In this episode, Ryan and Terry discuss the most important mechanism for developing a sense of conviction and direction for your financial future: your financial plan. It’s well known that behaviour accounts for the majority of investor returns, and a well constructed financial plan is one of the most important behavioural tools that exists. And, it is much simpler than we’re often led to believe. If you want to know how to avoid the biggest mistakes most investors make, this episode is for you.
What you'll learn
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Terry: Welcome back to the Passive Income Project. Is Terry here Ryan? Loving that blue polo mate. Is that an Italy special?
Ryan: it’s not mate, these Europe jokes, they gotta go But this is actually rayon and it’s bloody soft. It’s one of the most comfortable shirts I’ve ever worn. If you’re wondering
Terry: But you’ve been rolling around in these linen, You’ve corrected me linen pants, from Italy for the last couple of months and it’s freezing in Victoria and I’m like, Mate, they look good, but aren’t you freaking cold?
Ryan: they’re actually quite thick mate and very comfortable. And I’m happy with him. Alright, get off me back,
Terry: Clearly I’m not the fashionist to hear. What are we covering?
Ryan: We are covering how to construct a financial plan and it’s bloody good to be back on the podcast I feel like a bit of a ghost on the podcast recently, and to be talking about something that I guess is in my domain a little bit. I’m excited to talk about this, especially just because of, a lot of the topics of conversation recently, between us on the podcast.
Then just amongst people as well around, just what’s happening in the world. Interest rate’s been a huge thing at the moment and the debt issue is quite heightened at the minute and, I’m just keen to focus in on what it is that we can control and how we can prepare ourself for it.
Just so that we know that we can navigate the storm and we’ve got a plan of attack for it, which is gonna be good.
Terry: Yeah, it’s hard to get your bearings, isn’t it? If you don’t have a plan, you of just get buffered left and right and you don’t know what to come back to and find those bearings and go, Okay, What do we need to think about? What do we need to do? I
Ryan: think in those times we tend to get drawn towards the shiny objects too, as these big ideas or these new things that we go, All right, feel like everything else is burning. Maybe this is the answer. And so, yeah, keen to dive into this and just make sure that, we keep coming back to the things that are relatively timeless and, have a course in our plan of attack to, ride through it.
Terry: made. So easy to get sucked into an hour new cycle without a plan, isn’t it? If you don’t have a plan, you’re scrolling your socials and you’re like, Oh my God, the world’s about to burn today. It’s gonna burn today
Terry: All right, so what are we actually gonna cover in this episode?
Ryan: we’re gonna start with what it is to begin with, but importantly, what it’s not, we wanted to demystify what a plan isn’t, because I think, a lot of people’s experience with financial planning and a financial plan in particular is not really what it should be.
Terry: Mate, I can talk. From my experience, five or six years ago, she said to me, Have you got a financial plan? The image in my head is just this super complex document. It’s thick, it’s got like heaps of numbers and figures in it. there’s lots of moving parts, but that’s not really what a financial plan is it?
Ryan: No it’s not. There’s really three jobs a financial plan must get done and there’s probably six core elements that must be part of any financial plan. And they’re really what we’re gonna cover today. Make sure we really kind of pull that apart, help you see what are the most important, the most effective elements make sure that, There should be baked into it.
Terry: those three jobs are six core components. That can all be done in a couple of pages, can’t, It doesn’t have to be this big, thick document.
Ryan: Yeah, I know our members that create theirs tend to end up with maybe four pages in total. Definitely not the 75 pages that you might have landed on a while
Terry: Not the one you gave me, mate. Not the one you gave me. ,
Ryan: No few things have changed since then, for
Terry: which I never read. but coming back to the point I. It’s so critical to have a plan because without a plan, it’s just hard to get that direction, you know? So a lot of people that we talk to are working really hard, but they don’t feel like they’re making that progress.
And it’s honestly because mostly of their energy is spent in transition. They’re looking left and right. they’re not harnessing all that potential and they’re not directing in one sort of clear path. So it’s very hard to be as consistent as they actually need to be to make compounding work for them.
the biggest thing for me is without a plan, you really dunno how and what to start doing. And what that means is you can just get stuck, I guess looking left, looking right, looking up, looking down. And all that time that you are not doing, that’s gonna work against you. You want time on your side and the sooner you start getting into action, the sooner you can have time on your side, can’t ya?
Ryan: Oh, absolutely. If you think about the episode you did last with Helen and Chase, it’s a perfect example of this. They were working hard, wanted to make the most of their income, and were feeling like, we’re actually intelligent people and we’re making good incomes, but they lacked this sense of progress.
And really that was because, that were following the prescriptions, Barefoot investor they mentioned and really had nothing to measure their movement against. So they were doing a lot of things, but they didn’t have this sense of momentum. because they weren’t measuring their movement.
