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The MOST important part in designing your Financial Life Plan Thumbnail

The MOST important part in designing your Financial Life Plan


WRITTEN BY: Gideon Drucker, CFP AIF ECA


I run every morning πŸƒ ...along the East River in NYC.

Before I head out, I drink wayyy too much coffee... β˜• more than I care to think about. But hey...I think I'm done growing anyway.

Of course, I run to stay in shape...but at this point, it's also just become a πŸ” habit.

I sweat, clear my head, listen to a podcast (currently: The Rewatchables by Bill Simmons), mentally run through meetings and Right Fit calls on my calendar and come back ready to start my day.

It's the single most important thing I do every day.

It doesn't matter if what I do later in the day is more significant, life changing, or impactful overall to my course of my life...

The way I think about it, πŸŒ… STARTING my day the way I want is what allows the rest of my day to reach it's potential. (Wow...did not expect this deep πŸ’­...but here we are...stay with me!)

I can think of no better metaphor for financial planning. Taking the first step into plotting your financial future is BY FAR the most important part.

It doesn't matter if what comes after (the recommendations, investments, retirement accounts etc.) is more technically impactful...none of it happens without this: committing to the process.

So with that in mind, I want to peel back the curtain of what happens in Part 1️⃣   of designing your Financial Life Plan entails.

Let me do this by answering the following:

What is the FIRST and MOST IMPORTANT part of the process?

What is the "morning run" of building a financial plan?

Here it goes:

When we begin a new client's Financial Life Plan, the first questions we seek to answer revolve around their cash flow.

Here are the first 3 questions we want you to be able to answer definitively at the end of our planning process (as a reminder, this is before we even touch on investments, tax coordination, insurance coverage etc.):

  1. How much excess saving capacity do you have left after all of your expenses are taken care of?
  2. What percentage of your gross income does this saving capacity equate to?
  3. Will saving/investing this amount of money allow you to reach your specific financial goals?

To further understand why we chose these questions for the first part of the process read on...

πŸ‘‰The first part of this whole process is figuring out how you actually spend your money month to month.

We'll help you uncover figures like fixed expenses. The expenses you absolutely have to spend every month and that are relatively static month to month: rent/mortgage, groceries, subscriptions, car payments etc.)

And then figure out your variable expenses. (These are more discretionary: going out money, travel, random purchases, Amazon, gifts etc.). And what your one-off "big" purchases will look like over the next few years (Vacations, school payment, buying a ring, down payment on a home, buying a car)

πŸ‘‰ We need to know EXACTLY what these numbers look like.

Why is it so important to do this first part?

Because after we go through all of your "stuff" ( your salary, bonus, stock options, business income, the money going into your 401k's, the money being allocated for federal, state, local taxes, health insurance, HSA's etc.)we will show you exactly how much money you should have left over to "save" each month.

Should is the key word here because this is only saying what your saving CAPACITY is. We will drill down later on to determine if you've actually been hitting these targets. The first step is just knowing what they are.

Now once we go through all of this, we'll have a better answer for those first two questions.

1. We'll know your current saving capacity is in actual dollar amounts on a monthly basis and,

2. We'll know what your saving rate is.

These are important! How else could anyone make recommendations or suggest changes if they don't know where you stand?

That's it for part one! Stay tuned for what happens next...

In the meantime, if you have any questions about your financial world, please set up a time to connect and Book a Right Fit call with me here.

Warmly,

-GD