Carl Richards’ book The One-Page Financial Plan: A Simple Way to Be Smart About Your Money
Why? Because it is so darn simple! For most people, financial planning is a simple matter that starts with spending less money than they make and getting a return that beats inflation on their savings. That’s it. Now, we’re in an era of stagnating incomes, so the “spending less money than you make” part has been a huge challenge for many families. I get that.
But if you have the money? Then the hard part is over.
Richards has an interesting story. He is a financial planner, with a CFP designation and all, and he made a huge financial mistake: his family bought a dream house that they really couldn’t afford right before the financial crisis. The house lost value almost exactly as Richards’ business slowed down. Ooops. His family ended up losing the house.
I talked to Richards about the book in March. He said that one reason people get waylaid from a simple process is the motion. “Talking about money is a specific form of anxiety,” he said. “It’s emotionally complicated. That’s the piece we underestimate.”
For years, the financial services industry has added to the complication by emphasizing products over good advice. Richards thinks that this is starting to change, as financial advisors realize the need to form relationships that last longer than one market cycle.
This book is simple, and that’s what most people need. It asks readers to start with a list of values. Why is money important? What can money do? The answer will be different for everyone, and that’s okay. Then, set goals. Richards says that goals are guesses that will probably change over time, but the process always gets back to connecting the goals to the values.
After that, Richards gets into the tactics, which are simple. Pay down debt, set up an emergency fund, contribute to a retirement fund. That part is easier than determining why you do it. “We’ve been approaching this at though it’s just about spreadsheets and calculators,” he says, when really, money is emotional.
