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Make Better Financial Decisions - (3 Of 9) Balancing Act: Planning with a Strategy

Updated: Jul 6

 Better Financial Decisions with planassist in winter garden,Florida

Make Better Financial Decisions - (3 Of 9) Balancing Act: Planning with a Strategy

Understanding the distinction between strategy and planning is crucial for managing personal finances. Although the terms are occasionally used interchangeably, integrating the two is the foundation of financial success.

A well-structured plan combines strategy and practical planning. Advocating for "having a plan, being diversified, and seeking counsel" merges these elements. Despite their differences, strategy and planning are both essential and intersect at the crucial point of creating a plan.

Planning focuses on specific steps and their sequence, such as buying life insurance, increasing retirement contributions, reallocating funds into CDs for better yields, opening IRAs, and investing in 529 education savings plans. While these tasks support strategic objectives, they are less flexible and require execution.

On the other hand, the strategic aspect focuses on defining goals and objectives, such as monthly expenditures, income, or net worth. These goals are more flexible than planning tasks and are influenced by external factors beyond our control, including health, economic conditions, and unexpected crises. This distinction underscores the dual nature of control: while we can directly manage the implementation of planning steps, our influence on strategic outcomes depends on how we navigate these steps alongside external factors.

Recognizing the relationship between planning and strategy is essential. Adjustments to the plan in response to life's uncertainties help us move closer to or further from our strategic goals. A written financial plan includes not only necessary actions (planning) but also the pursuit of desired outcomes (strategy). Engaging in both planning and strategizing is crucial for achieving our financial aspirations.

In conclusion, by distinguishing and integrating the components of planning and strategy in our financial plans, we create a robust framework for navigating the complexities of personal finance. This approach facilitates a balanced focus on immediate actions and long-term objectives essential for financial well-being.

Finding Balance Through Fewer Rules

AI developers are transitioning from rule-based to goal- and principle-based decision-making systems, moving away from rigid planning that can rapidly become outdated. These strategic-approach systems adapt to various circumstances, mirroring the complexity and unpredictability of financial life. Life events such as family crises, marriages, divorces, health issues, and emergencies complicate managing financial risks and pursuing growth. As financial landscapes become more complex with increased income, assets, and dependents, we face chaos that necessitates balanced decisions, prioritization, and timely action. The wide range of financial decisions, from minor to significant, requires identifying which actions need immediate focus based on specific criteria. It is vital to recognize that financial risks often arise from inaction. As you build out your personalized plan, do as AI developers are doing - be less rules-based and more goal and principle-based, which is the foundation of PlanAssist®.

Managing Risk Starts with Accurate Assessment

Accurately assessing risk presents a significant challenge in risk management. For athletes performing high-risk activities, their skill in real-time risk assessment makes these activities less hazardous for them compared to the average person. Although not infallible, their ability to evaluate and mitigate risks improves as they progress in their sport.

Similarly, as our assets grow, becoming adept at risk assessment is crucial, and seeking counsel is a vital component of our financial strategy. It provides us with a second opinion, addressing a common issue among clients, which is the difficulty of accurately assessing risks.

This accurate assessment is crucial for prioritizing decisions and maintaining balance. In discussions with clients about events or investments, I often find that their perspectives are misaligned with historical data or broader financial industry risk assessments, likely based on biased information. They may perceive significant risks in areas that are improbable or uncontrollable, neglecting more likely risks.

This scenario leads us to question how some individuals amass wealth with what looks simple, making confident financial decisions with minimal errors. Part of the answer lies in their proficiency in assessing, prioritizing, and implementing strategies to mitigate known and controllable risks.

Risk management involves a blend of emotion, belief, ability, and action. It's crucial not to underestimate the impact of emotion and belief. While professional insights are valuable, having a solid belief in the risks and adopted strategies is essential. For instance, without a firm belief in your risk assessment strategy, financial crises can lead to panic-driven decisions.

Below are some commonly identified financial risks to help emphasize the importance of understanding and prioritizing them. Recognizing your significant financial risks is the first step, followed by implementing a long-term strategy you can commit to.

Seven Risks Planning Helps Us With

There are multiple risks, not least of which are seven that most in the industry agree impact an individual's financial health. However, this list is not exhaustive. Completely eliminating financial risks is unrealistic; instead, it is common to prioritize and focus on mitigating certain risks due to limited time and resources.

However, it's crucial to recognize that reducing risks in one area might inadvertently increase risks elsewhere in your financial plan. For example, to counter market volatility, risk-averse investors might invest in Certificates of Deposit (CDs) or consider annuities recommended by advisors. While these choices reduce exposure to market fluctuations, they also introduce other risks, such as longevity and inflation risks.

