Overview of the Financial Template, Part 3
The key to your financial future is the financial template, the Afterburner Success Partners differentiator, Part 3
Completing our financial template is hard. And important…That’s why we don’t rush it
We are now into week three of the financial template overview, and we will wrap up developing your physical template with this session. We will then spend a significant amount of time learning about all the information you need to properly complete YOUR template so you can have a customized financial plan. A plan that is exactly what you want to do, for you, developed by you, and unique to you and no one else. That’s pretty cool! And you do know why we do this, don’t you? Yes, that’s right; So, you can achieve your dreams and live your best life! I knew you knew it! Remember what we said a few weeks ago:
Developing your lifetime financial plan is likely one of the most difficult and important decisions you will make in your life
Because developing our financial plan is so difficult and important, we spend a lot of time on it. Our financial plan affects every aspect of our life, as you know from your own experience and the statistics I quoted last session. I think if I could succinctly summarize it, it would be like this:
Get it right = good life. Get it wrong = not as good or even bad life.
This is why we are spending three weeks just drawing your template, and we will spend a lot of time going forward providing you with all the information you need to make an informed, excellent plan for the financial future for you and your family.
Generational wealth, generational poverty
I’m going to go off on a tangent, perhaps get a little preachy for a bit, and it’s possible you will not agree with me, even get angry with me. As I’ve previously mentioned, “The world according to Dave” is my opinion and may not be shared by everyone, but it’s what I think, and I try to base Dave’s world on fact. Because I am a student of the Bible, I read it every day, and I think it speaks to each of us individually. It is alive and as pertinent to each of us as when it was written. There is a passage, Exodus 34:7, that states, “the inequity (sin) of the fathers shall be passed to the 3rd and 4th generation” (Note 1). Click the link to read one interpretation and see what you think. I’m sure this verse is unrelated to financial matters (more to idol worship and unbelief). In a few paragraphs, see if you get to the same place as I am.
Ponder this cliche: "The rich get richer, and the poor get poorer." This is an aphorism attributed to Percy Bysshe Shelly, and written a very long time ago, in 1821 (Note 2). Have you ever noticed that “those who have” seem to pass it to their children who pass it to their children? How about “those who do not have” and seem to suffer from generational poverty? Look around you and see what you think. Now, before you go off on me, let me say that I know for a fact there are exceptions to this. I’m one of those. Both of my parents were raised in very modest financial environments by parents who worked hard to scrape out a living for their families. Both of my parents recognized this in their childhood and made a conscious decision to live better lives for themselves and their children. They then took the necessary actions to make it a reality.
My upbringing progressed to mostly upper blue-collar because of my parent’s choices to improve their lot in life. Over time, toward the end of their careers, they found themselves very well off as their neighborhood was transformed into a decidedly upper-class, “inside the beltway” (Note 3) neighborhood. Since I left in 1979, and culminating with the demolition of my childhood home, aside from a few homes owned by generally older families, most of them have been replaced by very large homes worth several million dollars. So, while I don’t consider myself to fit in either category, I understand and have observed throughout my life this situation, and I believe it to be generally true.
Living on the dole
Regarding generational poverty and to understand how this can happen, read the Forbes article in Note 4. I have another possible explanation that may seem a little off-putting: Government social programs. Click on the link in Note 5 to learn more. While the referenced study is now ten years old, I might opine that not only is it still relevant, but it may actually be worse, given our increase in government aid in recent years. If you’ve never heard the term “living on the dole,” click on the link in Note 6 to learn more.
At Afterburner Success Partners, we don’t think it has to be this way…
Ok, so just writing these past few paragraphs made me a little uneasy, but I’m making a point that is decidedly positive. It’s simply this: If you find yourself in a less-than-optimal financial situation, you can do something about it. You don’t have to accept what’s been given to you. You can do something about it, and getting started is easier than you think. Oh, now wait a minute, I did not say it would be easy; I just said getting started would be easy. At Afterburner Success Partners, we like to say we take you from here to there, and we take you where you are and build on it.
