If you didn’t know, I very much consider myself a student of behavioural finance and ‘evidence based’ investing.
One of the select few financial commentators that form part of my ‘circle of inspiration’ is an American Financial Planner and author called Carl Richards. Carl is an influential figure within the Lifestyle Financial Planning community.
Each week I receive an email from Carl where he shares his latest thoughts along with a useful sketch that explains a complex financial concept in an easy to understand way (such as the feature image which I used for this blog post – with his consent).
Last week he shared his belief that in order for us to plan for the future, we need to be really honest with ourselves about our present situation, and this is often harder than it would first seem.
Below is an extract from Carl’s email. This is not my work and I cannot claim credit for it…..but I wanted to share it with you because I trust you will find it thought provoking:
“In its most simplistic form, Financial Planning is the process of charting a course from where you are today to where you want to go. The first step is to become crystal clear about what I call your ‘current reality’, or where you stand now.
I used to think that being very clear about your current reality was the easy part of Financial Planning. Once you did that, the hard part started: Making guesses about other things, like where you want to be in 20 years.
Defining your current reality should indeed be the easiest part of the process. It’s certainly a matter of fact. But apparently getting this clear is harder than I thought.
Many of us may not know where we stand with respect to our goals.
In fact, we may not want to know.
But how can you expect to make progress if you have no idea where you’re starting from?
Over the years, I’ve noticed that the biggest differences between people who reach their goals and those who don’t is knowledge of where they stand in the first place. For example, when I ask financially successful people for a balance sheet showing their assets and debts, not only do they know what a personal balance sheet is, they often have one that is relatively current.
The point here isn’t that a balance sheet leads to guaranteed financial success. But if we’re to have any hope of getting to a destination, it helps to start by being very clear about where you’re leaving from. In this instance, a balance sheet can help with that clarity.
If you’re unhappy with your situation and want to make a plan to change it, start today by defining where you stand.
I couldn’t have put it better myself….so I didn’t!
Great work, Carl.
Remember, you can download a copy of my budget planner by clicking HERE
I have an expenditure questionnaire available HERE
You can find out more about Carl Richards by clicking HERE
(Disclaimer: If you click any link in this email, you will be departing from the regulatory email of Clarity Lifestyle Financial Planning. Neither Clarity Lifestyle Financial Planning nor Intrinsic are responsible for the accuracy of the information contained within the linked site).
Until next time…
If you want someone to flog you an investment, then unfortunately you are in the wrong place. If you are looking for a collaborative partner to help you and your family succeed financially, then hit me at planning@claritylfp.co.uk – mine’s a coffee with milk!
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