FINANCIAL (LIFE) PLANNING

Financial planning is essential for five key reasons:

1. Money is integral to your life, and you cannot achieve a meaningful lifestyle without planning your money.
2. Only financial planning can tell you if your money will run out before you do and help you achieve financial security
3. Financial planning enables you to understand how fear and greed influence your decisions about life and money
4. A good financial plan will make your money work as hard for you as you do for your money
5. A financial plan provides clarity and understanding and helps you sleep at night

But you’ve missed the point if you think personal financial planning is just about investment returns and tax savings. An effective financial plan must be more holistic and stand on three pillars.

Pillar 1: Your goals, aspirations and values

Your goals, values and aspirations are the cornerstones of your life. If you see money as an end in itself and not a means to these ends, financial planning will likely not help much.

Pillar 2: Your relationship with money.

Your financial plan stands or falls on your relationship with money.

Here is a quick and dirty self-assessment quiz to determine the strength of your relationship with money. Score yourself on the truth of the following statements (1 = false, 5 = true, 2, 3 and 4 = somewhere in between).

• I have relinquished childhood beliefs, thoughts and stories around money, recognising that they are invalid and misleading.
• I live free from pain around money, envy of others with greater wealth than me, and anger at having to work for a living.
• I have identified my financial goals, assessed my financial resources and planned my finances; I review frequently.
• I have experienced a personal transformation by dealing with issues around money and understanding myself.
• My life is profoundly purposeful and energetic. I have passions and goals in life and the energy to act on them.
• I am keenly interested in my community, to which I make available my resources and talents.
• I give out of kindness or compassion, not self-interest or the expectation of getting something in return.

(Adapted from George Kinder’s Seven Stages of Money Maturity.)

A higher score indicates greater maturity, but the real benefit of the quiz is that it emphasises the importance of your relationship with money.

Pillar 3: Your money

A financial plan should involve planning your money (it goes without saying).

Indeed, improving your self-understanding by compiling statements of your assets, liabilities, income, and expenditures may be a good place to start. You should determine the data’s meaning by calculating your key financial ratios and comparing them to your benchmarks (which you must evaluate, an insightful exercise in its own right).

Use the worksheets in the self-help section of my website to guide you.

Financial planning done well will combine your goals, values, aspirations, relationship with money and your money itself into a plan to ensure you always have the right money in the right place at the right time. That’s why I and others called the process “financial life planning” instead of financial planning.

Your Next Steps

Reflect

Take it further

Attributions and references

Photo attribution

Photo by Hans-Peter Gauster on Unsplash

Audio link

https://audio.com/jeremy_deedes/audio/financial-planning/

References

Kinder, George. The Seven Stages of Money Maturity : Understanding the Spirit and Value of Money in Your Life. New York, Dell Publishing, 2000.

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https://wordsnotdeeds.co.uk/self-awareness/

ABOUT

I work with ambitious, family-oriented professionals transitioning to independent consultants to create a 3 to 5-year holistic plan so that they grow wealthy, make a difference and find meaning.

My clients are aged 35-50. They are in a long-term relationship with family and parents who are supportive but ageing. They wrestle with personal and financial responsibilities and dream of more control, wealth, time and purpose.

If this excites you, you are coachable, willing to change, and want to stop going around in circles, then find out more at jeremydeedes.com

Then, take your next step and explore your way forward with a Mapmaker, a one-off online coaching gig to help you decide your options, assess our compatibility, and determine whether we are the right fit. Mapmaker is excellent value, held in confidence and without further commitment.

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Your views are important, and your fellow readers would love to hear your opinion, so share your thoughts in the comments box below, and thank you for your time and generosity.