This Is What A Financial Plan SHOULD Look Like

Hey there, real quick, before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience Live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. What if I told you that your financial plan isn't just about money? See, it's about unlocking the dream life you've always wanted. You know, if you've ever felt, like, stuck or overwhelmed or just uncertain, unsure about how are you going to bridge the gap between where you are now and the life that you envisioned now, this episode's for you because I'm going to reveal why most financial plans actually fail and the critical steps to creating one that really works and how you can take that plan and make it the pathway and the action steps to bring your vision for your life alive.

What if I told you that the financial plan isn't just about the numbers, but it is the paintbrush that you use to design the masterpiece you call your life. Your dream life, if you will. See, here's the thing. Money, I don't think it's just not a result. If we are totally focused on money, then we're missing the boat, the money. And I've heard this said over and over again, and I've said it, too, is a tool. But I think that in a more refined way, money is actually the paintbrush. It's the paintbrush that fuels and paints the masterpiece, allows us to create the life of choice that we envision, that we actually deserve. It's the thing that allows us to shape the goals and drive specific outcomes like lifestyle and vacations and health care and all the things that you find so meaningful to be able to have that choice. And so in this episode, I want to break this down for you because I do financial plans differently. We do something called the Money machine master plan for many of our clients. But at the same time, it's something that we talked about in my book, building your money sheet in the first part of the book about how do you really start to craft the vision? Because money, disconnected from life, has no meaning, and it doesn't give us life. It sucks life out of us. And so we need to marry money with the life. In fact, what we need to do is see how the money is what creates the life in the life that we want. And so what I want to do is I'm going to walk you through some of the processes, the things that a plan should have, the things that might be missing with most people, and how to start to look at it through a different set of eyes. Because when we do this, what I don't want you to do and beware of this, is that I want you to dream big, but I don't want you to start wondering, well, how am I going to make it? Let's say that you're. You're sitting back saying, I really don't have anything. I've got debt, I haven't figured this thing out. But my life, I need. I want $5 million, I want $10 million, I want 20 million. You don't. You don't really want the dollars. What you want is the life. The dollars can give you, the choice that the dollars can give you. But the tendency is, this is if I'm at zero and I need 5 million, is that that gap is so big that the how starts to cloud our thinking. So instead of trying to figure it out, what ends up happening is we shrink the 5 million, we shrink the dreams. So in this process, as we walk through this, I don't want you to shrink the dreams. I'm not worried about the how for the moment. What I am worried about is the what and the path. When we understand where we truly want to go and we understand where we truly are today, we then understand the gap between and now it's a matter of navigating that gap. That's when we ask the how question. And we start to take one step at a time. When we start asking the how question too early, what we do is we shrink the dreams. I don't want you to shrink your dreams. You're here to live fully. You're here to live fully into what you are called, to do what you believe you can do. And even if we don't get 100% of the way, there's.

We get a percent of the way there, we get 80%, we get 70%, we can get 60%, but it's 60% closer to where you wanted to be than if you hadn't even tried.

The tendency is to sit back and say, I don't know how. So I don't even get there. So I don't want that to cloud the thinking here. So promise me that you're going to Dream big. You're going to think big and you're going to visualize big in this process. But the first part of any financial plan is, starts with life. In fact, when we start to look at things in, in this light, when I create a plan for someone, here's how I look at it, is that we start with the vision for our life. And that vision for our life will then help us create the plan. Okay, but we don't. Without the vision, we can't do the plan. Now, the plan ultimately helps us determine what the strategy is. And the strategy will define the tactics we use to get there. Now we're starting to get to the how, and the tactics will set up the actions we need to take. The challenge happens when we are in this realm asking questions at the tactics level and the actions level. The how questions. What I want you to do is to really focus in on this, the what questions, the vision and the plan first. Now, all of a sudden is that you get the vision, a plan. Then we can sit back and say, well, what's the. Now we have a plan, what's the strategy? What are the tactics? And then what are the actions to make it real? So I want you to look at it through those eyes. But the first things first is we gotta start with the vision. So you're gonna ask yourself questions like, what does my ideal day look like? Now, realize this, your vision, just like I think your purpose will change as life shifts, as life changes, my vision has grown, my vision has changed. If I look back two decades ago, a decade ago, five years ago, even three years ago.

