Mastering Money and Financial Planning

The Importance of Financial Planning

Not having a plan for your money is a lot like working for free. How many hours do you think are worked to pay for inefficiency? How much time is spent paying for things that have nothing to do with people's values? This week, we’re highlighting the importance of having a financial plan, whether you hire a professional or do it on your own.

Three Key Points for Financial Success

Cash Flow

"If I can afford the payment, I can afford the thing." This is a huge misconception that many people have about money. The average car payment is over $700. If 15% of your take-home pay goes to just your car payment, it will be really hard to get ahead. Spending just $20.00 a day on little things adds up to over $7,000 a year. If this has been going on for a while, you also need to think about the opportunity cost – what else could that money have been doing? Possibly an even bigger question, why would we let it continue?

Financial Purpose

I am a big believer in financial purpose. Think of your financial purpose as a gravitational force pulling all your financial decisions in an intentional direction. I’m not saying that every dollar needs to be earmarked for a specific goal, and I don’t believe in perfect. What I am saying is that with your financial purpose, you’re going to be much more likely to say no to things that aren’t actually important to you. This is all about aligning your money with your goals.

Don’t Overcomplicate It

Do you have an unlimited amount of mental bandwidth? Financial purpose usually isn’t about money. If you can limit the amount of bandwidth you’re spending worrying about financial decisions, you’re going to have more time and energy for what really matters to you.

• How many more deals could you close?

• How much more impact could you have?

• How many more memories could you create?

A big goal with getting money things right is to not have to worry about money. It doesn’t happen overnight, but it does happen intentionally.

Practical Tips for Effective Financial Planning

A Simple Framework

There is an order of operations in financial planning, a framework to use as a general guide. My blog post talks about my 5-step order of operations. Things are done out of order when households make $50,000 and at $250,000. It is really common, but it isn’t your fault. They don’t teach this sort of thing in school. Preserve those mental calories and avoid common “putting the cart before the horse” situations with frameworks that make sense.

DIY vs. Hiring a Professional

Hiring a financial planner might not be for you, but financial planning isn’t a luxury purchase. What you need to decide is what is your time worth, and do you see the value in hiring a professional. Your financial planner should be someone whose mission is to help guide you to make decisions that align with what is really important to you. There should always be more to this than selling you a financial product. See how we approach financial planning here.

"Financial planning is about more than just numbers. It's about aligning your resources with your values and goals." – Carl Richards