priorities in financial planning

3 Steps to Build a Financial Plan that’s Truly Focused on Your Goals

You’ve probably heard us say over and over again how important it is to understand your priorities in financial planning and decision making. 

In fact, we spend several hours setting priorities with clients before we even begin working on their financial plan. If we create a plan with the wrong priorities, the financial plan is more likely to fail. If your plan doesn’t reflect your unique values, then you’ll have a hard time sticking to it.

1. Create a Financial Plan Based on You

The goal of a financial plan is to efficiently allocate your resources to help you accomplish your goals. I’ve been a financial advisor for a while now, and I have never seen two clients with the exact same goals. Your plan should match your goals.

In addition, having a set of priorities helps give context to your decision making. 

Imagine you’re trying to decide between two job offers in different cities. Both options seem great, so how do you choose? 

The best way to make this decision is to frame your pro/con list with respect to your priorities. If your priorities are family, generosity and health, then you should evaluate both of the options with respect to how they would affect these areas of your life. That way you can filter out the unnecessary information and focus directly on that which is most meaningful to you.

Staying focused on your priorities will help you navigate and make the most of the curveballs life throws at you. Sometimes, curveballs can give you insight into how your priorities and values have changed, other times they will strengthen your resolve and focus. 

2. Start from the Finish Line

So you understand the importance of your priorities, but how do you go about finding yours?

As with many aspects of the financial planning process, I draw from my background in decision science to inform how we approach this task.

Take a Dynamic Approach

Dynamic programming is a tool used by decision scientists to find the optimal series of decisions over time to achieve a given objective. From an analytical perspective, financial planning is an especially complex type of dynamic programming problem.  

The first thing we always do to start solving a dynamic program is to start at the end. 

I love this Lewis Carroll quote (spoken by the Cheshire Cat): “If you don’t know where you’re going, any path will lead you there.” In other words, you’ll never know when you’ve arrived if you don’t have a destination in mind. 

The other thing to keep in mind is that we don’t know when the end will be here. Hopefully it’s far away, but it may be much sooner than you think, so it is important that we know what we want things to look like when we reach the end, whether that be tomorrow or 70 years from now. 

3. Ask Yourself These 5 Questions

Psychologically, it’s hard to imagine that there is an end – it can be tough (or just plain unpleasant) to consider the concept of death. So to begin, we have to set the stage mentally to think deeply about how we want things to look. 

One exercise that we have our clients do is to picture their final days with these five questions: 

  • What would you do if you only had 1 day left to live? 
  • What opportunities would you have missed? 
  • What accomplishments did you not achieve? 
  • What do you wish you had done? 
  • Imagine your memorial service or funeral. Who would you want to be there? What would they be saying?

Now repeat that process with a different timeline: What if you had five years left to live? What would you change in your life? What would you do more or less of? 

Working through this exercise helps to bring into focus the things you have been putting off, but are actually very important to you. 

Often, we get caught up in things that are urgent and pressing, but perhaps not very important. The busy-ness of our daily lives can make it too easy to put the big stuff on the back burner.

But tomorrow is never guaranteed, and many of life’s greatest accomplishments are achieved by taking many small steps over a long period of time. It’s important to know what those big priorities are so you can start taking those steps now to set yourself up for the life you want in the future.

Plan Ahead with Clarity

Are you ready to start focusing on what’s really important? Need help planning your financial future based around your priorities? Clarity is here to help. Click here to schedule a consultation today.