The visions have shifted. So when we define the vision, it's as you see it today, tomorrow might be different. And that's okay. That's okay. But right now, if you start to ask yourself questions, the vision for my life. What does an ideal day look like? Where do I live? How do I spend my time? Who am I spending my time with? These are questions we need to ask ourselves. I go through a whole list of questions and a process in the first part of my book, building your money machine. So, and in order to do this, you're going to have to define some lifestyle goals, things that are tangible outcomes that will demonstrate that you hit some of these things. Where are you vacationing?

What's your education like? What's your travel? How philanthropic are you charitable, generous? What does your family look like? Health care, lifestyle, all these things that I want you to. You think that. Well, that doesn't have anything to do with money. It has everything to do with money. Because just like the vacations, for instance, I've told my wealth team, when we build the plan and we keep reworking the plan for my wife and I, that vacation budget, it's six figures. It's a lot of money, but we love spending. This is one of our joy points in the plan. It's important for us to put it in there. Our vacations, our family, health care, those kinds of things. The travel is really important to us and we build it into the plan. Now they have the ability, my well team and myself to look and go, no, that's out of the, out of the ballpark. Or to sit back and say, okay, to make that happen, here's what you need to do. See, the plan isn't important because it's a plan. The plan is important because it gives you a path. Okay, let me say that again. The plan isn't important because it's. You have a plan. The plan is important because it gives you a path to the vision for your life. And this is why it leads me to this other piece of it, that a plan isn't generic. So many times I'll get a note on my videos or on social saying, well, what should I invest in? Where should I be putting my money? See, that's a tactical question. That's not the question to ask because I can't answer that. Okay, one, we don't have a client relationship where I have the, the capacity to be able to be that direct of an advisor. But two, the answer to that question depends on the vision for your life, which depends on the plan you created, which depends on the strategy you're trying to maneuver through. So every plan, and this is one of the things that I think people miss, has to be a bespoke, detailed plan. In other words, it needs to be personalized to you. Every person's financial journey is unique. There is no one size fits all that works here. And there isn't just a box that we fit you in. And if you're in a committed relationship, you're married, you're going to be married, you're in an intimate relationship, you want to be married. The person you're sharing life with needs to be involved in this. And so it becomes personalized to create the life that you have together. And when you create a personalized, detailed plan, I'm going to show you what we do in a moment. Then what happens is that you get clarity and focus on the very things that move the needles. When I sat with my wealth team in our Last meeting. We have another meeting coming up. We spent the time walking through, what do we envision? What do we want? Where are we going? And then we looked at it and said, there's the plan. Great. What's their role in the plan? What's my role in the plan? They say, hey, I need you to bring this kind of income in for the next couple of years. We will then do this and we will hit the goal. That's the beauty in it, is we get clarity, we get focus. And now we can align the actions with the goals and the vision you have. That's the power of having a properly done plan. Now some people will say, well, I'm just starting out. Do I really need a plan? Yes. Even if. Even if it's going to change because it's the map that you're going to operate your financial life from that starts to move you forward. When we don't have a map, then we are. We are.

We are subject to. We are victim of temptation.

Media hype, emotional financial decisions. But when we have a plan, we have a place to go and say, oh, it's not in the plan. I'm good. It gives you a place to be able to check yourself. Now, I said, that needs to be bespoke. It needs to be custom and personalized to you. It needs to be detailed. It also needs to be adaptable. Because life changes. The plan will not be the plan you execute, because it will change. When I got diagnosed with cancer, trust me, life changed. The vision changed. Everything changed. When my first granddaughter, Emily, was born. I remember this so vividly is this realization. I was walking on the beach with my wife and the dogs, and we're walking after Emily was born, and I said, you realize that now with Emily coming into the world, that there's another 80 years, eight decades of Abrahams, at least in this world. And what that did for me is it started to get me to shift my thing and say, hold on, I got eight more decades to think about how do I impact those 80 additional years that got added on? Life changes, the vision changes. And I think that we get a chance to look at it through those eyes as things happen. But the plan that I had when I was 28 is different than 38. 48, 58 will be different when I'm 68. So it needs to be adaptable. Now there are those that say, well, I don't need a plan or I don't have a plan, and I think there's some consequences. And then I'm going to Break through some of the mistakes and give you some specifics on what to do, the steps, and I'm going to show you what we do. Okay. But if you don't have a plan, I think that it leads to a couple of things, and some of it you don't even realize. The first is stress and anxiety because you don't know where you're going. There's no clear path, there's no clear journey there. The financial decisions that you're making are haphazard, and if you reach your destination, it's a matter of coincidence and not strategy and not intentionality. So I remember sitting with a dear friend of mine, and we were having this conversation, and I said, what are you doing for your retirement? What is the plan? And he says, we have none. I go, how do you have none? And he says, well, we've never really talked about it. I said, but you need to talk about it. And he says, I don't know how. I don't know where to start, and why is it so important to talk about it now? I said, because you're going to get there. It's coming.