And so by developing their own plan they could actually gauge their progress and they could start to see the wind starting to stack, even if it wasn’t necessarily, the actual outcomes to begin with. It was at least the implementation and the progress in setting things up that has a huge impact.
And this is what’s ultimately allowed them to stay engaged with their finances long enough to make sure that they can see the effects of compounding start to take hold,
Terry: Yeah, spot on. I mean, they’re such a good exemp after that, and that’s one of the reasons why we’ve been wanting to get ’em on for a while. They’ve done such a good job of converting, all that energy or that potential, and then pointing in that one direction as we spread. Alright, let’s get into this.
What is a financial plan? What the hell is a financial plan? Let’s define it correctly and firstly, before we even do, why do most people not.
Ryan: like we mentioned just before, like we’ve got this warped idea of what a financial plan actually is. So often we think like Helen Chase, they referenced the soa, this is a thick legal document that is as about as interesting as reading and probably marking my year 12 English exam, to be honest.
Terry: Matt, your English too. Yeah. Interesting. That probably is pretty interesting.
Ryan: In fairness, I got Naomi that exam, so I definitely set myself up for a little brag on that one. but It’s not what a financial plan is. And so I just wanna make sure we talk about what it’s not, it does not need to be, a complex, lengthy document that a professional gives you, most of these primarily to do with compliance and, fee disclosures anyway.
And it’s also not a static reality that doesn’t change. It can’t be this point in time document that doesn’t move and evolve with you and needs to be this kind of thing that continually changes you evolve and things upgrade. And it’s definitely not a legal document that protects you from someone else.
That’s all I’ll say about that one.
Terry: Well, Look, when I go back through my soa, let me just break down the SOA acronym, language Statement of advice. I would say more than two thirds of it is all about compliance is all about fee. Disclosures is all about Legally protecting, not you, the person the plan is for, but actually the person who made the plan.
And I found. Just head scratching to be honest. I’m like, why am I paying for that? Why am I paying for the time it took to do that? it’s just how the industry’s set up. But, I think it is really important to understand, like most people think that a financial plan is only created by a professional.
A hundred percent. Not most people that have built real wealth had a plan. They didn’t go to a professional to start working that plan. And it’s really just about becoming deliberate about what that strategy, those steps are, isn’t it?
Ryan: Yeah. And that’s not to say you shouldn’t seek out experts to help. Create, or at least, help you refine what that plan is. It’s just creating that separation between, this lengthy, formalized document that, know, I’ve written hundreds of them in my lifetime. I’ll admit there’s a lot of copy and paste in there.
But actually just baking it down into what are the most important elements that actually influence the decisions, that you make. And so if I was thinking about what it is instead of what it’s not, it’s a mechanism for. converting your dreams into something that’s doable, like breaking it down into these decisions and actions that you need to take over time to get what you want.
And it becomes a map that guides your actions on the journey towards your own definition of success, which is gonna be different to everybody else. what you see and the outcomes that you wanna achieve. They’re gonna be very different for you as they are for me. And so it needs to be reflective of that for you.
Terry: it’s also a journal, isn’t it? It’s kind of a document that has to capture your best thinking when you’re doing your best thinking, cuz that kind of happens before you do. You’re doing, doesn’t it?
Ryan: Yeah. Yeah, yeah, absolutely. Once you start doing your, then influenced by your previous thinking, in your previous decisions, aren’t you? So, If you’ve made a plan, let’s say you’ve talked about, the investments that you want to have, and all of a sudden you’ve got this bias because you’ve said this is the path for.
And so you actually want to do a lot of that heavy thinking and capture that beforehand. And you always wanna be able to come back to the decisions you’ve made previously and go, What was impacting me then? How did I get to this point? In terms of putting all this together for myself. And that journal becomes something that, you can have expert stress tests, have other people contribute to, to help you refine that and create the path ahead of you that best suits you.
Absolutely. It also just becomes, set of bumper bars that nudge you towards the outcome too. So it’s something that continually pulls you back. The pathway that you’ve set out for yourself. Because if you don’t have that plan, kind of just get drawn to the shiniest objects at that time or the loudest voice on tally, it’s critical that once you’ve got that, you get to go how do these other things compare to my existing plan? And so instantly you have to make these comparisons and start thinking in terms of trade offs. So really, really important things. And I kind of alluded to it before about, what, it’s not being something that’s static.
What it needs to be is something that moves with you and the times. So you are gonna change your plans, your the things that you want to build your dreams, they’ll change and evolve as you do. So will the times, the conditions in which you’re making decisions within, the world in general, they will change.
