Most people don’t want or need a degree in finance to move toward their financial goals. In fact, most people are turned off by financial industry jargon and the reams of financial data that their financial advisers often expect them to process. In the world of financial services, “too much information” is a discouraging, even paralyzing, roadblock.
In hindsight, this may seem obvious: people come to us for help dealing with their money –not for a degree in finance. The development implications of this insight, however, were deep and far-reaching. We realized that a truly empowering financial planning solution couldn’t just deliver traditional financial reports and plans couched in the old, off-putting, and overly complicated terminology. So, we set to work building a system that would deliver personalized financial plans that our clients could immediately understand and put into action. We felt certain that if we did the work of processing and prioritizing our financial advice upfront for our clients – translating industry-speak into plain English and simple, doable steps – that our clients would finally be able to truly receive that information and take ownership of it. We, financial advisers, cherish our memories of moments when a client finally said, “I get it! I can do this!”
To get there, we stripped our financial advice of all industry jargon and found that most financial planning advice boils down to managing the relationships between four things: what you make, what you spend, what you own, and what you owe. The key is knowing which adjustment to make and when.
In the earlier part of your financial journey, most of the recommendations you receive from Sum180 will likely focus on freeing up savings. The specific steps will vary based on your unique personal situation, but the underlying goal will be the same: to move towards saving 10-20% of your income every year. This practice not only gives you the peace of mind of knowing you are living within your means, but it also enables you to take all the other steps you need to build a secure future, such as building an emergency fund, buying a home, and saving for retirement.
Later in your financial journey, as the balance in your savings account grows, it becomes relevant to consider even smarter ways to grow your savings over time. Your Next Steps may address the right investments for your situation; it may cover insurance or tax planning. Again, the exact specifics will vary depending on your financial picture, but the goal will be the same: to build what you own in relation to what you owe. This value (your “net worth”) is an important measure of your financial security.
This broad framework gives Sum180 clients a way to quickly grasp complicated financial issues, so they can focus their attention and energy on just the three most important next steps to take with their money right now. Because the truth is, when it comes to dealing with our money, most of us only need to know the answer to that one question: “What is the best thing for me to do right now in my situation?”
The answer to this one question is, of course, different for everyone. What we realized at Sum180 is that the more tightly we focus our advice on just what each client needs to know at the moment, the more we empower him or her to take action. In a very real sense, the right financial plan for each client is as much about what we leave out as what we put in.
In this context, let me break down why we believe our “Make, Spend, Own, and Owe” conceptual model is powerful.
1. It helps people immediately understand the rationale underlying the advice they receive from us. We don’t need to “educate” our clients about the finer points of finance – they just intuitively “get” what they need to know.
2. It helps them grasp, in a broad sense, how and why we prioritize our advice. In financial planning, the next steps you receive are never random – they belong in a sequence, each step building on steps that came before. The sequence of steps matters. At the same time, we do our clients a huge service when we eliminate the distraction of advice that won’t become relevant to their situation, perhaps for years to come. The right conceptual model helps by striking a balance: giving enough context to illuminate but never overwhelm.
3. It gives people permission to enjoy their money now as long as they have certain pieces in place. When you clearly understand that you are taking the right steps to secure your financial future – when you can see how the different pieces fit together to build your base – you can finally relax. You don’t have to worry and wonder whether it’s okay to spend your own money. Instead, you can feel confident that you’re living within your means and moving in the right direction. You have the freedom and flexibility to use your money, take that vacation with your grandkids, or treat yourself to the new car you always wanted.
More information can be found in our learning videos on YouTube for more visual learners. They talk about how the relationships between what you make, spend, own, and owe might play out in the real world. You’ll see how changing one thing affects the other and be better prepared to tackle your own next steps. Let us know how it’s going!