In all cases, it depends upon making a decision to do something different, and that’s why we are here. I hope I’ve made my case to any doubters that no matter your current situation in life, you can improve it. Let’s continue our discussion of the financial template overview.
Wrapping up the financial template overview
OK, so in previous sessions, we’ve defined all of the column headers and completed the first two columns in detail. We also defined the most important item of the course: Defining “Your Number.” The purpose of reaching your number is so that you attain financial freedom. Let’s state what “Your (My) Number,” the point of financial freedom, once again, just to be sure we have it:
Reaching your number is that point in life where you are confident that you are financially prepared to live the rest of your life, in the style you desire, and not have to worry about money, regardless of what happens
Let’s now complete the template. Remember: Don’t try to fill in the blanks now! All I want you to do is complete the basic template shell with column headings and begin to think about what may go in each template cell. That’s all!!!! OK, now we can go on.
After Time Period and Date, we have the following column headings in order. You have already defined “Your Number” and listed it. Key point: From this point on, we work backward from “Your Number.” Did you get that? Yes, we back into our lifetime plan from where we want to be, not starting from where we are. This is a key success point you will learn more about later. After each column entry, I’ll briefly cover what they mean:
Goal (what I want)-Over your lifetime, there are experiences you wish to enjoy and material items you wish to procure at certain times of your life that are realistic and tempered to your situation in life. You will probably need to think about these things for a bit. Your initial list will not be complete, and it will change over time, and that’s why we have periodic reviews. I’ve had in-person class students who could not complete this by the end of the course, so I know it’s difficult. This reminds me of an old ditty:
How do you eat an elephant? One bite at a time
It’s the same with the financial template; take it one step at a time. The first entry in the horizontal column labeled “Today” should read “Begin my financial journey.” Everything we do from here on out builds on this. You are now prepared to complete your entries in the “Goal” column and align them with what you want to have. Again, don’t do it just yet, you are now just prepared. Here are some examples:
6 months: Establish an emergency fund of $1,000. Increase my 401(k) contributions to 5% of pay. Visit my parents out of state. Complete the Afterburner Success Partners course. As you can see, multiple entries are OK and even encouraged.
1 year: Increase emergency fund to $2000. Be on track to Achieve my Dreams and Live My Best Life!
Retirement: Reach “My Number.” Retire as planned
Etcetera, etcetera, etcetera, until all entries are completed. Remember that you can have multiple entries for each time period, and you can add more time periods if you want. This document likely will be several pages when you are done.
Position: This is simply the career position you hold the moment you begin your journey and what positions you wish to hold up until you retire. For me, from the beginning, it looked like this: Aircraft mechanic (Crew Chief), many different and progressive positions in between, Managing Director, Retirement. An important point is that for most people, their job will mostly determine their financial situation, which will determine what they can do in their personal life, which will determine when, if, and how they retire. Please be sure to understand this concept. Advancing professionally takes a lot of planning, a lot of work, doing the right things, doing the right things right in the right order and at the right time. Did I mention that to get promoted it takes a lot of work? How about you must define what it takes to get promoted, to make more money, and it takes a lot of sacrifice? OK, I think you get the point about this column.
Annual Income: You know your income today and you can list that in the appropriate cell. Over time, you will track your actual income in this column.
Target Income: OK, this is where it starts to get difficult. You know your actual annual income, and you will track that in the Annual Income column over time. To the right of that column is the Target Income column. Your goal, later, not now, is to achieve progressive income growth that will support “Your Number” and the total associated income stream you need. For today, throughout retirement, and that will allow you to enjoy the journey. At the appropriate time, again, not now, you will work backward from “Your Number” and add the income necessary at each milestone to achieve “Your Number” on the date of retirement or where you choose to place “Your Number” if different than your retirement date. When you do this, you can see, very easily in two side-by-side columns, the difference between what you are making and what you need to be making. If your annual income is less than your target income, then you have some catching up to do, and you will have to figure out how to do that. If you have a surplus, then that means, for the time being, you are ahead of the game. Completing this column is where the rubber meets the road.