And it needs to be something that moves with you and that essentially,
Terry: I always think about this Abraham Lincoln quote, and he’s like, If I had six hours to chop down a tree, I’d spend the first four sharpening the ax. To me, I think our financial plan is really just the act of you sharpening the ax before you start
Terry: let’s talk about those jobs. You said there’s three jobs that a financial plan must do. What are they?
So the first one is it needs to improve your decision. And what I mean by that is, when we’re making decisions on the fly and just kind of on the move at all times, reacting and adjusting to, life as it happens. A lot of our decision is on autopilot.
It’s subconscious. But when we sit down and naturally create a plan and we sit down with purpose and intense, we sit down and go, All right, what are the things that should be influencing My thinking is to kind of break down some of the things that shouldn’t as well and allows you just to see it, allows you to put intensity around your planning and balance your emotions ultimately just, remove the obstacles to you thinking.
And so if you’re always doing it, you’re kind of impacted by all the things around you. But if you sit down with some intensity around it and go this is what it needs to look like, and this is what the path looks like right now you can balance your emotions to help you do
Terry: yeah, there’s a great book. It’s called What I Learned, Losing a Million Dollars. And what I learned by reading what I learned, losing a million dollars was basically anytime you make an investment and you make a decision and you take a, I guess, a stance, right? It’s almost like you enter a kind of hypnosis after.
And all your best thinking happens before that point, cuz after that, you alluded to it before, but you now have a bias. You start seeing information differently. You’re filtering information differently, And so you don’t see things as clearly as you did beforehand.
You’re not as agnostic, you’re not as neutral. You are now, invested , right? You’re not just financially invested, you’re emotionally invested and that changes the way you think.
Ryan: Oh, that’s huge too. That’s confirmation bias ultimately, isn’t it? Where you go once you’ve made a decision about something, you’re looking for data points to support the decision that you’ve made, and so they become super visible to you. Yeah. that’s huge. So that’s the first job, improving your decision making.
The second job is to get you into action. So take you from just thinking about and learning about to actually doing. And obviously that means that, you’ll start to lead to results and it helps you break down that big fuzzy vision into clear and concrete steps that you can control as well.
And I know we’ve talked a lot. And we’re gonna go deeper into habit formation pretty soon. But being able to break, that big vision for the future into these bite sized chunks, right? Back to what do I need to do right now to get that first, thing in place to help me build towards that is a part of it.
sometimes that’s literally just setting up a bank account or, this initial little step that can catapult you into the next ones.
Terry: Yeah. And we’ve talked about Alex Core before, but he’s a neuroscientist. And referenced him around the power of making a plan and then taking one bit of action. It actually changes the way your brain operates in that moment. And before that, everything’s theoretical and theoretical it’s probably fun for some people, but it also can start to become overwhelming.
The longer the theory doesn’t sort of, degenerate into some kind of action. And like you said, it could be just as simple as, holy shit, I went and changed my bank accounts. That becomes the launching pad for the next thing and the next thing and the next thing. And all those little actions, they start to build that new identity around the kind of person you are around money, the kind of person that takes action.
I’m now a saver, I’m now an investor. You know, I’m proactive in that sense. It’s so critical to be able to, break it down into the first small
step and be very deliberate about that, because otherwise, if it’s too big, too fuzzy, just easy to push off side.
Ryan: Yeah. Another word for that is it’s mental masturbation until you do something
Terry: Yeah. .
Ryan: Oh, what a turn of phrase. Mental masturbation.
Terry: So who came up
Terry: What, what’s the third job?
Ryan: yeah, so the third one is it keeps you on track and it shows you exactly what you need to do now and what you need to do next. And then it also becomes something that you profile and filter other opportunities against. And you start to do that quite effectively because it’s all of a sudden it’s between this or that.
And so as soon as you’re thinking between this or that, you’re starting to draw the comparisons and you’re starting to think at this higher level of, I guess the nuances between the opportunities that exist for you. and are those other things evolutions of what you’re doing now or do you need to stay the course effect.
Terry: That one’s massive, I reckon, because if you think about two parallel universes, and one of these universes, you have a plan that you’re working and the other one that you don’t, If you have a plan, as you said, the choice is between this or that, the thing I’m doing or the new thing or the other thing
Terry: in the other universe the question is, should I do that or.
And that’s where you get stuck. Zigging and zagging. Cuz you’re gonna say yes most of the time. , you’ll be like, Yes. And then the next time something comes along, you don’t have a plan to reference it again. You’ll be like, Yes, . So you end up spending all your energy in transition. You’re like one of these yo-yo dieters that’s just going from one thing to the next and nothing is lining up and there’s no sort of geometric progression that compounds.
Ryan: Oh, it’s huge. It’s huge. And it’s not necessarily once you have a financial plan that you go or everything else is just a shiny object.
