Do you have a system for financial planning?

When I think about financial planning, it’s easy to get lost in all the information, well meaning advice, books to read, Instagram personalities to follow, etc. Everything feels important and urgent. We all have so many financial goals and obligations, and each of them demands our attention and contributions.

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I use a framework to help think through my financial planning. The first dimension is understanding the time horizon of the financial decisions. The second dimension is attention that I’m going to allocate to one or two time horizon focus areas. 

The time horizon is not when the decision needs to be made (as soon as possible is always the best answer) but when the outcome of the decision matters. For example, having enough money to pay all the bills this month, or saving enough money for college. The key here is to consider the successful outcome and how much time is available to land that outcome. For time horizon increments I use the following: months, years, decades, and generations. And I like to plan in bundles of 3. So 3 months, 3 years, 3 decades, and 3 generations. I make a list of all the various financial goals and obligations into each category. The purpose here is to make a list so I can declutter my mind. The list doesn’t have to be good or complete. Just write everything that causes my mind to ruminate. It might look something like this.

Time horizon	Key Results
3 months	Optimize my monthly and annual subscriptions expenses Optimize my emergency fund usage, and savings interest rate Read a new book on financial planning
3 years	End of auto lease, decide to return, buy, or lease another car.  Review kids' college savings amount target and fund allocation Review my insurance policies and make sure it’s appropriate for my family situation.
3 decades	Decide on retirement financial targets, and select financial instruments and accounts Learn about long term health care insurance and decide if it’s right for me.
3 generations	Set up a living trust and fund it

This is meant to be a living list. Whenever something pops up in my mind, I just write it down and put it aside. Next, I decide on 2 focus areas with 70% and 30% effort allocation. I spend the time needed to get these focus areas in a good enough shape and I pick another set of focus areas. If something outside of the focus area that’s urgent, of course, take care of it. But otherwise, just add it to the list. 

This is a slightly more complicated version of making a list, and working the list. This method works for me because the outcome time horizon is a good forcing function to make sure that I plan for the long term and use a similar level of decision granularity. 

What about you? What is your system to help you achieve your financial goals? 

Ricky