• Jeran Van Alfen, CFP®

The Essentials: Sticking To A Plan

This week I had the hardest time getting back into my normal fitness routine after a 3-day road trip weekend. Looking for some motivation, I read an article from a coach that trains first responders and athletes, and found the following quote, “All we really need is the conviction of purpose, and the discipline to keep ourselves accountable.[1]” He outlined three principles to stay motivated: purpose, discipline, and perseverance. As I took the advice to heart and got back to work this week, I thought about how these three principles are not just for fitness goals but can also be applied to sticking to a financial plan.



Purpose


One of Centered Financial’s guiding themes is: Invest with Purpose. This is because I have always felt that our financial choices should reflect what we truly care about. At the start of every financial plan or investment policy, we need to take the time to define the purpose. This should go beyond a list of financial goals. There should be an emotional component or vision that is the fundamental “Why” behind our plan. If you haven’t defined your purpose. Now is the time. Here are a few exercises that I like for connecting your purpose to your money:


  • The Vision Board: Time to get creative. Create your vision of your career, health, family, activities, etc. The goal is to get a visual. If you’re not ready to get crafty, then start with a list on a piece of paper or a journal page and write down what you want your life to look like.

  • The Top 25: Also known as the bucket list. Create a list of 25 things that you want to do in your lifetime. There is no limiting scope on this list. Once you finish your list, the next step is to prioritize the top 5. Take these 5 and write down if you have made a financial commitment to these goals. Start working toward number 1. As you check off the list add the next one into your top 5.

  • Balanced Goals: Write down the things you want to accomplish in the next 3 -5 years in the following areas: Education, Family, Career, Health & Fitness, Social, Spiritual. Once you have your list, write down a monetary cost that you would apply to each goal. This will help you define how much income is needed to accomplish your goals.

Discipline


The third principle of Centered Financial’s investment philosophy is managing behavior. JP Morgan puts out a deck of fact-sheets each quarter called, "A Guide to the Markets." The guide always includes a slide that shows how the average investor compares to returns of various asset classes. As you can see in the image below, the most recent guide shows that the average investor’s returns trail all of the asset classes included.

This can be extremely frustrating at first glance. The lesson is that most investors don’t stick to their plan. With constant news and marketing efforts bombarding us, it is very easy to get distracted. When we lack confidence or do not base our investment decisions on a system, we often find ourselves losing money. The solution is in the system. A simple investment system should include these 5 steps:

  1. Define your purpose

  2. Make a conscious investment decision

  3. Allocate your risk appropriately

  4. Diversify

  5. Define an exit strategy based on needs, not emotions

Of course, discipline does not just apply to investing. It takes discipline to make smart financial decisions on a daily basis to reach your financial goals. If you want to create good financial habits, try these 3 strategies:

  • Automate your savings. You can make the decision once and then let it take care of itself.

  • Pay yourself first. When you get a bonus or a tax refund or a raise put at least 10 – 20% in savings before spending it.

  • Track your progress. Use the Centered Financial Dashboard and App to stay on track.

Perseverance


It takes perseverance to reach a financial goal. We all hit roadblocks. Here are some common mental hurdles to financial progress and ideas for overcoming them:

  • I don’t have time: Schedule an appointment to review your financial plan each month or each quarter. It is probably one hour out of your month to review your progress and make adjustments.

  • I am embarrassed about my finances: Your financial journey is completely unique to you. You are not competing with anyone else and your success is completely dependent on the goals you have set for yourself. Remember that no matter how you are doing with your money, there are always people ahead of you and behind you.

  • I’ll save more later: Now is the time, even if you start small. Start saving for your goal and then increase your savings as you go. Change your habit to a save first, spend later approach.

Celebrate your Wins


Most financial planning involves delayed gratification. Your future self will appreciate your commitment to your purpose, your discipline and your perseverance. However, if you want to stick to any long-term plan you need to enjoy the process. Make sure to celebrate your small wins along the way and rely on a coach (your financial planner) to help you see your progress and stay committed.

[1] Da Rulk, 3 keys to stay motivated. 2019

CONTACT:

Centered Financial LLC

701 Palomar Airport Road

Ste. 300

Carlsbad, CA 92011

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