still investing for your future. A couple summers ago, I spent a ridiculous amount on tickets, so my son and I could take a road trip to see Lionel Messi play live. Totally worth it, would do it again. This initially felt irresponsible until I reflected on the fact that our family was still investing in various accounts that month just like all the others.

Many investors learn this lesson later in life. The art of spending your money discussed earlier must include fun. Both planning and spending can exist together and get along, it’s not one or the other.

Money is a tool, not something to base your life around. Take the trip this summer, get away with friends, splurge on yourself because it’s possible. Having a financial plan should leave plenty of room for error, opportunities, and goofing off with those you care about. Life is just too short to think, live, and plan otherwise.

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