It’s just that you start to make sure you compare those things and it might be that better opportunities arise the way you go. All right. That actually needs to be a part of my plan.
a common thing that we see with members is, you know, it might be mapping out an asset allocation, thinking about, what they, the next a hundred grand or 200 grand might be towards investing, but then a business opportunity might come up these
than the plan that they’ve already created.
And it absolutely makes sense to adjust and pivot.
Terry: This is exactly what we did with this business, right? We both had our kind of human capital and financial capital point in a certain direction, and then there was a period of time where we’re getting this off the ground where actually everything got channeled into the business. that’s as it should be.
But you need to be able to compare those two things, don’t you? We look at this and say, What’s the return on this? What’s the return on that? And then what are those kind of two possibilities and probabilities, and then sort of move forward from there.
Ryan: Yeah. Spot on. And so sometimes it is bringing in new elements to it. But the key thing is you’re just refining what your track looks like. You’re not necessarily going off track,
which is, there’s a big difference between those two.
Terry: yeah, that makes sense. Let’s talk about these components. We talked about six components at the start of this episode. What are they? What’s the.
Ryan: Yeah. So the.
first one is objectives, which is the jobs your money must do for you. This is really speaking to, what does a rich life look like for you and what are the core outcomes that you wanna achieve over time?
And be able to look back and say, I’ve been able to achieve this. And, this is where all your decisions should be anchored towards, the decisions around how to manage your money, the decisions about where to invest your money, the decisions around the strategies they all need to be anchored towards your objectives, the life that you’re looking to build and needing to be help.
And it needs to help you underwrite that experience ultimately. So objectives is that first one that really kind of becomes the North Star for all the decisions you make with money.
Terry: I don’t like the word objectives. I think Mark is better because, the wrong way to do this is to, and I think a lot of people do this in the finance space, is say, my number is $2.4 million saved by this amount of time. Whereas we’re saying, what’s the, that money going to do for you?
So what, how do you know that you’ve actually got to that position? Is that right?
it’s huge. If I think about some of the planners that I’ve seen from our members having not had guidance versus when we’ve guided in this way sometimes it comes back and it says, be financially independent
Ryan: or have $100,000 worth of passive income, or, things like that.
Whereas it needs to be something more like, I’ve being able to. Personally designed my own home. that reflects, the experience I want to have. When I come home. I see this, when I look out the window, I see that. And, all these kind of visual cues that help you see.
And I guess marker, like you said, that show you that what you’re doing is working.
Terry: Yeah. You gotta really define what the money’s for. Cause it’s so easy to just have a number. But I feel like I say this, just add a nauseum. If you just optimize for a number, you could climb very hard on a ladder that’s leaning against the wrong wall.
because you are not orientating your way through the environment.
You are just optimizing narrowly for a number. And all the research shows that when you are primed to think about money, you do not think creatively. ,
you think in a very reductionistic, you think in a very narrow minded way. And so your ability to solve problems and course correct towards those goals is quite narrow.
I see it so much in a lot of these fire groups. I had posted something up in the community last week and I sent it to you on the weekend and you know, no offense to this guy, but he’s bragging about how he saved five bucks cuz he bought Vicky Rubin’s Your Money or Your Life Book . And then he realized he could get it cheaper on Amazon.
So then he went and took it back. So he went back to the shop, took it back and ordered on Amazon. And I was like, this is so ironic because the point of that book is that money is for life. Life is not for money, but you just traded your life for money . You know what I mean? Like, That’s a clear example of being so narrow mindedly focused on, let’s call it an objective that you just miss the point.
Ryan: Yes, I can definitely tell that he hasn’t read the book yet. Hopefully by his own finishes reading the book, he’ll rethink that strategy , and I’d say he is definitely optimizing towards savings objective for that year.
So objectives, that’s the first one. The job that your money must do for you. The second core component is your profile,, which is really digging into what kind of ride that you prefer to have.
And so there’s a little bit of, digging in internally and thinking about the way you wanna feel along the way and kinda looking at when it?
comes to investing or It comes to the strategies what’s the experience that you want to have personally? Volatility is a huge part of investing and it’s thinking about well, do I wanna be on the, most hectic roller coaster at Disneyland?
Or I prefer to take something that’s a little bit more slower paced and gets me to where I want to go? It’s just gonna take a little bit longer, most probably.
And so these are kind of things you wanna surface?
Terry: Do I wanna be floating down the river on that? Tube or do I wanna be on that big pendulum thing or the big rubber bear thing? ,
Ryan: The slingshot.
Terry: exactly this lecture cuz it’s true though, right? Like, Hey, if you want a really steady, very predictable ride, you probably don’t wanna go anywhere near something like Bitcoin.
And those are really important discussions to have, particularly if you’re in a couple, because people have different preferences and you really have to, the guests come to a common ground with this, don’t you?
