The One-Page Financial Plan | Book Summary

Have you ever wanted to get started on managing your money, but feel overwhelmed by all the concepts that you hear about finance? Have you ever procrastinated or given up on creating a financial plan, simply because it’s all just too confusing?

What if you could figure it all out in one page?

“The One-Page Financial Plan” by Carl Richards helps people simplify and clarify financial planning. It’s for people who like to save time and avoid information overload. It also de-mystifies the commonly intimidating concepts that people usually hear about money.

I like to think of it as having almost like a one-on-one coach to client session with Carl himself. Here, he gives concrete examples from his past experiences and guides you towards the direction you want to go to. The best part? You don’t even have to book an appointment!

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Part I: Discovery 

This part contains chapters about analyzing where you are and where you want to be. It also contains information that lay the groundwork to align yourself with the goals you want to achieve.

Chapter 1: The Most Important Question

The Power of “Why?”

“Before you can plan, you have to know why you’re planning.”

In this section, Carl Richards conveys that before starting any kind of financial plan, the most important step is to first identify the reason why you want to be successful in managing your finances. What is it really for?

Identifying your “why” is a solid basis that you can work with, because different goals require different steps to take. It’s uncomfortable, but we may end up discovering things about ourselves that we didn’t even know existed.

He also compared it to the process of going to the doctor’s office to ask for a prescription: most people want the medicine immediately without identifying the cause of their symptoms. People want to know all the hows of finance without identifying the reason why they’re doing it.

Sample Question: Why do I want to be financially secure?
Sample Answer: This is because my parents always used to fight about money and I don’t want my kids to go through that.
What It Shows: I value the survival, safety, and peace of my family.

Chapter 2: Guess Where You Want To Be

Guessing Your Way to Your Goal

“What would it take to get to the place you want to be?”

This chapter focuses on the next steps after figuring out your “why” in the previous chapter. Instead of asking “Why do I want to do this?”, it asks the question “Where do I want to go?”.

Determining the place where you want to head towards is an extremely important part of financial planning. Here, we use our “Why?” answers to formulate our “Where?” answers.

It also highlights the importance of “Guessing”, which is a word that Carl Richards has used, to tell us that you cannot predict everything in the future with the highest precision. Here, we try to “guess” where we want to go.

It gives us a breath of fresh air and a sense of flexibility, knowing that we don’t need to have everything figured out by the smallest detail. Sometimes, things won’t go according to plan – a change of job might happen, an accident, or something unpredictable. And this is also why the book encourages us to leave some wiggle room in our planning.

Sample Questions:

• What is the goal?
• When do you want to do it?
• How much will it cost?

Chapter 3: Get Really Clear About Your Current Location

Things Just Might Not Be as Bad as You Think

“For now, all you need to do is get clear about where you are.”

For the third chapter, the main question to ask would be “Where am I right now?”. Since we’ve gone past knowing why we want to learn personal finance and what our financial goals are, this chapter focuses on guiding us to evaluate our current financial state.

Extra note, this area requires full transparency to ourselves and also to the people who are joining us in this journey – and things aren’t always easy to admit. This section helps us deal with past financial mistakes, how to tackle the alignment of how we view money with our loved ones, and taking the first step towards making the changes we want to happen.

It also emphasizes the importance of a “Personal Balance Sheet”, which is a list of both assets and liabilities in our current state. Now, don’t be intimidated by this terminology! Assets are basically just what we OWN and liabilities are what we OWE.

Once we’ve identified what we currently have, we can make more realistic financial decisions where we also consider the things we have to pay for. It helps give us a clearer picture of where we are in our personal finance journey.

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Part II: Spending and Saving

This part helps us understand the importance of our everyday habits and the role it plays in our financial plan. Often times, habit determines how we let go of our money and how we keep our money. In some instances, we don’t even realize where our money goes! How are we supposed to manage it then?

Chapter 4: Budgeting As A Tool For Awareness

Tracking for Awareness

“If we want to take control of our finances, we also have to take responsibility for the many unnecessary purchases we’ve made—and understand that nothing will change unless we change our behavior.”

