Financial Frameworks
The Importance of Keeping Track
Synergy and System
One of the first pieces of advice we get as we embark on any wellness journey is to keep track. Of what we eat, how we feel, how much we spend. The ability to pivot toward opportunity or away from potential disaster largely depends on maintaining accurate tracking . But to maintain that state of awareness requires a constant vigilance that is humanly impossible. That is why people look to wealth managers and financial advisors to help keep track of their finances. But even these experts would struggle to accomplish this without effective and accurate frameworks.
If we revisit the third principle of Optimal Financial Wellness, we know that creating synergy is key to optimizing our finances. Synergy allows us to utilize all the tools and resources at our disposal in a way that yields favorable results with very little effort.
But before synergy can be achieved, we must first be aware of what resources we have, how to access them, and be easily alerted to changes in their condition. We must also understand how our resources interact with each other, and what the benefits might be as they are put into action. And this framework must remain accurate and actionable with minimal maintenance.
Assembling Frameworks
Let’s take a simple yet effective framework into consideration: a budget. It is a tool that most people rely on to keep track of their finances and to plan for both long and short-term expenses. An effective budget can be relied on to accurately reflect your income and expenses over any given period. It can also be used to help you to quickly assess how much you can afford to save for long-term goals like buying a house or even retirement. Your budget can also indicate areas in which you might be overspending, or where you might be missing money. Without a current budget, you likely wouldn’t become aware of discrepancies like a negative balance until after the fact. And in some cases, when it’s too late to rectify it. It is, therefore, imperative that access to that information is easily and readily available.
In our line of business, keeping track is crucial. This is why we rely on a simple framework organized by the four dimensions of personal finance: protection, assets, liabilities, and cash flow — for keeping track and maintaining accuracy. Our framework also helps to inform decision-making, which is a huge element of any financial advisor’s job. The truth is, the best decisions are made long before they are actually implemented. And having thought frameworks, such as guiding principles, can make coming to the best decisions that much easier.
Perils of Disorganization
Financial organization is an essential prerequisite for the effective assembly of frameworks. But just as a budget cannot be relied on without accurate figures, a financial framework will fail in the midst of financial disarray.
Imagine going in for a check-up and your doctor was rummaging around trying to find her stethoscope. Or that after a flight you discover your bags were never checked. Neither scenario would inspire very much confidence in the service being provided. And those initial signs of disorganization would, in all likelihood, be precursors to the mishaps that are sure to follow.
The same premise applies to financial organization. Disorganization is almost always a tell-tale sign that trouble is looming. And the consequences can be dire, from lost opportunities to, worse yet, exposure to financial ruin.
Organization is a pillar of any system, as it requires each element to be easily accessible when needed. That ease of access can make all the difference in how well you can assemble frameworks. And as a result, how ready you will be to take advantage of new opportunities on the horizon.
Watch this video to learn more about the next two principles of Optimal Financial Wellness.
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Scott Foster | www.jscottfoster.com | scott_foster@pacificadvisors.com
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 333 N INDIAN HILL BLVD, CLAREMONT CA, 91711, 909–3991100. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Pacific Advisors is not an affiliate or subsidiary of PAS or Guardian. Pacific Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. Insurance products offered through One Pacific Financial & Insurance Solutions LLC, DBA of Pacific Advisors LLC. Pacific Advisors LLC is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. CA Insurance License Number — 0605098.
2022–136972 exp 04/2024
