up with a financial plan can be a daunting task no
matter what your age, but perhaps even more so when youíre
in your 20s and just getting started.
do you plan for a retirement thatís some 40 years
away? What if you get married? Have a baby? Go to
graduate school? Switch careers?
so many unknowns, planning may seem like a pointless
exercise, but Carl Richards, a financial planner who
writes the "Sketch Guy" series for The New
York Times, says itís more valuable than you might
think. In his latest book, "The One-Page Financial
Plan," (Penguin Group, $24.95), he argues that
listing a few important goals on a sheet of paper can go
a long way toward making smarter decisions about money
ó even if those goals change a few (or more) times in
in an edited version of our conversation, he answers
questions about how to apply this strategy when youíre
just starting out.
How do you write a one-page financial plan when youíre
in your 20s?
Make some guesses about where you think you want to be
five or 10 years from now. Just some guesses. Put them
on your one-page plan. You donít have to carve it in
granite with a chisel because we know itís going to be
wrong at some point. So give yourself permission to let
go of that false sense of precision. Youíre not
committed to the plan. Youíre committed to the process
of guessing. Itís sort of like being a pilot. You have
a flight plan, but the wind ends up being different than
you thought. Just make a course correction. Thatís OK.
How does the plan help you better reach financial goals?
My financial plan is up on the shelf in my office. Just
this morning it came in handy because I was offered an
opportunity to invest in a company that sounds exciting
and fun. Itís a startup and all cool. And then I
thought, oh wait, that plan up there says weíre saving
up money for a down payment on a house. OK, let it go. I
spent three minutes on the offer instead of three weeks
researching it. Itís along the lines of the old
Stephen Covey quote: "Itís easy to say no when
thereís a deeper yes." I like the idea of having
some document there thatís your much deeper yes.
What goals should go on your plan?
I think the stuff that ends up on the one-page plan is
the stuff youíre working on right now. On mine, it
says fully fund retirement accounts for me and my wife,
save money each year for our kidsí education, and save
for a house. Now, if I were recently out of school and I
had a little bit of debt, Iíd probably have something
like pay down my debt, start saving for a trip that my
wife and I want to go on, and save for a down payment. I
think the goals that drive actions every day or month
are what end up on that plan.
What is the value of writing a plan if your goals are
bound to change?
I think itís incredibly valuable just because of the
increased awareness youíll have when you make
decisions. At least youíre noticing what youíre
doing. Most of us are walking through our financial
lives with our eyes closed.