Financial Planning Lessons from Your Grocery List

A grocery list and financial planning may have more in common than you think.  Both are created with purpose by outlining necessities with some degree of time sensitivity.  Both allow you to get more done instead of organizing items in your head.  Consider these tips for better financial decision making.

Write it down.  Everyone in our home understands if you want something at the grocery store you need to put it on the list.  If it’s not on the list, it’s likely not coming home.  Before making a trip to the store, it’s good to know what you need and what you don’t.  This same principal applies to financial planning.  Get started by taking inventory of all your accounts and where they are located.  You may have an old retirement plan from a former employer or stock you’ve forgotten about.  Check your mail and email for quarterly statements that may provide details, so all balances are accounted for.

Organization.  Now that your list is created, arrange it by what you own and what you owe.  Tally up cash, investments, and other “stuff” you own like your home.  What’s this all add up to?  Then list out any short- or long-term debt.  Now minus the debt from all the things you own, and this creates your family financial statement.  So, how’s it look?  It’s just a number, but there is value in tracking it overtime.  Why?

Perspective, it’s easy to forget where you have traveled from in financial terms.  The busyness of life gets in the way and a year or two can zip by before you know it.  Looking back on the progress you’ve made is valuable and allows you to readjust as necessary each year.  Having visibility on what’s changed and the direction you are heading in is necessary for long term financial success.

Our client community gets an updated balance sheet as part of our planning process each year.  We periodically compare the current year to where they were five years ago.  It’s fascinating to see the reactions, from positive to almost disbelief in how much financial progress has been made in this time frame.  All growth can be tracked back to money habits and having a clear sense of what you want to accomplish.

Liquidity.  All stages of life are cash flow based, especially retirement.  Making sure you have enough cash reserves for near term purchases are just as important as having enough equities to hedge rising costs when you are no longer working.  It’s a balancing act to consistently refill cash reserves as they are spent down.  No real science other than selling equities when you need the money for spending.  Purchasing equities follows the same rationale.  When you have excess cash available per your financial plan, it may be a good idea to buy more.

The quality of your grocery list and what you consume will impact your overall health.  Updating your plan annually will do the same for your financial health too.  Financial planning is not about market timing, performance relative to a benchmark, or reacting to current events.  It is about repeating a pleasant planning experience that allows you to verbalize all possibilities.  This allows you to prioritize your goals and then assign job descriptions to your various accounts.  Taking small steps that add structure to your dollars will determine your choices and quality of life.   Life plays out each day so go make the most of it!

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