A Simple Planning Model

“If you fail to plan, you are planning to fail!”

– Benjamin Franklin

“No battle plan survives contact with the enemy”

– Helmuth von Moltke

“Everyone has a plan until they get punched in the mouth.”

– Mike Tyson

There are a surprisingly high number of famous quotes pertaining to putting a plan in place. Not all of them paint planning in a very positive light.  And, without a doubt, planning on its own is not very useful. We are all planning for the future.  Some of us may not be as deliberate as others, but we all have at least a general idea of where we want to go and how we’re going to get there.  Here is one simple planning model that can be used to help organize the plan.

Plan-Do-Check-Act (PDCA) is a model associated with W. Edwards Deming and is based on the scientific method.  I leveraged this model during my career and have applied to personal finance planning with retirement as a key objective.  It isn’t magical or complicated.  What I have found it to be is useful in providing an easy way to help organize life goals and the actions required to achieve them.  Even more importantly, it is a tool to help adjust the plan based on what is actually happening in real life.

The Model

Before you abandon this article, rolling your eyes in the process, hear me out.  What I’m suggesting is not some maniacal adherence to this planning model for every aspect of life.  Instead, I’m suggesting that we can bring some deliberate organization to the “big” planning we all do.  Life happens as it will.  Tragedy and Windfall can both show up at our doorstep unannounced.  Having a plan in place will not prevent unexpected occurrences from happening.  Creating and using a plan will leave us better prepared to adjust and move forward.  I wish I had started more deliberately planning even earlier in life.  I also believe it is never too late to start.

Whether or not you find this particular model for planning useful, I hope this article sparks an idea about becoming more intentional with your plan.  Learning what is working and what isn’t, becomes more straight forward as you become more organized and specific about where you want to go.

PLAN

What is it that you and your family want to achieve moving forward?  How do your goals align or conflict with one another?  How long will your plan take and what are the right milestones to measure along the way?  In business, PDCA is often used to evaluate and improve a process that can be measured in days or weeks.  For this purpose, we should think about the plan spanning months and years.  A simple set of top-line goals might look like:

• Invest/save enough money for both partners to retire in 15 years
• Invest/save enough money for child to attend college starting in 5 years
• Fund/prioritize a “significant” family vacation every year through retirement

Good goals or objectives are clear, measurable and timebound.  Keep the list only to the most important goals.  A real pitfall I observed (and fully participated in) during my career was giving into the temptation to create 17 key objectives.  When everything is a priority, nothing can be a priority. Life is a series of trade-off decisions.  By using your resources (time and money) for one thing, you naturally are not using them for another thing.  A reasonable plan should acknowledge this reality. 

Once goals are clarified and written down, it is time to honestly assess what is already being done to achieve them (if anything).  A likely key first step will be to put budget and investment/savings plans and goals down on paper.  And by paper, I mean a spreadsheet.  I’ll describe straightforward ways to do this in future posts but essentially you need to know how much more income above spending is required over the duration of the plan to make it happen.

DO

Taking a plan and turning it into action can seem challenging.  Under a more traditional use of the PDCA model, we would try out a solution to a problem or make a change to a process that could be observed and measured for effectiveness in days or weeks.  For this purpose, it is much more likely that the observation and measurement will take months. 

Here are some specifics actions that you might take toward your plan goals:

• Change your work trajectory.  Might be a new job or perhaps a different approach to your current job.  I share some of my career learnings in this work post.
• Establish and fund a brokerage account.  Saving money is grand but likely insufficient to meet your goals.  I use E*Trade and Merrill Lynch to manage investments.
• Establish a 529 education savings account.  Our family uses Scholar’s Edge to save for our kids’ educations.
• Reduce monthly spending.  This is not an easy action to take, but it is possible.  Live in a high cost of living area but also want to retire early?  It is likely you have some important trade-off decisions to make.
• Improve your health.  Are there any changes you want (or need) to make so that your health keeps pace with your plans?  Exercising and eating healthier can be long-term investments for you to make in you.

The actions taken should align with your key objectives. For example, if one of your key objectives is achieve an advance degree, are you taking specific steps toward that goal now? It is often helpful to identify the longer lead-time actions that required so you can make incremental progress across all your key objectives.

CHECK

Is your income vs spending plan on track?  How have overall conditions changed?  What assumptions need to be updated?  I’m not advocating that you ask these questions daily or even weekly.  Rather, I’m talking about monthly, quarterly and yearly reviews of your plan.  There may have been a large change in your work or an unexpected event in your life that should be evaluated against your objectives.  Equally important, there will be smaller learnings that should considered.  Maybe there is a new investment instrument you think could be helpful.  Or perhaps you’re finding it difficult to reduce a particular area of spending.  The important thing is to make sure the information evaluated during this step is complete.  You’ll want to make sure you have a complete and timely picture before making any changes.

ACT

What good is learning if we don’t leverage it to improve the plan?  This step is sometimes referred to as “Adjust” and is perhaps the most crucial part of the planning model.  Does your plan need a major update – like changes to key goals?  Or are there smaller changes you want to make – like investment or spending modifications?  It’s entirely possible (especially at a monthly level) that no changes are required and the plan continues forward “as is”.  However, it’s likely you’ll find some amount of change is required at the annual check-in.  Whatever the case, you now have a new baseline plan that begins the PDCA loop again.