The book "One-Page Financial Plan" by Carl Richards - review

The book "One-Page Financial Plan" by Carl Richards explains step by step what to do today so that your money is not wasted, but tomorrow turned into fulfilled wishes for you and your family. Financial planning, as presented in this book, means first of all realizing what matters to you and taking all the necessary steps financially to make those things a part of your life.

Sorin Scortan, a member of the Money Science community, has selected some interesting ideas from this book:

Most financial books, magazines, and websites offer readers a long list of options that can only confuse them;

• There are enough smart people who are great at what they do, and yet when it comes to their finances, they get stuck. They are paralyzed by the fear that they will make the wrong decision;
• Some of them have books on investment or finance, but they just don't have time to read, so instead of doing "something wrong", they better not do anything;
• A friend, who also happens to be a doctor, once told me that if he practiced medicine the way he did, he would kill half the patients. When it comes to his field, he would never prescribe a drug before reading the studies of his colleagues, to make sure that all the tests have been done and that there is no danger of using his intuition to make the right decisions. After all, when you are smart and knowledgeable, how difficult can it be to identify investment opportunities?
• One thing you will not find in this book is a magic investment strategy. There is a whole industry built around the idea that successful financial planning involves finding the best investment opportunity: if we invest enough time or have the right relationships, we will be able to identify the next package of actions, sector, or investment fund with potential. However, research shows quite clearly that this strategy is not the winning one. We just don't know how to anticipate what the next"t Google will look like;
• Your one-page plan represents only the 3-4 things that are most important to you: a few actions you need to take, followed by a phrase that reminds you of why you are doing them;
• Life is unpredictable, so it's a good idea to create a financial plan that takes into account the unforeseen: a plan that will prepare you to make quick changes that won't affect you too much so that the disappointment you feel doesn't become a disaster. ;
• The purpose of the book is to help you understand the basic steps to create a personalized plan that takes into account your values ​​and goals;
• Creating a financial plan is one of the best ways to earn what everyone wants: more time;
• Once we have used the one-page plan to focus on savings and investments, it is desirable to do everything possible to forget all the insignificant details, automating the processes whenever possible. In this way we will not be tempted to deviate from the plan every time the market fluctuates;
• The first step in creating a one-page financial plan is to clearly understand where you are and where you want to go;
• There is no better way to solve personal finance problems than to ask yourself, "Why is money important to you?" Once you discover the answer, instead of feeling overwhelmed by the supposed complexity of financial decisions, you will clearly understand which strategies will work best in your particular situation;
• It is vital to ask yourself how important money is to you. Understanding your values ​​can help you make better financial decisions because they are tailor-made for you;
• When you wonder why money is important to you, it's like applying the rigor of a medical consultation to your financial health. The situation is comparable to a visit to the doctor's office for a serious consultation before you are prescribed a prescription;

The process looks something like this:

1. Observe your symptoms (it seems to you that your financial life is unbalanced or needs a consultation),
2. You clearly state what financial health would mean to you (you wonder why money is important),
3. Find a solution (use the values ​​you have identified to argue your financial planning decisions).

Other questions you need to ask yourself:

• Why do I invest so much time and money in X thing?
• Why spend so little on the Y thing, if I claim it's so important?
• Why do I save so much (or so little)? What do I hope to achieve?
• Strive to get accurate answers, such as "I want my kids to have more opportunities than I have" "I want to be financially independent and have more time for myself" or "I don't want to be I have to worry about money, just like my parents did. "

You need to think about two things:

• How do you spend your time?
• How do you spend your money?
• You may be surprised that you spend a lot of time and money on things that don't matter, to the detriment of the things that matter. This process can help you restore balance;
• If we approach things in the right mood, analyzing mistakes can help us to avoid repeating them in the future. At some point, you have to reconcile with the past and move on. This is essential when it comes to assessing what is important to you. Do not use the mistakes you have made as an excuse to give up things that are very important to you;
• The purpose of the question "why?" must reveal why you already have certain goals. Expect to get the first answers relatively easily. But give yourself time to think hard; by doing this, you can understand things more deeply, getting closer to what is important;
• Once you have discovered what is most important to you, you will have a tool for making decisions;
• It is almost impossible to underestimate the role of money in a relationship, it is a reason for many misunderstandings in the family;
• Each of us brings into a relationship a set of beliefs, habits, and deep-rooted feelings about money. Most of us grew up in families where money was a topic that was not polite to open. Therefore, we are very unprepared to deal with the emotional issues inherent in our financial life;

