Your financial plan is only as good as the questions you ask
When I was just a child, my dad gave me a gift that has served me well all my life.
He gave me the gift of asking questions.
Now, I know you’re thinking that every young child asks a million questions – and that’s true. But what my dad did was not to simply answer my questions, or tell me to go away and stop bothering him. What he did was to preface his answers with: “That’s a good question, Anthony.”
As a result, I’ve gone through my life being unafraid to ask questions. I don’t believe there are any stupid questions, if they are asked in earnest.
I can truthfully say that asking questions, and finding out and reflecting on the answers, has got me to where I am today.
As you know from your own experience with me, when I take on a new client, I sit down, make sure there is plenty of coffee on hand, and literally grill them about their situation. In addition to the usual information used to calculate net worth, I try to get the answers to more than 80 questions about their lifestyle and goals.
That seems like a lot of questions, and it is. But when the clients are through answering, we now have the basis to put together a meaningful, practical financial plan that will help them lead the kind of lives they want. The results of their answers are often surprising. Sometimes people overreach their capacities for generating and accumulating wealth. But, most often, they underestimate how easy it will be to reach their goals – with just a few adjustments needed in how they manage their money.
In creating a financial plan, there are four questions you should start with.
They may seem obvious, but they are the basics – because the answers you give to them will form the basis of your plan:
- What are your wants?
- What are your needs?
- What are your goals?
- What is your current financial state?
Admittedly, these fundamental questions take some time to answer. It’s all too tempting just to skip them and rush into making decisions. But that’s like setting off to sea without charts or a compass. Thinking about, then stating, the answers to these questions – especially the ones that make you a little uncomfortable – helps you navigate the ups and downs of our complex modern economy.
After the basic questions, you need to ask yourself more probing ones, such as: What is your debt load? What is the exit strategy for your business? Where will your family income come from if you become disabled or die? Will the life insurance you bought 10 years ago be sufficient?
Many people shy away from asking themselves those types of questions, usually for psychological reasons related to fear of the unknown. The financial world is complex; it can be a mystery, even to highly intelligent people. And questions about it force you to confront not only your inadequate understanding of finance – but also your deepest fears about what the future may hold for you. Understandably, some people find it easier just to dive into investing, buying insurance, and creating a simple budget than to seriously plan for the rest – and the end – of their lives.
Questions force you to take an inventory of your situation. Answering them gives you an overview of how best to protect yourself against life’s uncertainties. And, how to build and manage your wealth for a comfortable retirement. Answers give you a navigable chart.
Then, once you have your chart, the unknown becomes the known. And before you realize it, you’ve started building a financial plan that will work for you!
So, when is the last time you sat down and answered some serious questions about your future?