In creating a financial plan, when you hear the word budgeting, you may immediately think about a form of restriction. However, this chapter shows us that it’s not the same thing at all. Carl Richards looks at budgeting as “Awareness”.

It’s not a form of punishment that we put on ourselves because we want to hoard money. It’s determining where our money goes and being more intentional about where we put it moving forward.

Let’s say that in the first few chapters, you found out that you value painting. However, what if the majority of your money is spent on nightclub drinks to the point where you don’t even have enough cash to buy good quality brushes? Buying drinks in itself is not the issue – it’s the fact that you value it less than paint brushes but you put more money in that area without even realizing it. Tracking helps us identify these discrepancies.

Are your current finances really aligned with your values? Once you find this out, it becomes easier to ignore that ‘SALE!’ sign on the items that you don’t even need or care about. Having control over your priorities is one of the most powerful feelings in the world.

Chapter 5: Save As Much As You Reasonably Can

How Do You Know If You’re Saving Enough?

“How much is reasonable?” The answer is: “It depends.”

This chapter focuses on saving money, and how it differs from one person to another. Immediately, Carl Richards mentions that there is no one-size-fits-all strategy for everyone. People have different responsibilities, situations, and circumstances. A good estimate would be an amount that you’re capable of putting away without sacrificing your most basic needs and responsibilities.

From this, we can see that the set percentage of income that finance gurus tell us we should set aside for saving isn’t always the same. However, you can create a financial plan that works for you. This is the concept of “saving as reasonably as I can”, which is mentioned all throughout this chapter. It allows people to accommodate their needs, not be put in a fixed box, and avoid an all-or-nothing mindset.

Carl Richards also mentions some tips to make savings easier, such as automating them or setting short-term goals. The important thing is that we are still taking action towards setting aside a portion of our money for our future selves.

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Part III: Investing

Once we’ve built up our habits of saving and tracking our expenses, this part introduces us to the concept of investing. It discusses what investment is, what kind of investments there are, and how it can be a part of our financial plan for the years to come.

Chapter 6: Buy Just Enough Insurance – Today

Do You Need It or Not?

“If someone depends on you economically, you need life insurance. “

This chapter focuses on insurance and how it fits in our financial plan. While insurance is a personal topic for a lot of people and not everyone wants to discuss it (let’s face it, who wants to talk about death or accidents?), it is important to take a look at ourselves and consider if we might need to avail it or not. However, in this part, Carl Richards clarifies that:

“Insurance is an expense, not an investment.”.

This means that insurance does not really fit with our idea of what investment is, which is putting more money in a place where it can make more money. You’re not gonna make more money by paying for insurance. You’re paying for the support it will provide to the people you love if something unexpected happens which can render you incapable of making money.

To determine how much insurance you may need, the rule of thumb that Carl Richards talks about here is the amount of economic loss that stopping your stream of income will bring. He mentions here the 4 percent rule, as well as the advantages of term insurance.

He also emphasizes in this section to only avail as much insurance as you need, but never more than what you need.

Chapter 7: Borrowing and Spending Wisely

Paying Down Debt Is an Investment

“People who understand interest earn it. People who don’t pay it.”

This chapter focuses on debt or borrowing money. It discusses the importance of paying down your debt every month as much as you can. It also identifies the kinds of debt that can be advantageous, and why it matters more than our other investments in the financial plan.

An important reminder as to why paying off debt is really important – it’s because high-interest debts have the capability to eat away the dividends we earned from our other investments. For example, we have a debt that earns 15% interest. Instead of paying that off, we invest our money someplace where it can make 7% profit. From this, we’ll still be at a loss of 8%.

It also tackles the topic of buying a house. From this, we can find out why may be the right decision for some people. We also see why others may not really need it but only feel pressured because of media or peers. There’s also some questions that you can write down and answer to see if buying a house is really what you need at this moment.

“The more we can make money decisions that support our values—including when and how we borrow money—the less likely we’ll regret those decisions, even if they’re expensive choices.”