Ryan: Ah, absolutely. And then that’s a massive one. There’s often, there’s things internally that you need to reconcile. Sometimes that’s around, how big your dreams are, the ambitions you have, and your willingness to put yourself out there, in terms of how much you wanna invest or how crazy of a roller coaster you wanna jump on.
And so sometimes the ambition’s great, that capacity or tolerance for a ride like that is a lot lower. And so there’s this internal marrying up that needs to happen. And that even more so when it’s between you and a partner. Because no doubt, I’d probably say 80 to 90% of the time.
I would say personally I’d see that there is a difference between two partners that need come together in some form of middle ground to make that work quite fluently over time.
Terry: And that’s gonna be a slow, very deliberate discussion I reckon over time, where you really of work your way through it and a lot of it, this is where I think psychology is so important because a lot of, it’s coming down to, the way your brain built itself when you were. because your view of the future and how reliable and predictable and positive or negative things are, all of that comes way back to what you experienced when you’re a little person and your brain’s still building yourself.
My kids are four years old right now. The environment you’re growing up within then really does determine and dictate how you feel about the future. And when we’re talking about investing, we’re talking about the future.
Terry: So it’s not right or wrong, it’s really just trying to understand yourself and try to unravel some of that psychology.
And then if you can separate, what you saw and what you heard from what you’re trying to do now with your finances.
If you can’t do that, I think it’s very hard to think clearly about those decisions. I think that’s why a lot of people get stuck and do nothing.
Ryan: Yeah. And I think, you know, just kind of reflecting as you were saying that around, how the couples in our program, the mentorship have probably come into alignment, hasn’t been one single conversation or, this forced coming into alignment. It’s actually just a series of structured conversations where it’s built up together.
Sometimes it is breaking down some of those ideas and beliefs and kind of stories that may be built up from early child. But then it’s also the structured conversations together as they built up new ideas,
that pulls that
Terry: I think education’s a huge part that changes your perception of risk as well. What risk really is definitely was the case for me. Like, You read Peter Thorn Hill’s motivated money and at reset your perception of risk, what the real risk is, and you start to go hang on.
The real risk is doing nothing. And the real risk is not playing at all. And that’s worse. part of it is you of really understanding yourself, but the other part of it is continually educating yourself to reset that perception of risk. And I think education’s almost vaccinates you against that fear, doesn’t it?
that’s huge. Huge. Yep. So that’s profile what kind of ride you’d prefer digging into that for yourself and maybe between you and a partner. The third thing is the vehicles. and this is really referring to the mix of investments will help you achieve your objectives in terms of what you want to create in the future, but then also the experience and the ride you wanna take over time.
And so profile that we’re just talked about, it’s F four, really just helping you get the mix right between the vehicles that you wanna choose to help you get there over time.
Obviously they need to be reflective of actually achieving the objectives. Being able to, be in good quality assets that have the ability to increase your purchasing power over time or generate the income that replaces your income over time. But then also reflective of that ride that you’d like to have over, time as well.
And making sure that you’re really. Cement exactly what this is. As I said before, it’s not something that’s necessarily locked in, it’s not set in stone. But it’s set with enough certainty so that you know exactly where you’re gonna contribute your next dollars for investing purposes. Because as soon as you have doubt over where you wanna invest the next block of money, then you start to just go around in circles again.
You start chasing new ideas, getting pulled in different directions. And so you should always have a clear asset allocation, that mix of vehicles that will determine where the next hundred thousand of the next million dollars will be allocated. and I feel like if you do the first to write, really get those objectives solid and then really understand the profile side of things. What it does is it helps. Automatically disqualify a whole bunch of opportunities so that you can focus on a certain area. So if if I know I’m vegetarian, awesome.
Terry: I know that there’s a huge buffet of shit, but actually just down there, that’s all my part. That makes it so much easier. Right? I think it reduces the overwhelm because there’s so, so many options, so much information that you could get through. And so for you to be able to disqualify 80% of it to focus on the 20, that matters for you.
Huge. For getting you into action, isn’t it?
Ryan: Massive. And I think where a lot of people get stuck here is thinking that there’s a right mix. Thinking there’s a
bowl of ingredients that, guarantees a Michelin star. It’s not true. reality is there is a million different ways to slice it and, you just wanna make sure that it is reflective of your objectives reflecting in your profile bakes in those principles.
And the, the risk elements that we talked about in episode eight. I definitely encourage going back to and thinking about that and make sure it’s reflective of, where your level of understanding is as well and your experience is, cuz a big marker of this being effective is actually how well you sleep at night.
So that profiling helps set you up for making sure that is true.