Most financial planners focus on money, ignoring other incredibly valuable things:

1. Your time
2. Your skills,
3. Your energy.
4. Focus on the things you can control and leave behind the things you can't control;
5. Ignore any financial advice that starts with a solution. The goal is to create a financial plan that suits you, so why not start thinking about what you want to achieve?
6. no one knows what the capital market will look like in the next week, month, year, or even decade. And if an investment expert says he knows this, run away as soon as possible;
7. Financial planning comes down to the most accurate estimates of goals that will help us live the life we ​​want. Don't worry about them being "perfect". You can correct your estimate when you notice that you are deviating from the road;
8. When it comes to calculating the amount needed to accomplish your goals, you can eliminate the need for accuracy. But you will still do better than most people if you make an accurate estimate;

Examples of financial objectives:

• We would like to save enough to send our children to study abroad;
• We would like to set aside a safety fund for 3-6 months;
• I know we'll have to change our car in a few years;
• We want to retire before the age of 65;
• We want to pay off the mortgage in 10 years;
• We would like to take a little trip with the family every summer;

Here is a process of 3 estimates to calculate how much your goals will cost. Once you have defined each goal, estimate the time you would like to accomplish them and how much it will cost you. This process will not make the future less uncertain, but it will guarantee that you are prepared for the things you want to achieve and for the inevitable challenges that will arise from time to time.

1. What is the goal?
2. When do you want to touch it?
3. How much does it cost?
4. After you have written down all the estimates, order each goal according to its importance and urgency. This process reminds us that our reserves of money are not unlimited: we might think that we are indulging at the moment, but we often do it to the detriment of more important things that we have chosen;
5. Most of the time we don't realize that the money spent on a new car means the time we don't spend with children;
6. Few financial decisions should be considered nailed down. At some point, we will all have to make changes, taking into account the new circumstances that change our decisions;
7. Estimation is a continuous process, it is not done once in the hope that you will find it. Your estimates will change because life will change;
8. No matter how accurate our estimates are, we may have to face a harsh truth: we will not have enough money to achieve all our goals;
9. Few things are more painful than working hard for something you can't get. But that is also part of life. We learn to deal with disappointments, set achievable goals, and move on;
10. Disappointments usually occur when people are so focused on results that they no longer live their lives. They lack the flexibility they need to change their goals when circumstances change;
11. Don't turn an estimate into an expectation. Recognize that circumstances may arise that divert even those goals for which you have worked hard; so make sure you set some goals for the next year, for the next 5 years, and the next 10 years;
12. Worry is a habit that we find difficult to learn and it does us no good. Do you remember at least one thing that got better because you were worried about it?
13. The goals that matter often involve a sacrifice. It can be difficult to get out of our comfort zone and give up immediate satisfaction to stay focused on certain goals, but if they are important enough, they are always worth the effort;
14. Most people do not know what their financial situation is. Without this clear understanding, you will never be able to take the necessary steps to accomplish your goals. One of the simplest aspects of financial planning is to estimate your current situation. All you have to do is count your assets and liabilities;
15. Create a personal balance sheet. Divide a sheet of paper in half and write down the assets and liabilities in as much detail as possible.
16. The assets can be: bank accounts, the real value of the home on the current real estate market, and the investment portfolio. Write down each asset and its value;
17. Liabilities can be: credit card debt, mortgage credit, loans;
18. Then add up all the assets and subtract from the amount all the liabilities, obtaining the net income;

The one-page plan should include between 3 and 5 things that are very important right now:

• the answer to the question, "Why is money important to me?"
• your estimates of goals,
• the debts you will have to pay
• If we want to take control of our finances, we must take responsibility for the many unnecessary purchases we make and understand that nothing will change if we do not change our behavior first;
• We become aware of spending by creating a budget, but many see this as a punishment: it forces us to refrain from buying the things we want and makes us feel guilty because we pay for the things we need;
• The purpose of the budget is not to punish us for spending money; its purpose is to make us aware of how we spend our money so that we have enough left over for the things that matter most;
• Creating a budget involves being orderly, setting goals for your expenses, and following them. But it is difficult to be orderly and people tend to avoid difficult things;
• If you don't check your expenses, you don't know where your money is going. Almost all the people who checked their expenses for at least a month came to the same conclusion: "I had no idea I was giving so much on X thing";
• Creating a budget is important because it helps us realize how important it is to save money and spend on things that are important to us. Creating a budget forces us to reflect on how we spend. It gives us the opportunity allows us to differentiate between what we say is important to us and how we spend our money;
• If there are fixed monthly expenses, make automatic payments. You can automatically transfer a fixed amount to your savings or investment accounts each month;
• Watch out for unforeseen events. When we create a budget, we have no way of anticipating financially unforeseen events, such as the breakdown of the car or the thermal power plant. Every month, we should set aside some money to pay off these financial shocks;
• Creating a financial plan should not require such a rigid framework as to make you give up on things that keep you healthy, happy, and healthy;
• Half of Americans could not get $ 2,000 in 30 days if they needed it;

Basic rules of saving:

1. Save as much as you can reasonably;
2. You spend less than you earn;
3. Don't waste money. You worked hard to save some money. Don't let the pressure to make up for lost time push you to a reckless investment. For now, focus only on saving and controlling expenses;
4. The only real mistake you can make when it comes to financial planning is to do nothing;
5. When we believe in a plan, we are less likely to fall victim to our desire for immediate satisfaction. We feel confident that we have designed the plan with our personal goals and values ​​in mind;
6. If someone is financially dependent on you, you will need life insurance. Remember that life insurance is not a savings or investment account. Her job is just to replace an economic loss that results from a death;
7. "People who understand how interest works, earn it. People who don't understand pay. " Borrowing with your head means more than knowing when it's the best time to take a loan. It also means having a loan repayment plan;
8. The fundamental rule of investing: earn more, spend less;
9. If you have debts with a very high-interest rate (eg on credit cards), paying them is the best investment, it brings you a guaranteed profit. You can eliminate these high-interest debts one by one;

For a mortgage loan, ask yourself the following questions:

1. Can you afford your home and save enough money to advance?
2. Do you qualify for a loan?
3. How long are you going to live in that house? It must be at least 5 years old to be taken seriously;
4. The more financial decisions we make in line with personal values ​​- including lending - the less likely we are to regret it later, even if we spend more money;
5. Don't confuse investing with speculation, invest only in what you know;
6. The investor's dilemma is that no matter how much data we have from the past, we have no data for the future. No matter what history tells us about the long-term upward trend of the capital market, we still don't know for sure what the future holds;

There are 3 principles regarding how the market has evolved over long periods:

1. Diversify your portfolio;
2. Keep your costs low;
3. Understand the correlation between risk and reward;
4. The next time you are about to withdraw your investment due to a drop in prices, ask yourself, “Why am I so shocked? Haven't I learned this lesson yet? ” The fact that prices fluctuate should never surprise us;
5. Once you have decided to divide your investments into shares, bonds, and cash, write down the arguments for which you made this decision. This document is called IPS (Investment Policy Statement) and will serve as a benchmark, stopping you from doing something crazy. It is a simple contract with yourself to help you do the right thing;
6. If you follow exactly what this book teaches you, you can create a financial plan in line with your values ​​that will help you achieve your goals. But if you don't respect it, it won't be long before your plan becomes just another sheet of paper lying in a drawer;
7. Investing is one of those wonderful, rare things to do when it comes to laziness. Once you hit it, the less you do, the better.

"The representative attribute of the investment process is well-intentioned negligence, neighboring with indolence" - Warren Buffett

P.S. If you like to read while drinking coffee, you can offer me a coffee too.