Annual Savings: This is the column where you track all your actual pretax and after-tax savings. Like annual income, this column “is what it is” and is simply a measurement of where you are at any given moment.
Target Savings: The Annual Income and Annual Savings columns are simply measurements of where you are. Target income is the number that will drive you to the Target Savings column. You will remember that the intersection of the Target Savings Column and the “Retirement!” contains a dollar figure which is “Your Number.” After determining “Your Number”, the most important column is Target Savings. Why is that? Simply because the accumulation of wealth over time is what is necessary to achieve “Your Number”, which is the point you achieve financial freedom.
Notice that we don’t have a column for debt such as credit card, car payment, or mortgage. Yeah, well, you can probably figure out that you will need to manage that number as well if you are going to stay on track with your target savings.
Action Steps: This is the column where you list any needed actions to achieve your goal. We’ll talk more about this, but I’m guessing this inherently makes sense without much discussion.
Adjustments Needed: During your periodic reviews, you may find that you must adjust to get back on track. This is where those required actions are recorded. Subsequent periodic reviews will either confirm the previous adjustment was adequate or if further action is required.
Let me describe a beautiful thing for you. If you are in the 3% club, or maybe even the 1% club, and you completed this exercise and followed it, you likely will find yourself ahead of schedule! Yes, this tends to happen to disciplined people who do the right things in the right order and at the right time. When you find yourself in this situation, take a moment to celebrate it and then put your head back down and work hard. We never know what life will throw at us, and just because things are good today, they may not be tomorrow, and this little cushion you have today may be the boost you need to stay on track tomorrow.
We’re finished now
Well, OK, that wraps up our financial template overview. I’m not sure if your head is pounding or you are full of excitement! I’m guessing the latter because even getting this template down on paper, much less filling it out, is quite exciting. We will review the past few sessions as preparation for getting into the details to allow you to intelligently complete the financial template. There are many things to consider and it’s always best to have as much information as possible before we make decisions on important topics like this. That’s all for this week!
What’s in it for Me
Developing your financial plan for a lifetime is a tremendous achievement that places you in the 3% club. This is one of the actions necessary so you can achieve your dreams and live your best life!
Call to Action
Once you have drafted your template, take time to ponder it and think about what you might put in each cell. Don’t do it yet; there is still so much to learn before we can. If you have a financial advisor, you might want to meet to discuss your work and seek his or her input. They will be trusted partners in your journey.
Recommended Resources
Purchase and read Made in America by Sam Walton. This is simply an incredible rags-to-riches story and is an example of what is possible in America. You may not want to own WalMart, but the principles you will learn will make you better. Click on the link in Note 7 to purchase the book.
Up Next
Review Time 5!
Notes
Please note that as an Amazon Affiliate, I may earn a small commission on the sale of any of these recommended resources.
Gotquestions.org: https://www.gotquestions.org/iniquity-of-the-fathers.html
The rich get richer and the poor get poorer, Wikipedia: https://en.wikipedia.org/wiki/The_rich_get_richer_and_the_poor_get_poorer
Inside the Beltway, Wikipedia: https://en.wikipedia.org/wiki/Inside_the_Beltway
Why The Rich Get Richer And The Poor Get Poorer, Forbes Magazine: https://www.forbes.com/sites/jackkelly/2024/05/14/why-the-rich-get-richer-and-the-poor-get-poorer/
Parents’ reliance on welfare leads to more welfare use by their children study finds, UChicago News: https://news.uchicago.edu/story/parents-reliance-welfare-leads-more-welfare-use-their-children-study-finds.
Unemployment benefits, Wikipedia: https://en.wikipedia.org/wiki/Unemployment_benefits#:~:text=Unemployment%20benefits%2C%20also%20called%20unemployment,to%20work%20for%20a%20living.
Made in America by Sam Walton: https://amzn.to/42WCDgp