Terry: Totally. And you know that you’ve chosen the wrong vehicles if you’re not sleeping, because the biggest risk once you’ve made those decisions is we talked about the ride before. If you jump off the ride before it’s finished, ,
Terry: That’s the biggest risk. , you wanna make sure that you’re not gonna jump off, you’re actually gonna be comfortable enough to see it through.
Or else you may as well do nothing.
Ryan: yeah. Absolutely. Absolutely.
And so, this looks very different for different people, like I said, and, some of our members maybe guys that have a lot of experience in property or work in the industry. I think about, a client caught up with the other day has worked as a developer for the last, six or seven years, and their family has been heavily involved far beyond that, family, business.
He has a much higher orientation towards property as opposed to the other asset types because he can influence the outcome more.
And because, he can sleep well at night knowing that, he’s got some experience there, he knows what can happen and how things can change. whereas then we have other members that choose a very passive route because they don’t want to have to be, involved in any way and don’t wanna have to make too many decisions over time.
But they might have a family home, for example, so they know that they’ve got a, property that they can secure loans if they wanna be aggressive in different ways but don’t necessarily need to push it that far. So Yeah.
the vehicles and that mix of vehicles looks different for every person.
Terry: that definitely makes sense.
So we’ve talked about objectives, profile and vehicles. What’s the next component?
Ryan: Yeah. So the fourth component?
is the strategy, and this is about how you’re going to use these vehicles and the concrete steps that you’ll take. And so it’s thinking about, know, the implementation steps when you might need to be setting things up or putting things in place as well as where you’ll be focusing your efforts or where you’ll be focusing your surplus, I, should say.
Which might be, the money that you’re saving over time, where’s it going, where should you be moving that? and so, it’s literally mapping this out over time. We follow a formula, which is who will do what by when. And so it’s surfacing the exact thing that needs to be done and detailing that really well.
It’s who will enact it or who you might get help from to enact it. And when you plan to do it by, and these become tick boxes that you have to just mark progress points along the way. And so it’s that roadmap over time that is ultimately helping you fulfill that asset allocation and execute on purchasing those vehicles over time for the purpose of achieving those objectives that you have. And so sometimes it will just be financial things where it’s.
Meet with the mortgage broker and set up a loan and this loan will then go towards purchasing this. Or it might be something like, Alright, now I’ve reached this point. I wanna be more aggressive in investing in my human capital and I’m gonna take this program or this course that’s gonna help me level up in this way.
because once I’ve got everything up until that point in place, I now feel like I’ll be in a place where I can take a few more risks at a personal level, something like that. Or it might even be a holiday or whatever it might be. But it’s having really distinct concrete steps that you can tick off over time.
But you’ve actually started it with, like we said before, you’ve been thinking at your clearest to begin with and said, Here is the best order and sequence of things. and it might be something where you’ve got expert help that kind of says, at this point in time you should be focusing on paying down your mortgage rather than the investment loan for this purpose, or whatever that might be. Or it might be that, the mix with your asset allocation that you’re working towards involves a bigger rock where it’s like, not necessarily always this even split between property shares and crypto.
It might be that you’re actually first working towards executing on a big rock as part of that. Maybe it’s a, second property and then it’s after that you’re saying once I’ve done that, then I’m spreading and diversifying more so from there. And so it’s just mapping all those things out over the next, five, 10, maybe even the next 15 years, and knowing what those steps will be that you’ll take.
Terry: Hot tip for the master procrastinators like me. if you’re not taking those steps one of the best things you can do, We talked about the who does what by when formula. so you might have heard of the five why’s.
It helps you get beneath a goal. The five, hows gets you right down to the most tactical, practical step that you can take right now. For example, it might be get an investment. And you’ll say Well, how am I gonna do that? And you’ll say learn about investing. And how am I gonna do that?
I’m gonna take this course and how am I gonna do that? I’m gonna talk to these people about who’ve done this course, and how are you gonna do that? I’m gonna pick up the phone tomorrow and call X person who’s done that course. That’s the step you take. And so if you’re finding it hard to take action, just make the steps smaller and smaller and smaller just by continually asking yourself how.
Ryan: Yeah, that’s perfect. And as part of your strategy, you should be doing that too. Like sometimes people do stay quite high level and there’s less boxes to tick. And so progress will feel a little bit slow, but the more you do break it down the sooner you get to tick things off and see that progress.
And it might be, something I started recommending for our members is with the big rocks that exists within it, make sure there’s a celebration that goes along with one of those milestones, those markers of progress.
Terry: Compass is good for that too.
Ryan: So it is, it’s very good for that spot on, and
we’ll help you
Terry: Absolutely. so that’s strategy. So you want to think about breaking it down into these really concrete steps. Use the who does what by when formula. And if you are struggling to get into action, just ask yourself how five times,
Ryan: Yep. The next thing is documenting the controllables. So things that you should be doing to give yourself the best chance to get what you want and
execute on the plan.
