‘The One-Page Financial Plan’—Simple, But Not Simplistic

Originally in ForbesSimple is hot, even fashionable. But in many cases, it’s for all the wrong reasons. Simple is easier to pitch, explain and sell, and therefore also easier to receive, understand and buy. But when simple devolves into simplistic, becoming a one-dimensional end instead of a user-friendly means, it’s no longer an advantage and may actually be doing damage. Not everything can be turned into a tagline, a rule of thumb or a short cut.

Therefore, when my colleague and New York Times contributor Carl Richards first asked me a couple years ago to think about what a financial plan might look like if it was constrained to a single page, I was skeptical. After all, I’d dedicated my life and work to helping people, primarily in their dealings with money, wholly through the written and spoken word. The fullness of that education seemed impossible to responsibly confine to a single page. Then I read Carl’s new book, The One-Page Financial Plan

At 208 pages, it may be a tad shorter than most personal finance books, but it’s obviously longer than one page. There is, however, a single page in it that I believe will help you understand why the book was written and how it could benefit you. On page 11, toward the end of the book’s introduction, Richards shares with us his family’s first attempt at an actual one-page financial plan.

At the top of the page, you’ll see a seven-word answer to the question, “Why is money really important to us?” It creates a point of reference—a true north, a litmus test—for the remainder of the document, which succinctly lists the top three actions the Richards family took at the time to make meaningful progress toward their life and financial goals.

Why, then, would you read the other 207 pages? Because they give you the education necessary to make your one-page financial plan worth more than its intimidatingly blank predecessor. They are designed to help you understand why you’re doing what you’re doing. Without this deeper understanding, your one-page plan isn’t effectively simple, but shallowly simplistic. And you don’t have to be a word nerd like me to appreciate this important difference. Unfortunately, it’s rarely explored.

Merriam-Webster defines the word “simple” as “not hard to understand or do.” Simplicity can be described as clear and lacking in pretense. “Simplistic,” meanwhile, is defined as “too simple” and “not complete or thorough enough.” Yes, both “simple” and “simplistic” come from the same root, but the latter is considered an excessive example of the former. In other words, too much of a good thing.

Financial planning is such a broad discipline that it often overwhelms. I confess that I have contributed to this inevitable complexity by writing financial plans that were scores of pages long. They explained recommendations numbering in the thirties. Meanwhile, personality-driven personal finance is often rigidly confined to simplistic (but highly marketable) dogma, disconnected from your unique values and goals.

What we need is a reliable way to separate the immaterial chaff from the essential wheat. This method should also form a connection to that which makes us, well, us. The One-Page Financial Plan, I’m pleased to say, gets us moving down that less-trodden path.

I’m a speaker, author, wealth advisor and director of personal finance for Buckingham and the BAM Alliance. Connect with me on Twitter, Google+, and click HERE to receive my weekly post via email.