Despite all this, the chapter also tackles the importance of not guilt-tripping ourselves for spending money on the things that really matter to us. We can use our “why” and “where” lists with delayed gratification to evaluate whether the purchase really supports our values. It also emphasizes how saying “Yes” to what matters to you might mean that you’ll have to say “No” to something else in order to afford it.

Chapter 8: Invest Like a Scientist

A Framework for Investing

“The belief that our gut instincts can help us predict the future of the market is the kind of magical thinking that can wreak havoc on your financial plan. It also has nothing to do with real investing.”

This chapter debunks a lot of the myths about the stock market, mutual funds, and diversification. There are two extremes on the spectrum when it comes to the stock market: those who aggressively speculate about it, and those who don’t believe in it at all. We can achieve a possible balance between these two.

Carl Richards highlights the importance of diversification, or “not putting all your eggs in one basket”. It’s tempting, but financial planning requires risk management. He also mentions that portfolios are not one-size-fits-all, and each one is different depending on the person’s goals and values.

However, there is a default “good enough” advice that he shared. It’s using the 60/40 institutional default between stocks and bonds. From this, you can modify it according to your goals and values – and this is what Carl Richards did for his clients in the few examples he gave in the book.

This chapter also gives some tips on how to prepare for market crashes (since the market does naturally go up and down). It also shows how to stick to our financial plan when it does. We can build mental fortitude to deal with temporary losses for long-term investments. With this, we don’t get carried away and panic during inevitable times.

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Part IV: Strategies for Avoiding the Big Mistake

The “Big Mistake” is buying high and selling low. However, it is also made up of the small missteps that we might make in our financial journey – such as the people we hire or how we behave. This part gives us perspective on how to hire the right financial advisor and how we can achieve the right financial behavior.

Chapter 9: Hire a “Real Financial Advisor”

I’m talking about finding someone who’s willing to get to know your goals and values well enough to help you stick with your plan.

This chapter talks about what financial advisors are and how they may help you in creating and sticking to your financial plan. It also explains why you might want to avail one as an objective third party. More importantly, it emphasizes the traits that you might want to look for in a financial advisor.

Carl Richards talks about how in the finance industry, there are instances where salespeople who belong with a particular brand call themselves financial advisors. He also acknowledged that it can be tricky to tell the difference, but here are some questions that may be helpful to ask:

1. Do they get to know your personal goals and values, or are they just prescribing a product or strategy immediately?
2. Are they putting your interests ahead of their own?
3. Do they get paid or get commissions based on the products that they recommend to you?
4. Are they willing to help you stick with your plan, or do they easily get carried away by the hype?

The author himself, who is a financial expert, confirms that finding a good advisor can be quite difficult. However, having the answers to these questions can at least help you evaluate them more holistically. This can help you see if you can truly trust them with your financial journey or not.

Chapter 10: Behave, For a Really Long Time

Financial success is more about behavior than it is about skill.

This chapter focuses on our personal behavior towards money, and how our biases can affect our financial decisions. Whether we admit it or not, all of us have the capability to make financial decisions based on emotion.

It is only natural because we are human beings, and expecting otherwise would be unrealistic. Despite this, Carl Richards offers some tips to help you stick with your financial plan and not be led off the course.

He emphasizes the importance of creating a plan first, calling it an IPS (Investment Policy Statement) that you can refer to whenever you feel tempted to deviate. Another helpful tip that was mentioned is to automate your preferred transactions. This helps in a way that you won’t have to repeatedly make the decision of whether or not you’ll be transferring the money yourself.

One of the helpful tips is also to remember how our previous financial decisions turned out, so that we can learn from it. There is no better teacher than experience. Lastly, when it comes to investing, the most important part is to leave it alone. Investing is often compared to planting a tree, where you make the effort but don’t have to immediately check up on how it’s doing.

It’s never about finding the perfect investment. It’s about giving you the time to do what matters the most.

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Conclusion: The One-Page Financial Plan

If we had to summarize each chapter’s main topic using just one word, it would be something like this:

1. Why
2. Goals
3. Assessment
4. Spending
5. Saving
6. Insurance
7. Debt
8. Stocks
9. Advisor
10. Behavior

Wanna know what we think? Head over to The One-Page Financial Plan book review for more!