Your Money By Design
I love to read about fashion/design trends and couldn’t help thinking about the similarities with personal finance as I read a recent Globe and Mail article entitled “The High Drama of Low-Key Design”.
Before you declare me “crazy”, let me explain…
This well written story featured beautiful pictures of elegant yet simple rooms. The style of design, praised by the author, was a wonderful blend of colour, texture, clean lines and comfort at an affordable price. Isn’t that what personal financial planning should be all about too?!
Here are a few design principles from the article to help illustrate my own philosophy of financial planning.
1. Simplicity of design- edit or remove anything that is not necessary
Just like a great kitchen, a financial plan does not have to be complicated to be useful. Simply thinking through some key areas like savings and spending goals, investing and risk can get you well on your way and provide a strong foundation for your finances. Sound financial planning does take time and commitment but the benefits can pay off for a lifetime. So take small steps first. Incremental improvements, like using your tax refund to reduce your mortgage , will multiply over time.
2. Comfortable, calm, clean feel- picture of serenity
The major goal of a financial plan should provide you with peace of mind, worry-free personal finances. Knowing that you have established priorities, considered options, taken steps to protect your loved ones will give you confidence in your finances. Everyone deserves to live the life they want with the money they have. That’s what a financial plan is all about.
3. Variety of furnishings and textiles
Just like the accessories in a beautiful living room, the parts of your plan must fit and work together. So should your efforts as a family, not just as individuals. For example, if you are earning less on your savings or investments than you are paying in interest on your debt, you should rethink your strategy. If your family’s investments are properly diversified and tax effective, no one event should have a significant impact on your overall plan.
4. Contrasting/materials/patterns engage but don’t overwhelm
If you are a young adult just starting out, you do not need a complicated, detailed plan. It is more important to be doing the right things like regularly saving a portion of your income, paying down student debt and watching your spending carefully. Generally speaking, as we age or assume greater responsibilities, our financial plan needs to reflect more components and competing priorities.
5. Quality over quantity
It is far better to focus on doing a few things well rather than a bunch of things poorly. If your finances are a mess, set a few goals for yourself and work hard to achieve them. For example, if you are buried in debt, maybe your first task is to take a debt inventory. Write down your debt, interest rates, monthly payments and time period for repayment. You might be surprised what you learn when you do this and how easy it is to make the right changes.
6. Willingness to experiment, patience for trial and error
Coming up with a realistic budget that you can live with takes a lot of tries. It certainly did for me! But once you do, you will feel empowered and in control of your spending. Different life stages or events (i.e. buying a house, having a baby) can also trigger the need to rework your plan. However, the effort will be less because you already have a solid base to build upon.
So you see, designing a great financial plan is no more difficult than putting together a beautiful home or great wardrobe. Don’t wait any longer…get started today!