A One Year Financial Plan

In The MartianMark Watney discusses his travails while making plans while stuck on Mars:

They say no plan survives first contact with implementation. I’d have to agree.

I’m constantly pushing investors on the virtues of creating a comprehensive investment plan because it’s the most important step in the investment process. Security selection, asset allocation, market analysis and the various investment strategies are worthless if they’re not put into perspective in terms of an overall plan.

But even when you have a plan in place there’s still the fact that you have to actually implement it in real-time. There’s always the chance of screwing up a long-term plan when the short- or intermediate-term don’t cooperate.

Planning is more of a process than an event so these things are always evolving as markets and personal circumstances change. One of my readers recently shared with me how he reconciles the intermediate-term moves in his life and the markets with his long-term plan. In addition to their long-term financial plan, each year he and his wife create a one page document that outlines the steps they will take depending on what happens. He gave me permission to share here (with the names and amounts blacked out):

one year

The plan itself here doesn’t matter so much. The different accounts, investments, amounts and such are details that will be different with everyone depending on their situation. What matters is that there’s a plan in the first place. There’s an if/then scenario laid out for a wide variety of potential outcomes. No one can predict what those outcomes will be in any given year, but planning for a wide range of outcomes is what risk management is all about.

I think having a simple outline in addition to a long-term plan is a great idea. Emotionally-driven decisions and poor behavior can be an investor’s worst enemies. This type of thinking is a great way to minimize those kinds of mistakes.

Further Reading:
The 4 Year Rule



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  1. DonnieNYCA commented on Mar 05

    Carl Richards of the BAM Alliance would be happy =)