Money Lessons from "The One Page Financial Plan" by Carl Richards
AI's response in regular print | Beverly Hills, CFP®, Joe O'Boyle's in italics
Money Lessons from the “The One-Page Financial Plan” by Carl Richards
"The One-Page Financial Plan: A Simple Way to Be Smart About Your Money" by Carl Richards offers some valuable insights to investors.
“Your one-page plan simply represents the three to four things that are the most important to you: some action items that you need to get done along with a reminder of why you’re doing them.” — Carl Richards, CFP®
Here is a sample of Carl Richards’ one-page financial plan written on a napkin:
“Time with family doing things we love!”
1. Fully fund all retirement accounts each year.
2. Fund kids education accounts every year
3. Save for a house
Here are a few key takeaways:
Goals are Paramount: Richards insists on starting with "why" before "how." He argues that knowing why you're investing (i.e., your goals) is the cornerstone of your financial plan. For example, a goal might be to save $1,000,000 by age 50 to allow for early retirement.
Simplicity is Key: Richards emphasizes that your financial plan doesn't need to be complex. It can be as simple as saving a certain percentage of your income each month and investing it in a diversified portfolio. For instance, saving and investing 20% of a $60,000 annual income each year could lead to significant growth over time.
Avoid the Noise: It's essential to stay focused on long-term goals and not get sidetracked by short-term market fluctuations. For example, if the market drops by 10% one year, it shouldn't affect your long-term plan if you're investing for a goal that's 20 or 30 years away.
Manage Behavior, Not Returns: Richards highlights that the greatest challenge in investing is managing one's behavior. It's about sticking to the plan, even when it's tough. For instance, if you plan to invest $500 a month in a stock index fund, keep doing so even when the market is down, because you're buying more shares at a lower price.
The Value of a Financial Advisor: A good financial advisor isn't just an investment picker but someone who helps you articulate your goals, create a plan to reach those goals, and keep you on track. They can provide a neutral perspective during times of financial stress.
Carl Richards' "The One-Page Financial Plan: A Simple Way to Be Smart About Your Money" is a concise and practical guide to personal finance. The book is built around the concept of a one-page financial plan, which is a simple, straightforward way to organize your financial life and make smart decisions about your money.
Here are key quotes from the book that highlight its key themes:
“Creating a financial plan just seems so overwhelming. I’m going to have to meet with a lawyer and a financial planner and decide what my goals are for the rest of my life, and then face the overwhelming and depressing truth about planning for retirement… and so the only rational response is not to create a financial plan.”
"It doesn’t surprise me that my most successful friends are confused when it comes to savings and retirement. When they do something, they want to do it right. They don’t just want good advice, they want the best advice. They’ve often got a shelfful of books about investing or finance, but they simply don’t have the time to really dive in — so rather than do the “wrong thing”, they do nothing.
“I learned something valuable: the best financial plan has nothing to do with what the markets are doing, nothing to do with what your real estate agent is telling you, nothing to do with the hot stock your brother-in-law told you about. It has everything to do with what’s most important to you.”
“There’s a couple of important things to keep in mind about your one-page plan. No two financial plans will look the same. Yours will probably look a lot different than the one my wife and I created. That’s the point.”
“Your goal is not to create a “one-page plan for the rest of your life.” Creating a financial plan is a process. My wife and I will look at our plan often —whenever we need to make a big decision, it will be there to guide us—but I’m sure we’ll be adjusting it often.”
“Think about your one-page plan as a snapshot, not an instruction book… The one-page plan lets you know whether you’re on course to meet your goals, or whether you need to make some adjustments.”
“This book is also about getting really clear about what you want so that you won’t be so swayed by your neighbors’ new car or ads for that fancy new smart phone—all those “American dream” promises that might have nothing to do with what’s most important to you. I’ve let myself get caught up in those promises, too, so I know how tempting it can be to trade in your own values for the ones that everyone is telling you you should have.”
"The goal of the one page financial plan is to simplify your financial life and help you focus on what's most important."
“The first step in creating your one-page financial plan is simply to get clear about where you are and where you want to be.”
"A plan is like a roadmap. It helps you know where you're going and how you're going to get there."
"The one page financial plan is not about having all the answers. It's about asking the right questions."
"By focusing on the big picture, you can make more informed decisions about your money and your life."
"The one page financial plan is not a tool for getting rich quick. It's a tool for living well over the long term."
"Investing is not about timing the market, it's about time in the market."
"Emotional reactions to market fluctuations can be harmful to your financial well-being. The best way to avoid making mistakes is to stick to your long-term plan."
"Diversification is key. No one knows what the future holds, so spreading your investments across a variety of asset classes can help you manage risk."
“Problems are never quite as bad as they seem… I still had the ability to make some changes and set myself on the right track… I’m also really clear on what’s important to me: spending time with my family and giving them as many great opportunities as I can.”
Here are a few chapters that are often highlighted by readers as particularly helpful or insightful:
Chapter 2: The Big Picture: This chapter provides a comprehensive overview of the one-page financial plan and the importance of focusing on the big picture when it comes to your finances.
Chapter 4: Your Spending Plan: This chapter focuses on the importance of creating a spending plan and managing your expenses effectively.
Chapter 5: Your Investment Plan: This chapter provides practical advice on investing, including how to diversify your portfolio, manage risk, and avoid common mistakes.
Chapter 7: Your Protection Plan: This chapter covers the importance of having adequate insurance coverage and protecting yourself and your family against financial risk.
Chapter 8: Your Legacy Plan: This chapter provides guidance on planning for the future and leaving a lasting legacy for your loved ones.
The One-Page Financial Plans demonstrates Richards' belief that a long-term investment strategy, focused on diversification and avoiding emotional reactions, is the key to success. He emphasizes the importance of having a comprehensive financial plan that takes into account all aspects of your financial life, and encourages investors to focus on what they can control, such as their spending and saving habits, rather than trying to predict market fluctuations. Overall, Richards' investment philosophy is grounded in simplicity, common sense, and a focus on long-term goals.
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Joe O'Boyle is the founder and principal of O'Boyle Wealth Management, a full service financial planning and investment management firm, located in Beverly Hills, California. Joe O’Boyle was named to InvestmentNews 40 under 40 class of 2016, and has a catalog of financial planning and investing articles on Money.com & U.S. News. Disclosure information.