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Have a plan. Follow the plan, and you’ll be surprised how successful you can be. Most people don’t have a plan. That’s why it’s easy to beat most folks. – Bear Bryant

How a Financial Plan Can Map the Way

Imagine you’re driving blissfully down the road when you hit a fork. You’ve heard this story before. Do you take the road to the left or the right? The answer is actually quite simple… look at your map.

The investments in your portfolio are an important component of managing wealth, but too much attention is often paid to investment returns and not enough to the other aspects of financial planning. If the investment portfolio is a car that can get you from point A to point B, then a financial plan is the map that will guide you to take the most efficient route. We’re often so focused on investment returns or how fast our car can go, that we don’t realize we’re taking the long way to nowhere.

Find the Optimal Path

A financial plan first and foremost helps to determine the destination. The destination in our example is two fold: 1) Building up to financial independence, defined as obtaining enough wealth so that there is no longer a need to work for basic necessities, and 2) Spending down of assets during retirement. A proper financial plan will show how much savings is expected to be required and will construct the most optimal path to achieve financial independence. For those who have already achieved this goal, a financial plan can provide guidance on how much can be spent each year and the optimal sources of income.

There are many points of interests during our journey and a financial plan will help find the best route for each. These points of interests may include savings for a house purchase, education funding, and gifting strategies, to name just a few.

Take gifting for example. A financial plan can not only estimate how much you can afford to gift, but can also introduce strategies on the use of your annual or life-time exemption , the best assets to gift (stocks vs. cash vs. bonds), and the optimal vehicles to use such as setting up your own foundation or a donor-advised fund. There are strategies for every financial goal that can help you to determine your best route and stretch your dollar farther.

A financial plan also deals with the less fun, unfortunate events in life. Although you may hope to finish the journey as the driver of your own car, having a second driver or a spare tire could save you from stalling in the middle of the road due to an unexpected event. An up-to-date estate plan and appropriate insurance coverage, not just health and life, but liability and long-term care as well, among others, can provide your assets with protection from unfortunate legal or medical events.

Find the Right Speed

Akin to a car that can be driven faster, albeit at more dangerous speeds, an investment portfolio can be constructed with a higher allocation to stocks, albeit at the risk of higher volatility. A proper financial plan can help guide your portfolio’s asset allocation, or the mix of stocks and bonds. Put another way, it can help determine how fast, or slow, you can afford to travel in order to get to your destination on time. Various studies1 have shown that asset allocation is responsible for approximately 90% of the variance in long-term returns. The importance of asset allocation cannot be overstated, making a financial plan that leads to a suitable asset allocation all that much more important.

A long-term financial plan will also give you greater perspective and help you understand that short-term volatility may be but temporary traffic, and things are likely to get going soon enough. This can help to keep you calm during turbulent stock markets and help you to avoid making rash decisions.


Many clients engage B|O|S for investment advice, but often come to appreciate our financial planning strategies to be of even greater value. Life can take a surprising turn now and then, and we don’t expect everything to go exactly according to plan. However, a financial plan can be a helpful map that can provide a broader perspective and guidance through both ups and downs. Drive safely!

1Roger G. Ibbotson and Paul D. Kaplan, Financial Analysts Journal, January/February 2000, Vol. 56, No. 1:26-33.; July 2012 Brinson, Hood, and Beebower, Wallick et al.; Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower, Financial Analysts Journal, January/February 1995, Vol. 51, No. 1:133-138.

Filed under: Financial Planning

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