The One Page Financial Plan Synopsis Part 1: Values

In late March Balentine’s Director of Communications had the privilege of speaking with Carl Richards about his latest book The One Page Financial Plan. Carl Richards is an author and artist, perhaps best known for his napkin sketches. Balentine has long been a fan of Carl Richards’ message on overcoming psychological factors which oftentimes cause a disparity between returns earned by actual investors versus market benchmarks.

The One Page Financial Plan then is a logical next step for Richards, as it effectively counsels readers on how to bridge that so-called “behavior gap”. Over the course of five Market Notebook entries, we explain what our top five takeaways were from The One Page Financial Plan and our subsequent conversation with Richards. 

1. Values should dictate how you spend your money.
When it comes to money and investing, the questions people ask themselves typically involve the usual suspects: When? Where? How? How much? In The One Page Financial Plan, Richards turns this on its head by asking the question “Why”. Why is money important to you? This question, says Richards, should reflect your values and these values in turn should be the lens through which you view your financial goals.

Since each investor’s goals are unique to his or her situation, no one financial plan should look alike. As Richards says in his book, the best financial plan has nothing to do with what the markets are doing, nothing to do with what your real estate agent is telling you, nothing to do with the hot stock your bother-in-law told you about. It has everything to do with what’s most important to you.” (emphasis added).  Establishing your own personal goals up front also serves as a compass when life tries to pull you off track. There are three culprits in particular that many investors fall prey to: media noise, The Joneses and our culture.

  1. Media Noise: Balentine has long been counseling clients to tune out the noise. But, from the stock ticker on the elevator ride to the stocks app on the iPhone that cannot be deleted, there is no denying its pervasiveness in our culture. The truth of the matter, however, is that most of the minute-by-minute moves of the market have little to do with your portfolio or your investment goals. Remember that information is not knowledge and knowledge is not wisdom. Instead, it should be taken for what it is: entertainment. Richards admits that selling a book based on “the hottest stock tip” or “the best financial advice you’ll ever receive” would have garnered much more attention, but at the end of the day it is just fluff. One of the most striking parts of the book was discussing some investment “advice” by billionaire hedge fund manager John Paulson (of “the greatest trade” fame). Despite the fear of missing out, Richards used his one page financial plan to evaluate his own situation and goals. “In the end,” Richards writes, “I was reminded of something incredibly important. John Paulson doesn’t know me or my situation.”
  2. The Joneses: The Joneses (or the Kardashians in today’s parlance) are the perennial representation of comparing ourselves to our neighbors. The advent of social media has made this even more prevalent, especially when it comes to children and teenagers. One of the easiest ways to derail your financial plans is an attempt to keep up with the Joneses. This has to do not only with material goods (a new car, new handbag or new house) but also with portfolio performance. This idea of “keeping up with the Joneses not only shifts the focus onto short-term, relative returns, but it can even cause investors to “ride the bubble,” focusing on the frenzied price inflation rather than underlying fundamentals. If your goals are clear and your portfolio is meeting those long-term absolute benchmarks, your neighbor’s car or investment portfolio should not matter.
  3. Culture: Today’s culture is one that promotes busyness and consumerism. It has gotten so widespread, states Richards, that “at some point, we stopped being American citizens and started being, first and foremost, American consumers.” With modern day life so full of conveniences and short cuts, it is easy to see how Richards arrives at this conclusion. Case in point, one day after Richards’ book debuted, Amazon unveiled its newest product Dash, which literally reduces shopping to the click of a button. Hand in hand with this consumerism is the state of “busyness” that we all live in.  In my conversation with Richards, he stated that many people wear their busyness and exhaustion as a badge of honor. The question to ask then is” is our busyness and exhaustion serving a purpose? Similarly are the things that we so mindlessly purchase with the click of a button or the daily $4 latte, in line with our financial goals? Richards cites the old saying “the calendar and the checkbook never lie.” After all, he writes, “it turns out the way we spend our money and our time often says something about what we value.”

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