A Simple Method for Creating a Financial Plan

November 25, 2013

In a July 2012 report released by Consumer Federal of America and the Certified Financial Board of Standards, only 31% of the 1500 respondents to a May 2012 telephone survey said they had a comprehensive financial plan.  Why so few?

The answer may lie in the misconception that a financial plan involves massive document-gathering, meetings, introspection, and time commitment. The task may seem so overwhelming that people are afraid to begin.

Beginning writers often face the same fear when starting a 350 page novel book.  One technique used by seasoned pros is called the “Foolscap Method”.    (‘Foolscap’ refers to ‘legal-sized’ paper measuring 8.5” x about 14”.  Its name is derived from the imprinted watermark in 18th century England).   The method is to get the structure and outline sketched out on one single sheet of foolscap, normally in three-four “acts” or sections.  Once done, the rest is filling in the details.  Instead thinking about the whole project, the writer breaks it down into manageable sections.

The core benefits are: 1) Getting the structure down on one page removes the excuse of “It’s too much”, 2) You see the project as a whole, from beginning to end on one sheet and 3) You boil down the goals into the essentials and avoid drowning in the details at the start.

For your financial plan, you break up the different areas into Acts 1, 2 and 3.  Within each section, make three solid objectives you’d like to achieve.  Why three?  Because three seems doable and having just a few objectives helps with focus.  Apple founder Steve Jobs used to ask his senior management team for 10 goals, then cross out all but three, stating it was better to focus doing three well, rather than many less-than-well.

If you’re having trouble starting a financial plan or getting your finances in order, try using a single-sheet of paper to get your thoughts, dreams and ideas down and keep it simple.  Often, simpler is better.