Starting the new year with a concise, effective financial plan is like setting sail with a clear destination in mind. Picture this: A single page that holds the potential to transform your financial future.
In a world where complexities often overwhelm, a one-page financial plan provides clarity, guiding you through the maze of budgeting, investing, and securing your financial goals. Join The Agent of Wealth Podcast host Marc Bautis on a journey to unravel the incredible power in this seemingly modest tool.
In this episode, you will learn:
- The power of simplicity in financial planning.
- What a one-page financial plan is, and how it differs from more traditional forms of financial planning.
- What’s included in a one-page financial plan.
- Compelling reasons as to why you should have a one-page financial plan.
- How to get started in creating a one-page financial plan.
- And more!
Resources:
Example of a One-Page Financial Plan | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis.
This is the first Agent of Wealth podcast episode released in the new year. In previous years, the first episode has always been about goal setting, as improving one’s finances is always near the top of the most common new year’s resolutions.
In today’s episode, we will still talk about how you can improve your financial picture in the new year, but by putting a financial plan together. Specifically, a one-page financial plan.
The typical financial plan is 100 pages, and contains everything from balance sheets, financial risk data, projection scenarios, cash flow analysis, and disclosures. It’s all good data, especially for someone who loves numbers (like myself). But what I’ve come to realize over the past couple of years is that clients appreciate an executive summary of their financial plan, more than receiving the full blown plan.
Let’s talk about what a one-page plan is, why it’s important, and how you can generate one.
The Power of Simplicity
When it comes to managing your finances, there is power in simplicity. Consider the practice of budgeting: A straightforward approach of tracking income and expenses empowers individuals.
Simplicity not only reduces the cognitive load associated with financial decision-making, but also minimizes the likelihood of costly missteps. It fosters a sense of discipline and accountability, allowing individuals to allocate resources towards their goals – whether that be debt repayment, saving for the future, pursuing meaningful experiences, etc.
What’s more simple than seeing your full, financial health at a glance? That’s exactly what a one-page financial plan is.
Financial planning as we know it is evolving away from an annual display of technical printouts and toward advice engagement and an ongoing ever changing advisor-client conversation. There is now a heightened demand for information that is reliable, quickly produced, and easily digestible so that it can be used to make financial decisions.
Principal Financial Group performed a study that found that we make 35,000 decisions per day, but 7 out of 10 people postpone major financial decisions. Their research concluded that what’s largely driving the procrastination is the lack of the right, confident mindset. The one-page plan aims to change that.
What is a One-Page Financial Plan?
A one-page financial plan is a concise and simplified document that outlines an individual’s or a household’s financial goals, strategies, and key information. It’s designed to provide a clear and easily digestible overview of a person’s financial situation and objectives.
The purpose of a one-page financial plan is to distill complex financial matters into a straightforward format that is easy to understand and reference.
What is Included In a One-Page Financial Plan?
Here are the elements we use in the one-page financial plans we create for our clients…
Goal Summary
The probability of success of reaching your specific goals (retirement, children’s education, etc).
You can think of this section as a heat thermometer:
- If you’re tracking behind your goal, it will be red.
- If you’re approaching your goal, it will be yellow.
- If you’re on track with your goal, it will be green.
The goal summary answers the question: How am I doing?
Whether you have a 5%, 10%, or 20% return on your portfolio is important, but that percentage doesn’t matter as much as tracking towards your personal financial goals.
Related: How to Set Investing Goals
Assets
Shows the current breakdown of your assets (investments, cash, retirement, trusts..) and how they are projected to grow over time.
Monte Carlo Simulations
This section answers the question that retirees and pre-retirees often have: Will I run out of money in retirement?
It shows a year-by-year depiction of your assets growing, or being depleted over time. It takes into account market fluctuations by running 1,000 different scenarios.
Related: What is Retirement Scenario Planning?
Net Worth Summary and History
This is a snapshot of your current assets and liabilities. The net worth history shows how your net worth has grown over time. A lot of people feel like they aren’t making much progress financially, but seeing how their net worth has grown over time really puts things into perspective.
Related: Why Knowing Your Net Worth is Important
Assets by Tax Type
This is a breakdown of which accounts are taxable, tax deferred, and tax free.
Your assets will all be taxed differently – $1 million in a pre-tax 401k is a lot different than $1 million in a Roth. It’s important to understand the tax differences of each account, and how these differences will impact you financially.
Cash Flow Overview
This section shows how expenses will be covered and your sources of income (salary, Social Security, RMDs, withdrawals).
If you are retired, this will likely be the largest and most detailed section on your one-page financial plan.
Next Steps
This final section of the one-page financial plan lists the items that will be worked on in the near- term.
There are many areas that go into a financial plan – investment planning, estate planning, retirement planning, risk management, cash flow and budget, assistance to loved ones – and each of those high level areas has multiple sub areas.
For example, under investment planning there is:
- Investment portfolio review
- Asset allocation
- Withdrawal strategies
- Company stock strategy
- Alternative investments
If we put together this laundry list of financial topics to cover with each individual we work with, many would find it to be overwhelming. As a result, nothing would get done. The “Next Steps” section has two to three of the most important items to focus on over the next month or quarter.
The goal of a one-page financial plan is to provide a high-level snapshot. It’s not meant to replace more detailed financial statements, budgets, or investment plans. Instead, it serves as a useful summary that can be easily referenced and shared with trusted advisors or family members.
Why Have a One-Page Financial Plan?
Here are some reasons why you should consider having a one-page financial plan:
- Clarity and Focus: A one-page financial plan forces you to distill your financial goals and priorities into a clear and focused document. It helps you avoid overwhelm and concentrate on what truly matters.
- Simplicity: A one-page plan encourages simplicity. It prevents you from overcomplicating your financial situation with unnecessary details or complex strategies.
- Ease of Reference: It’s easy to refer to and review regularly. Plus, you’re more likely to revisit and update a one-page plan frequently.
- Accessibility: It can be easily shared with a financial advisor, spouse, or trusted family member, ensuring that others are aware of your financial goals and can provide support or guidance.
- Adaptability: It’s easy to adapt and adjust as your financial situation or goals change over time. This flexibility is crucial for keeping your plan relevant and effective.
A strong financial plan is built on an incredible amount of details. In fact, one could argue that the better and more abundant the information, the better the plan. As a planner, I love how these details weave together to provide a customized path for our clients. With that said, I’ve come to realize that every client is different in how much detail they want to see. Too much detail is lost on some so we’ve decided to boil the specific concerns and goals of the client into one page. A clear concise picture of where they are heading and what needs to be done to get there..
The response to the addition of the one page plan has been extremely positive. Without realizing it, most of our clients come to us because they are busy and simply need somebody they can trust to keep them on track. I have seen twice the action items checked off the list of clients since introducing this new simplified version of what they need to accomplish and why.
It doesn’t mean these same clients didn’t appreciate strong detail at times, but often found themselves putting things off until they had more time to look over the plan. The truth is there were always too many things in their lives demanding their precious time and they would struggle to check these boxes. With the one-page plan, it was immediately clear what needed to be done and why.
Sample One-Page Financial Plan
Thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.