Terry: or not doing. Right. It’s not just about what you’re doing, it’s also what you shouldn’t be doing.
And I think when it comes to the not doing part of it, there’s something really important that you can do. It’s called a Ulysses contract.
And I guess the name of that comes from the famous story from Homers Odyssey. And there’s a guy called Ulysses, and he’s sailing home from the Trojan War, and he has to sail past the sirens, which are these beautiful women in the middle of the sea. And they sing. And when they sing it, but which the sailors, and it lures them to deaths. And so he’s aware of this. And so what he does is he says to his man, You’re gonna have to plug my ears with bewa and I need you to tie me to the ships’ mask. And he said to them, Under no circumstances, Should you follow my commands? Whatever I tell you, do not listen to me.
Just keep going. That is a Uy contract and you should have a few of these UY contracts when you do a financial plan, Shouldn’t you?
Ryan: Yeah. I remember asking Brit to do the same while I was in. kidding. She’s a beautiful woman. I love her. And I had only eyes for her you’re exactly right. And it is, it’s, you know, it’s sitting down, like I said before, when you have your best thinking on, and you’re not experiencing all those temptations or the things that can pull you off track, just identifying what you can do and what you shouldn’t do over time to make sure that you stay on track.
if I think about some examples of that, sometimes it is to do with the practices that we teach that we kind of see, we go, well, What are the actions that you wanna consistently do over time to make sure that you have enough to achieve those objectives or, sometimes it’s around know, having open conversations with a partner about how you’re going and how you might be able to do things better, and that just, I guess that continual optimization in your teamwork.
But yeah, really just kind of identifying how you will be over time to, give yourself the best chance. So they’re the controllables.
Terry: Yep. What’s the last one?
Ryan: So the sixth one and the last one is considerations, and this is the criteria for tweaks or changes to your plans.
just identifying ahead of time what can change or what might change and what you’ll do if that does happen.
Terry: Yeah, this is another one I think heavily influenced by the book that I mentioned before, What I learned losing a million dollars, and it talks about exit criteria. Under what conditions is it appropriate for you to exit this position or to change it or do anything dramatic, basically. And again, it’s an interesting form of a UY contract because it allows you to go back, and Helen and Chase talked about this in the Covid crash, and they were like, We’re good, we’re fine.
And it’s because we talked through all this stuff all the way through. What would you do if this happened? What would you do if this happened? And they realize that none of those were criteria for change. And it’s really important to be able to put these things down and go, Look, unless B, C, or D or all of these.
then there’s no reason for me to make any wholesale changes to this plan. So I’ve been talking about we’ve got this whole liquidity bubble that’s popped basically because interest rates are going up, and that means liquidity’s getting sucked outta the whole world. US dollars are hard to find, so everybody else, US dollars, everybody’s selling out of everything for the US dollars.
And it creates a lot of panic. And so the price of all assets is dropping. so people are kind of using that price as a signal when they shouldn’t. If your plan is long term, it shouldn’t matter at all. It actually just means that you might be able to buy some stuff cheaper.
And I’ve talked about it before, but like, man, Bitcoin’s dropped a lot since I started buying it, but the thesis hasn’t changed at all actually. Probably even more solidified, and it’s cheaper for me to buy it. So I don’t panic when it drops. I just ask myself, do I want to actually increase my allocation?
And this is where I, my UY contract is with the lease. I’m like, Elise, under no circumstances will you let me get equity outta the house and put it Just kidding. But the point being, right? So these criteria are so important because it just helps you to kind of level yourself. And again, we set it at the start, find your bearings and realize, okay, On our timeline. None of these things matter. So that’s huge. the other one is what’s the timeline for review? So if you started investing this year, Let’s say you started in January, you probably think you’re a really bad investor.
Let me tell you something, you have no idea , because you’re only six months in you shouldn’t even be thinking about that at all because you should have been investing for five to seven 10 year timeframes, and in your mind you should be thinking, Okay, cool, just got cheaper for me to buy what I wanted to buy.
The price shouldn’t be a signal. So setting a review date for your decisions is really critical, Because stuff can go haywire and stuff will, I think, they keep doing what they’re doing with rates. We’re gonna see some pretty hectic stuff in the credit markets. And when that happens, you might see a really big drop again, like Covid.
But if it’s within your timeframe, you really have to set back and say, Is it time to review my decision now? Or where am I in that timeline? And I think that’s really important as well. It just helps you to step out of the chaos a little bit and realize, look, it’s way too early to assess that decision and it’s not fair.