And when we don't plan for the things, the inevitability of getting older, of trying to slow down or wanting to live a different life, then we never get there. At least the probability of getting there is far less. And what that does is underneath, whether you realize it or not, it creates a level of stress and anxiety because there's this little aching thing in your consciousness, in your unconscious mind that's going, hey, we don't even plan. Hey, we're not sure where we're going. And every time you spend something, you're kind of going, I don't know if I should spend this. Is it okay? Should I do that? So that's one of the consequences. The other consequences, I think that we miss opportunities that come our way. The lack of planning leads to missing the chances to. To have wealth building.

In your journey. The fact that I have a plan, the fact that my clients have had a plan, was given them the path and the possibility to take advantage of opportunities as they presented themselves, because we left room in the plan to do that. The other thing that happens, I think, is that it will lead to reactive decisions. In other words, emotional decisions. We. We just make a decision in the moment. But does that decision align with the journey that we were on? Well, if we didn't define the journey, then I guess it aligns with it. You know, it's that. That whole Alice in Wonderland thing where you know, they asked Alice, where do you want to go? She goes, I'm not really sure. And he said, well, then you're already there. And so I think it's important to, to remove reactive decisions from our financial decisions, especially when those decisions are meant to allow us to live the life of dreams that we want. And so it removes emotions, it removes short term decisions, it removes reactionary decisions and everything. And it, it will allow you to move in that direction. The last thing I think happens when you don't have a plan is you become financially vulnerable because you don't have a safety net. You haven't built it in and thought about the alternatives. If a problem rises, if the market drops, if there's sudden unemployment, if there's a health issue, if inflation comes back, if interest rates go up, you haven't thought those things through. And a properly structured plan actually tests all of those things to look at what your alternatives are. All right, so let's talk about common mistakes and then let's get to the plan itself. Okay? Common mistakes, I think that I see with plans is this. First off, it's vague and undefined. It's not linking the plan to specific tangible outcomes. A plan needs to be linked to specific tangible outcomes because that can be linked to specific tangible action steps to get us to those outcomes. So one of the biggest mistakes I see is vague, undefined goals. Just putting a number out there and say, I just want 5 million, I want 10 million. Why doesn't matter. It's a number, it's arbitrary. But when we attach it to specific life goals and we do the math behind it, we say, I need 4.5 million to live this kind of life. It's a very different thing. Okay? The second thing that I think happens is that we underestimate the risks. We ignore things like emergencies, emergency funds, insurance, diversification, all those things. When you have a plan that is generic, a lot of that stuff doesn't get considered. When you have something that's bespoke and detailed, you are asking those questions. Number three, I think that many plans neglect tax planning. Listen, when they can take, you know, one third or more of your, your wealth and your income away. Tax planning is a big thing. And being smart about reducing the amount of taxes that you pay legally so you can keep more in your pocket is important. And so doing a plan without thinking about the taxes is an issue. And then thinking about using outdated methods is another common mistake like spreadsheets or generic advice or hey, just use the 50, 30, 20. Well, it's a good starting point if you have nothing. But that's not really a plan, okay? It's outdated, it's static, it's not dynamic, and it doesn't move with you and consider things. And then the last mistake I think is waiting too long is procrastination. Your life is going right now. You need a plan right now. Because every step that you take, each and every day should be closer and closer to the vision you have for your life. Or why are we taking the step? Okay. And, and so I think that these are the mistakes that we make. And I'm going to revisit one other thing because I mentioned it just, just before in this idea of spreadsheets. Listen, I, I'm an accountant. I'm a spreadsheet nut. I love columns and rows, especially when they add up. Okay? But when it comes to these types of plans.

