...is probably the most difficult question we ask clients. Most of us are so busy working and living we don’t stand back and plan – which could mean missing out; below is your planning starter for ten list.
Market Commentary
The value of investments can rise as well as fall. Tax up, spending up? Chinese take away appetite for tech companies.
Planning & Objectives - don't start with money
Be honest with yourself.
I was reading a book that compared planning between different nationalities. The Germans and the Japanese plan for the long term, with mostly impressive results. The Brits (the book says) wait to see what happens and then retrospectively plan for this outcome; in financial terms this latter approach is called ‘confirmation bias’ – the tendency to fool ourselves that this was the outcome that we really wanted. Challenging outcomes is always important – are we good, bad, ugly - or just lucky?
So how to start?
First note that, as stated, this is not just about money – money is just a tool we use to help us with our life-plan and financial planning should always follow on from life planning rather than leading it.
A quick method of starting and prioritising your plan is to pretend you are dying and that you have only one minute to advise your kids how to live their lives – this will focus you on the important stuff which might for example encompass your health, family, friends, work, service etc. One side of A4 (or a Word doc) is plenty to start with. Once you have the bare bones ask someone to read your plan through – perhaps your partner (unless it includes a section on splitting up with them).
When analysing your objectives consider three outcomes – what you really want to happen, what you would like to happen (but is not essential) and finally what you definitely don’t want to happen, all against a backdrop of realism.
At all stages it is important to write it down; if it is not recorded it is not real - and most of us become confused if we try to remember too much information.
Finally look up the acronym ‘SMART’ and apply it to your plan.
Summary
When we put together a financial plan for clients, it is a progression of their life plans and we produce a written report, which means that we and the client can re-visit the plan to both check progress and modify it as necessary as we go along - because change happens. We also confirm in writing the details of each meeting with clients – which is to say that we update the plan - so that in years to come we have an audit trail. Recording discussions and actions can be seen as tedious but serves to measure progress; this is important since the past is the only guide we have to the future and it is very useful to be able to look back to see the effect of actions taken or omitted.
p.s. Steve's Dead Plan - the final countdown
My post mortem planning takes two forms, my Will and also what I call a ‘Steve’s Dead’ document. This latter document could more formally be described as an ‘expression of wishes’ and whilst it has no legal effect it contains really important stuff such as telling the kids to not fall out with each other, help their Mom out, listen to Martyn on financial matters and selecting the music at my funeral.
I have done this because when someone snuffs it, it is an emotional time and a little bit of guidance from beyond the grave can go a long way towards calming things down and vitally getting people to work together. Luckily (??!!) two of my three kids have no real interest in the financial matters which often cause post-mortem family problems (their only questions being "will I be able to afford a Mercedes G Wagen when you die" and "can I have your watch when you are dead"). Hopefully with the combination of my Steve’s Dead document and the laid-back approach of two of our kids nobody will fall out when I die… unless of course they have the wrong partners at the time… still, can’t plan for everything.