On that decision. I don’t wanna be someone who’s zigging and zagging getting in and outta positions, never actually getting any power of compounding. I want actually to be someone who’s in it long enough to be able to make things pay off
Ryan: Big takeaway I took from that rant that you just went on is that you just wanna remove yourself from now. and protect yourself from yourself ultimately. And so yeah, considerations. Just make sure you go back to a checklist that you created when you were thinking at your best or wait until the next review date, the next time that makes the most sense in the scheme of the bigger picture to review things, review the decisions you’ve made.
Terry: it doesn’t necessarily mean you don’t review the plan, but assessing decisions and reviewing the plan. . I think you gotta separate those two things because you need to be able to move with the times. The plan is a live document as we spoke about, right? Making big changes to the strategy.
Way before the strategies had time to play out. That’s another thing entirely. So, I just wanna get that point across. We wanna be agile, but what we don’t wanna be as reactive.
Ryan: Yeah. Yeah, absolutely. And I think, we probably spoke to one side of that there, which is in times of chaos, protecting yourself. There’s also the other side of it, which is when should you. Upgrade your plans, Like what things could happen that make sense for you to change investment vehicles that you want to use, or the strategies that are involved as part of your plan.
Mentioned business opportunity before. It might mean that, might be that you’ve got this very well set plan, but then a business opportunity comes up that makes so much sense that you should absolutely start to bake that in and reconfigure things as part of your plan.
And so it’s also, the criteria for things where maybe you should add things in. and what that does help you do is it helps you have this healthy level of detachment with the plan itself so that you don’t necessarily have the blinders on too. Because sometimes we can get dogmatic around, what we’ve set for ourselves and we don’t stay agile, we don’t keep our eyes and our ears open to how things could be done better.
and so we see it as, you know, the steps that we’ve got laid out for ourselves and we commit ourselves to it, but we also make sure that when better opportunities or other opportunities do come up that make sense that we do refine things and we tweak it, and we evolve it and we update it and it gets better with us over
Terry: Yeah. And it’s a great dichotomy there, isn’t it? Like you want to be steady and you want to be really dependable, reliable, but also you need to be adaptable at the same time. And you can and should be thinking about both steady and adaptable. They can coexist. I would love to say that you could just make one time set and forget decisions when it comes to finances, but if the world has taught us anything over the last couple of years, yeah.
You just need to be moving and just really understanding how things change and whether that changes things for you.
Ryan: huge. And yeah,
it might not be, world events. It might be, know, there’s a change in the tax system or, the way things are looked at or the way, income from different sources are received or something like that can change over time. Historically things like that have changed.
And so it’s just knowing that things can change and that you do want to continue to evolve and adjust what your plans are. And like I said before, having a base plan that you always have to compare against.
Just make sure that you are comparing the value of the different options. And so you’re always looking at how do you make it better? Not necessarily get, pulled off track.
Cool. All right, so they’re the components You gotta have objectives, you’re gonna have a profile, really understand that. Think about the mix of vehicles that you want to be able to get you there. And then within that, these vehicles, how are you gonna make these work together?
What’s the strategy? And then the steps to actually put these vehicles to work for you. And then the controls and the considerations. They’re those six components. And I think the key point we’re trying to make here is planning isn’t just for the pros. Your plan, the plan that you come up with for you, your way, it’s probably gonna be a lot more effective than a plan that any pro hands you because you will own the plan. There’s a whole IKEA effect. If you build it, you actually value it a whole lot more.
And any financial plan has to have all those six components, objectives, profile, vehicle strategy, controllables, considerations. So is there anything you wanna add to that mate?
Ryan: I’ll just add that. So of the conviction that you have in your plan comes from the putting of it together. And so, I know from the people we’ve worked with it’s the learning that goes into formulating the strategy and kind of learning about the vehicles and all that stuff, and then putting it into an order, maybe getting a pro to help you configure it.
and it’s the questions that you ask and then the answers that you receive as part of that, that gives you the conviction to then execute on it. and no one’s ever gonna drive your plan harder than what you will.
And so you wanna make sure that you’ve got the understanding of it, but then the conviction in it to want to do it and reduce as much doubt in your mind over what to do now and what to do next so that you can just continually to take the next step and execute on it easily, step after step.
Terry: Action creates clarity. Definitely. So listen, if you’ve got any questions about this and you haven’t already done it, join the community. Drop them under the post that we’ll drop into the feed for this episode. Yeah, love to hear some discussion around this one, whether you guys have actually got plans what you’ve had as a plan, what questions you have about plans that we didn’t answer in this episode.
So feel free to jump in there and ask any of those questions. But otherwise, if you like this show please wait and review this, podcast, it really does help us reach more people like you and we appreciate it.
Ryan: Yeah, definitely would, love to hear from anyone that’s actually gone through that process of planning.
Maybe worked with someone with an expert or gone through that yourself. you know, I’d love to hear what you’ve learned and putting that together and your experience of it. So I look forward to hearing from you guys.