A spreadsheet is static, it's inflexible. You don't have the, the dynamic scenarios that you could do as easily if you're using the proper software to make that happen. The other thing I think with spreadsheets is that they're prone to error. If you're doing anything manually, the risk of mistakes is high. And if you don't catch it, you could be looking at numbers or results that give you a false positive, a false negative, making choices and decisions that drive you down a direction that, that doesn't help. Okay. Many of the spreadsheets, like I said, are just columns and rows. They don't provide visualization that, and insights that some of the modern planning tools can, can do and then keeping them and maintaining them. It's time consuming, but they said if that's all you got, it's better than nothing. All right, but I want you to do something more detailed. So let's talk about the seven steps to create a plan. And I'm going to show you some of the things that we do when we do the plan for our clients so you can start to understand the dynamics of this and the power of it. Okay. The first step one is this. And I said it already is. First you have to start with a vision. Create the dream life. That's the foundation of everything we do. Okay, so you're going to start with the vision. That's going to help us start to craft the plan. But once we have the vision, we also have to get the reality, and the reality is our current reality. So step two is, is kind of data collection is sitting back and saying, okay, what's, what's what do I own, what do I owe the assets and the liabilities?

What's my income and what are my expenses? Okay, where is it coming in from and where's it going out to? Okay. That means that I get a chance to get my arms around my current reality of my starting point. Because if I have the vision and I have the starting point now, I can sit back and say, great. Now let me set in step number three the specific goals that I want to achieve over time. Maybe it's, I'm going to put my child through college. Maybe it's taking a vacation that every year or every other year. Maybe it's, I want to do a home improvement every six years. All these things come into the plan. So, so being very specific and detailed on your goals is step three and then step four. Now we start to model it. And this is why it's so much easier to use a software to do this. Now you can do it in a spreadsheet. I don't think you should do it in, in by hand. I think it's, it's near impossible. But you're going to run scenarios. Best case, you know, worst case, mid case, you're going to sit back and say, well, what happens when the, the market drops 20%? What happens if I change my retirement age by five years? What happens if I work another two years? Those kinds of scenario modeling will come in place. So, so it starts with a vision, the data collection Step two, defining the goal, step three, scenario modeling, step four. And then step five is how does taxes get integrated in there? Because they're a big deal. Especially in the US when you reach 75, you have something called required minimum distributions. If you have an IRA, 401k or something, they basically force you to take income. Well, that means that they're forcing you to pay taxes. And that's the reason they're doing it, is that if I put money away in a 401k or an IRA over time, that means that I took a tax deduction in the early years and it's grown tax deferred. And they said enough of the benefits, start taking money. And so right now the RMDs start at age 75. That means that you're going to get a tax bill at age 75 potentially if you don't plan for it. So we want to look at tax strategies in the plan as part of step five. Then step six is risk management. What are the risks to the plan? What are the risks in my life? You know, health insurance.

Estate planning, My emergency funds, long term disability insurance, all the things that I have risks that you get a chance to say, how do I navigate this? How do I mitigate or reduce the risk? Because this is the stage or the step that you're, you're looking at and saying, how am I going to reduce the risks to destroying the plan? Okay. And then the last piece of it is, is step seven is consolidating all of this into an actionable plan that is clear and, and precise, at least for the time that gets it it done. Okay? So those are the seven steps to creating plan. Now how does this really start to come into play? So I'm going to show you what we do here so you start to understand it because there's a couple things that I want to demonstrate to you. How do you stress test a plan, what if scenarios and in the things that you do? Because a plan isn't static. It's not a document you put on a shelf. It is a thing that guides you. It's this living, breathing mechanism that guides the choices, the decisions that you're making. Because if we execute on the plan properly and we adjust it effectively, we will find ourselves in the dream life that we plan for. Okay? And that's the objective of it all. Okay? So I'm going to jump to a software that we use to do this just so you can start to understand the power and then, and what it can do for you as you, as you move forward. So this is, this is where we go now. This is a sample client, it's not a real client. And remember I said that, that we're going to start off with the vision. And so one of the things that we do is that we get a chance to understand where they are in their planning journey. And in this case, they have a $2.4 million net worth. We've got it. This is where we're pulling all the data in. We literally are bringing the information in step by step. And we know what they have in here, but also we want to understand where they want to go. So we look at the goals they have. Okay, they've got college goals here, they've got retirement expenses down the road. They've looked at their health care costs, they know when they want to retire, they want to leave money for, for legacy, $300,000. They have family vacations they want to take, they need to buy a car or all those things. We get a chance to look at it. And so now we get a chance to look at their goals. And so we Build out their goals year by year by year. So we start to understand what we're working with. So they can see that, okay? We also look at their income and their expenses. So now we know what we got to work with because that's what we're, we're building from. Okay? Because once we have this now we can start to build a plan knowing what they're saving, knowing what they're doing. So we can then start to look at what are the results. And the results can be looked at based on probabilities of success. We can look at the cash flows. I get a chance in our plans, we'll look at all these different things that I can change for them. So now remember I said stress testing the plan. What if analysis. Well, what happens if? If for instance, we look at, at retiring at 67 here, it, it changes things. And let's say she retires, it's oops, not 605, it's 65, okay? You'll see that it's going to change the probability of success from 48% up to 71%. Now let's say that, that they decide to move and all of a sudden their expenses go down to 9,000, 250 here. Okay? Again.

