Money Talks, So Should You

Q&A: What is holistic financial planning?

Brent Lince
by Brent Lince, The Garrett Network (@brentlince)

Holistic financial planning is an approach that views your finances as a whole, as a system of interdependent parts.

It recognizes that there are no independent financial decisions. If you decide, intentionally or not, to use your financial resources in one area then you have decided not to use those same resources in another area. Decisions you make related to spending, paying off debt, giving, retirement, college, insurance, taxes, investments, etc. all are interrelated.

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Holistic financial planning helps you decide how to allocate your limited financial resources among various unlimited alternatives.

The key is a clear understanding of your dreams and goals and values. The most important questions are “what am I trying to accomplish?” and “what’s most important to me?” When you have clarity on these big-picture questions, the details of a meaningful financial plan then fall into place. You are allocating your limited financial resources to what is most important to you. Taking the time and energy to “zoom out” and see a longer-term perspective will help you make better financial decisions now.

This may sound good philosophically, but you might be wondering how to apply this to your life.

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Let me suggest seven practical steps to help you get from “here” to “there”:

  1. Take inventory. Before you can plan to get where you want to go, you have to understand where you are now. This includes understanding your cash flow (income and spending) and net worth (assets and liabilities).
  2. Build a solid financial foundation. Central to your financial success is your ability to consistently generate a cash flow surplus (live within your means). Also, focus on paying off your non-mortgage debt. This puts you in better position to save and invest for the future.
  3. Start with goals you already know about, such as retirement, saving for your children’s college and paying off your mortgage.
  4. Determine a plan to reach your goals, how much you need to save. Then create an efficient investment plan to grow your assets over time.
  5. Implement your plan. It’s great to have a plan, but it’s no good sitting on the shelf. Put whatever you can on autopilot.
  6. Monitor your plan and make adjustments. Things will never work out exactly as planned, so revisit your plan periodically, at least annually, or whenever you have a major life event.
  7. Go back and dream some more. Over time, you will make progress on your “core” financial goals, such as retirement, and gain confidence that they will in time become reality. Revisit the big-picture questions mentioned above. Go back to step four and repeat, incorporating your new dreams and goals.

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Financial planning is an ongoing process, not a one-time event. It takes time and energy, but the payoff is well worth it in the end. Rather than simply acting out the default “script” our culture writes, when you align your money with what matters most to you, you write the script and play the lead role in your own unique life story.

 

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Brent is a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional whose mission is to help everyday people gain purpose, clarity and peace of mind through holistic financial planning. He is an hourly-based, fee-only planner, which means his clients pay him based on his time, not based on any products they purchase or the level of assets they have. He is an investment advisor representative of Garrett Investment Advisors, LLC, an SEC registered investment advisory firm.