April 17, 2015
New Releases: The One-Page Financial Plan
What if we
told you that the best way to start making a financial plan is to start making
some guesses? Or that the hidden truth about personal finance is that it is
much more about the personal than the
financial? The financial matters, of
course, but too many people become paralyzed with fear of not knowing enough when
even the best financial experts can’t predict market success.
One-Page Financial Plan: A Simple Way to be Smart About Your Money, by financial
advisor and NY Times columnist Carl
Richards. In this new book, Richards shares the one question that should be at
the heart of your personal finance strategy: “Why is money important to me?” The
answer is different for everyone, but it’s a solid foundation for making a
Using his accessible, emotionally-intelligent sketches
and common-sense advice, Richards answers all of the questions he’s asked most
commonly, such as:
- How much should I really save?
- What should I think about insurance?
- How can I find a real financial advisor?
The One Page Financial Plan helps demystify the planning process so readers can figure out where they stand on key financial issues and where they want to go, in order to narrow the gap between the two.
About the Author
Carl Richards is a certified financial planner and a columnist for the New York Times, where he has a weekly “Sketch Guy” column. He is also a columnist for Morningstar Magazine and a contributor to Yahoo Finance. Richards is a popular keynote speaker and is the Director of Investor Education for the BAM ALLIANCE. Visit www.onepagefinancialplan.com.
At The New York
Times you’re known as “The Sketch Guy.” Why do you think the sketches are
so helpful when discussing personal finance?
prominent belief that anything that has to do with money has to be complex.
It’s an unfortunate consequence of the information age we live in. There’s more
and more personal finance and investment information out there, and people have
a hard time discerning what’s actually useful in terms of making a decision. My
goal with the sketches is to help people understand the decision they’re making
by condensing the problem to a single point. I think the combination of
minimalism, a little humor, and the simple tools I use (a sharpie and piece of
cardstock) gives these issues an air of approachability.
Financial Plan is unlike most books about personal finance in that
it deals with our anxieties about planning as much as the plans themselves.
What compelled you to write it?
experience, both personally and professionally, has taught me that it’s the
emotional issues surrounding financial planning that are most important. The
goal of this book was to give people a map of this complex emotional landscape
so they can build that solid foundation to address other important issues as
well. But until we recognize and establish our values and goals, it doesn’t do
much good to address those other issues.
the relationship between our emotions and how we handle our money.
Most of us expect money to be about math. We know 2 + 2 always equals 4. It doesn’t matter how scared, or excited, how nervous, or fearful I am; it always equals 4. We expect money to be the same way. But because money is a tool for us to accomplish the things that are most important to us, it’s emotional. We’re dealing with our fears and our worries, our greatest dreams and hopes. We should be prepared for those conversations to be emotional.
in-depth about the uniqueness of everyone’s financial situation and goals. Are
there any generalizations that can be made when personal finance is so
If we all just
operated on some of the general rules of thumb (save 10% of your income, buy
low cost mutual funds and hold onto them for a long time, etc.), we would
probably be better off than 99% of our neighbors. But it is important to
understand that the people who came up with those rules don’t know you. We all
need to take enough ownership of our own situation to apply those guidelines to
our own situation. I think general rules of thumb are really just a starting
the most common misunderstanding about investing for the average American
Not recognizing how irrational we can behave when it comes to our investments. One of the most common mistakes we make is buying high and selling low—exactly the opposite of what we should do. When the market’s doing well, our neighbors are excited, and news is good on television, we feel like buying. Then when the market goes down, everybody’s scared. Separate the emotion from investing. Warren Buffet said it best: “Be fearful when others are greedy, and greedy when others are fearful.” And while that sounds simple, it’s really challenging because it goes against our impulse to do whatever the group is doing.
best approach to having conversation about money with your spouse or kids?
The first step is to actually start talking about money with your family. Use whatever approach works for you, but commit to the process of having these conversations. If your kids ask questions, don’t brush them off. Start involving them with the family finances. Secondly, understand that these conversations are going to be emotional, especially with a spouse or partner. But stay committed. When things get emotional, learn to say, “Time out! We’ll continue this tomorrow, but it’s going to be OK because we’re committed to having this discussion.”
spending habits can be tedious and overwhelming. What would you suggest for
people who struggle with budgeting?
I love the old saying, “The calendar and the check book never lie.” The goal of tracking your spending is to provide awareness. We’re not doing it as a stick to beat ourselves up with. We’re doing it so that we can make better, more informed, and more aligned decisions toward that goal to be happy. We need to learn to say in a nonjudgmental way, “Oh that’s interesting, I didn’t know I spent that much there.”
you mean when you suggest hiring a “Real Financial Advisor”?
A “Real Financial Advisor” is somebody who takes the time to thoroughly diagnose before they prescribe. It’s a professional who’s really good at what they do, who actually listens to you. We want somebody that knows our goals and our values really well standing between us and “The Big Mistake”, so that when we’re thinking about doing something irrational, they can remind us of what we said when we were thinking clearly.
the 72-hour rule, and why did you instate it?
happened for me in the early days of Amazon Prime. Amazon Prime made it so easy
for me to satisfy instant gratification when it came to books. I would read
someone’s recommendation, quickly buy the book, and two days later it would be
at my house. I realized one day that I had a lot of unread books; books that
maybe I shouldn’t have really purchased because I didn’t need them or have the
time to read them. So I made a rule: any new book I want to buy has to sit in
my shopping cart for 72 hours. I was shocked after a couple weeks how many
books just stayed in my shopping cart. I didn’t go back 72 hours later and
complete the purchase. I just left them in my shopping cart. This rule really
curbed my impulsive online shopping.
10. After I’ve created my One-Page Financial Plan, how can
I avoid common budgeting, saving, and investing pitfalls?
a process. I’m asking you to commit to the continuous process of financial
planning, not the actual document. When things change (which they will), make
changes accordingly, adapt, and reevaluate. Your One-Page Financial Plan should
just act as a touchstone that you revisit when you have to make other decisions
or when things change. Reevaluate, reevaluate, reevaluate.
About Dylan Schleicher
Dylan Schleicher has been a part of the 800-CEO-READ claque since 2003. Even though he's stayed on at the company, he has not stayed put. After beginning in shipping & receiving, he joined customer service and accounting before moving into his current, highly elliptical orbit of duties overseeing the ChangeThis and In the Books websites, the company's annual review of books, and in-house design. He lives with his wife and two children in the Washington Heights neighborhood on Milwaukee's West Side.