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The 6 Principles of Financial Planning

In order to navigate the complexity that stands between our clients and their financial decisions, we have established six principles that we use to inform how we serve our clients:

1. Be organized

If you were blindfolded and dropped off in the middle of nowhere, what’s the first question that would come to mind?

We know that the very first step to planning any journey is to know the point from which you will depart. When it comes to financial decisions, being organized is the equivalent of knowing your point of departure.

2. Define the life you want

The life you want should be the destination at which your financial plan is aimed. This enables you to orient and align your financial decisions with what is best for you.

3. Find your signals in the noise

There is noise and then there are signals. Noise is the abundance of disorganized information that can be found virtually anywhere you look. Signals are the result of information lining up in a way that is useful to you. Typically, when we feel lost or confused, it is because we are trying to work with too much noise and not enough signal.

4. Know the rules

In order to have the best experience possible in any of life’s ventures, you must first know what you can and can’t do. Not being familiar with what is permitted and what is prohibited can be costly and lead to significant frustrations.

5. Test the limitations of your resources

How quickly can you determine what the purchase of a $10 million mansion at the beach would do to your financial plan? How quickly can you determine what a $3 cup of coffee from Starbucks would do to your financial plan? Now, how quickly can you determine what remodeling a room in your home would do to your financial plan? How about the purchase of a new car?

Most people can quickly and easily answer the first two questions. Most people cannot quickly and easily answer the third and fourth questions. Most people do not worry about the purchase of a $10 million mansion or a $3 cup of coffee from Starbucks, but for different reasons—the mansion represents an extreme that will never be attempted and the cup of coffee represents an extreme that doesn’t even register on our radar.

The third and fourth questions represent the types of decisions that most people will face and actually define our quality of life. This is the “messy middle”, between the extremes, where life takes place. It is when those kinds of determinations are difficult that we can feel stuck and as if our quality of life is suffering, real or not.

6. Follow your plan

A plan is only as good as the effort that goes into its creation, implementation, and adaptation.

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