  • Volatility: Market Volatility refers to the fluctuations in investment prices over time, which can significantly impact the value of an individual's investment portfolio.

  • Tax Liabilities: Tax Liabilities involve the potential for unexpected tax obligations arising from various sources, reducing overall financial resources.

  • Social Security Uncertainty: Social Security Uncertainty pertains to the unpredictability surrounding social security benefits, including concerns about future benefit levels and adjustments for inflation.

  • Longevity Risk: Longevity Risk is the possibility of outliving one's savings, posing a challenge to maintaining financial stability in later years.

  • Inflation: Inflation represents the risk that the purchasing power of money will decline over time, eroding the real value of financial assets and income.

  • Healthcare Expenses: Healthcare Expenses refer to the potential for significant and often unforeseen medical costs, which can deplete savings and impact financial health.

  • Estate Planning: Estate Planning involves the risk of inadequate preparation for the transfer of assets upon death, which can lead to unintended consequences for heirs and beneficiaries.

Addressing all these risks in every meeting is impractical. The approach involves working with your advisor to understand your primary concerns, then prioritizing and mitigating two or three risks based on current life events. Over several years, this focused approach allows for understanding, mitigating, and prioritizing risks over time. The objective is not elimination but mitigation and management.


Prioritizing too many risks at once can lead to decision paralysis. This chapter discusses leveraging PlanAssist® principles to develop tailored strategies, focusing on a balanced approach to risk management to avoid overwhelming decision-making( Better Financial Decisions) processes. By gradually addressing these risks with the support of financial professionals and applying PlanAssist® principles, individuals can effectively manage their financial plans and secure their retirement futures.

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Freequently Asked Questions

1. What is the difference between strategy and planning in financial management?

   - Strategy focuses on defining long-term goals and objectives, which are flexible and influenced by external factors. Planning involves executing specific steps to support these strategic objectives, such as buying insurance or increasing retirement contributions.

2. Why is it essential to integrate planning and strategy in personal finance?

   - Integrating planning and strategy is crucial for financial success because it combines the pursuit of long-term goals with the execution of specific actions. This approach ensures a balanced focus on immediate actions and future objectives, essential for achieving financial well-being.

3. How do life events affect financial planning and strategy?

   - Life events, such as family crises, marriages, and health issues, introduce complexity and unpredictability into financial management. They necessitate a balanced decision-making process that prioritizes actions based on specific criteria, adapting to changing circumstances.

4. What is the concept of PlanAssist®?

   - PlanAssist® is a principle-based decision-making system that emphasizes goals and principles over rigid rules. This approach adapts to various circumstances, mirroring the complexity of financial life and helping individuals make balanced decisions amidst financial risks.

5. How can one become adept at assessing financial risks?

   - Becoming proficient in risk assessment involves understanding and prioritizing significant financial risks, seeking counsel for a second opinion, and developing strategies to mitigate known and controllable risks. It’s a skill that improves with experience and careful evaluation of potential risks and their impacts.

6. What are some common financial risks individuals face?

   - Individuals commonly face market volatility, tax liabilities, social security uncertainty, longevity risk, inflation, healthcare expenses, and inadequate estate planning. Managing these risks involves prioritization and strategic mitigation efforts.

7. Why is it essential to prioritize only a few risks at a time?

   - Prioritizing too many risks simultaneously can lead to decision paralysis. A focused approach, addressing two or three primary concerns at a time with the help of a financial advisor, allows for a more manageable and effective risk mitigation strategy.

8. How does emotion and belief affect financial risk management?

   - Emotion and belief significantly impact financial decision-making. A solid belief in your risk assessment and mitigation strategies is essential to avoid panic-driven decisions during financial crises, emphasizing the need for emotional resilience and confidence in your financial plan.

9. What is the role of professional advice in financial planning?

   - Professional advice plays a vital role in financial planning by providing a second opinion, helping accurately assess risks, and developing tailored strategies for risk mitigation. It aids in aligning individual perceptions with broader financial realities and historical data.

10. How can individuals ensure financial stability in the face of uncertainties?

    - Financial stability can be ensured by distinguishing and integrating planning and strategy, adapting to life’s uncertainties through balanced decision-making, and focusing on long-term objectives while executing immediate actions. Engaging in planning and strategizing, with the help of financial professionals and applying principles like those of PlanAssist®, allows individuals to manage risks effectively and achieve financial aspirations.

DISCLOSURE - All written content on this article is for information purposes only. Opinions expressed herein are solely those of Core Wealth Consultants. Material presented is believed to be from reliable sources, however, we make no representations as to its accuracy or completeness. Core Wealth Consultants, LLC a Registered Investment Advisor in the States of Florida, Indiana and Michigan. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Diversification and asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss.

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