It changes the probability of success. And now I get a chance to look at the graph of it and say.

What is the likelihood, the confidence level that I can make, what are the comparisons, what, what does it look like when I, when I start to change things in, in the plan, all of that stuff. And then we stress test the plan by understanding what happens to it if we change things in the market. So if I just look at this and say what, what is going to happen if for instance.

The market drops 20%. Now I get a chance to see what happens to my ability to succeed. Right now it says 78.87%. But if the market drops 20%, the probability of success, in other words, the probability of not running out of money goes from 78.7 down to 69.9. I can look at what happens if inflation goes up. What happens if I don't get as much return in the market. What happens if health care goes up? See, we get a chance to dynamically test everything. And then if we really want to look at the details in the plan, I literally can look at all the cash flows year by year by year and see what exactly is happening, where the money's going, how it's going. Now granted things are going to change. This isn't the way it works. All the Time, but it's not. It. It's much more detailed and dynamic for us to understand where someone is. And if they, if they turn around and say well, they come to me and say, well, Mel, we're gonna have a kid. We need a plan for college. We add it to the plan, it changes the numbers, we change the strategy, we change the tactics, we change the actions. We do all those things. The plan needs to be dynamic and be bespoke to what it. But it's what brings it to life. So what are the things that happen here? I think that the key takeaways are that no matter where your age, stage or circumstances in life is, you need a detailed bespoke plan specific to you based on your vision. Two, you need to test the plan by doing scenario testing. What happens if the market drops? What happens if inflation comes back? What happens if I decide to work longer? What happens if, if, if I decide to retire earlier? What happens if I get a raise? What happens if I want to turn my house into a rental property? And you get a chance to see what it does to all the numbers and you stress test it and then you do regular reviews at least annually. We do ours more often, but, but at least annually you're doing a regular review of the plan. Some people that are in my money machine master plan will do an annual review with me where we take a chance, we take another look at it, we adjust the, the strategy, we adjust the plan, we adjust to make it happen. Now we look at it and we say, great.

I now have the plan and now I can set some priorities and say, what is the first action step following the process in chapter 12 of my book of the wealth priority ladder? You know, do I have my peace of mind fun in place? Do I have consumer or destructive debt I need to get rid of? How, how do I do that? So we, we now establish an action steps to bring it to life and then we automate as much of it as possible and we track the progress.

That's the way these plans should be done. If we truly want to find ourselves on the journey to the life that we envision, we need to have a plan to get there. No different than planning a road trip. We know the destination, we know the starting point, we look at the map, it guides us to the destination. Your financial plan, done right, starts with a destination and connects it to your starting point and maps the path to make your destination, that dream life a reality. All right, it's, it's really, that's what it's for okay, it's planned. It's step by step. It's done with purpose and intention. All right? And I hope that you'll take this and say, how do you create a plan? What can you do to bring a plan into your life so you have the vision for your life and a plan to get there? And over time, we'll get the how in place to make the plan and the vision an absolute reality. All right? I'm here for you. I hope that this helps. I hope you start to look at things through a different set of eyes and say, God, I need a plan. And I need a plan that's done not just simplistically on a spreadsheet, but something that is more dynamic, that allows me to feel in control, control of my financial future, to know that it was built on the vision that you had for your life.

And that that plan can be changed, adjusted over time to allow you to be in the driver's seat, that captain's chair, navigating your financial journey to live the life that you were put here to live. I hope that this helps. I hope that this was valuable. I would love to hear from you. I would love to hear your thoughts or your thinking on this and any questions you have. All right? And I look forward to seeing you on the road to your financial freedom. And until I get a chance to see it soon, hopefully, always, always strive, live a life that I lose you. See you in the next one. Thank you for listening to the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

And that's it for this episode of building your money machine, where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcasts, or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people, because I truly believe that financial freedom is your birthright, and I want to help each and every one of you claim it. Thanks so much.