Without discipline, structure, and clearly defined goals, a middle school class will descend into chaos and anarchy. The same can be said for your financial plan. Being a former middle school teacher and a current fee-only financial advisor, I have a unique perspective on these matters.
Establishing routine is essential to managing a classroom. If this is done properly, the class can basically run itself. More than once, I was held up by some pressing matters (going to the bathroom) and arrived a few minutes late to class.
I would often find the students copying their homework and working on their Do Now assignment. This was only possible because I vigorously established a classroom routine and stuck to it. The idea was my instructions said Do Now not Do Later!
Many of these same principles can be applied to the proper implementation of a financial plan. A lesson plan is a teacher’s road map to achieving the goals set for the class. In many ways it is similar to well-constructed financial plan. Both items involve destination, sequence, time frame, activities and a check for understanding at the end.
- Consider your destination – It is impossible to get somewhere if you do not know where you are going! In both a classroom and a portfolio, goals need to be established before any degree of success can be attained. This goes for both retirement planning and understanding the Constitution.
- Sequence your objectives – In a classroom, understanding World War II cannot happen unless an analysis of the preceding two decades is completed. The same can be said for managing money. Paying off debt and establishing an emergency fund needs to come before retirement savings. If not, all three objectives will most likely never reach fruition.
- Know your time frame – There is only so much that can be accomplished in a 45 minute middle school period. Most lessons will take twice as long as a teacher thinks. The same can be said for allocating your money. A retirement plan will be funded much differently than a bucket of funds for a first-time home purchase. Understanding this will enable you to protect and grow your capital to meet both objectives in a risk appropriate manner.
- Create activities to meet your objective – In a classroom, the utilization of various resources (e.g., films, primary source material, group work, or silent reading) is the key to meeting performance objectives. The resource selected will depend on the day’s learning goals. The same can be said for achieving your financial goals. There are often many different activities that need to be implemented to arrive at your monetary destination. These could include having a will, buying life insurance, and setting up automatic contributions into a retirement account. In both cases, a variety of methods will need to be in place in order for a successful outcome to occur.
- Check for understanding – A teacher can give a quiz at the end of period to assess whether students understood the day’s lesson. It is not so simple for a long-term investment plan. Hope is not lost. You can set up a process that will serve as your very own financial assessment. Make sure you don’t purchase any financial product unless you understand it. Waiting a certain time period before signing any contract and getting a qualified second opinion would be a good check. Being able to explain the basic concepts of the financial product to your partner before purchasing it is also a good rule to follow. I used to do something called a “pair share.” The students would have to turn to the person next to them and explain in their own words a recent concept that was presented in class. If both partners could not do this, we would not move on.
Lesson plans function as a learning map for both the student and teacher. You need your own financial map when plotting your financial course. Creating a financial plan based on these five concepts will help get you to your destination of fulfilling your financial goals.
Not knowing your financial objectives, or lacking a plan to get there, will lead to calamity and chaos. This is not much different from a teacher walking into a room full of hormonal teenagers and deciding to “wing it.”
“Winging” your finances will lead to a much worse fate than ending up in the Principal’s office. Get yourself organized and plan like a good teacher. Your retirement won’t be “Saved by the Bell” by delaying the inevitable.