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Why You Need a Written Financial Plan
Barclays Ring Public Blog

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Why You Need a Written Financial Plan.
And Why the "Why" Is Most Important!

Peter F. Tedstrom, CFP®


When Bob and Sally first came into our offices to explore the possibility of having us help them create a wealth plan, Bob said, "I want to retire, but I can't. I have two kids in college." They wanted a financial plan that addressed their desire to retire as soon as possible. 

We discussed in detail how they defined retirement. We discovered that Bob wanted to leave his company – but was still willing to work – just not for his current firm. As a result, we worked through various scenarios – forecasted anticipated expenses, evaluated debt structure and investment strategy and determined that Bob could depart his current company and set up his own LLC for consulting independently to the firm he was planning to leave.

We helped him realize that he needed to make just enough money to cover his children's college expenses and that he only needed to do so for a few years. A couple of weeks after our planning meeting, Bob gave his notice and started his consulting business. Two years later, Bob and Sally retired and are now living life completely on their own terms, which is how they initially defined their retirement.


"Failing to plan is planning to fail." This is a popular adage often attributed to Benjamin Franklin, the father of time management. Creating, or revising, your personal financial plan (or your wealth plan) is all about planning your current and future life. Long-term financial success is most likely achieved when one creates, follows and adjusts one's customized, written and comprehensive wealth plan.

From my experience, creating a financial plan that is date-specific and dollar-specific will boost your odds of accumulating and preserving wealth. Long-term financial success comes from acting on the plan, while failure is precipitated by reacting to markets. People have a hard time accepting this. They discount the value of planning – very few have a specific and written wealth plan but instead are focused only on investing and outperforming the markets.


People have a hard time accepting this. They discount the value of planning – very few have a specific and written wealth plan but instead are focused only on investing and outperforming the markets.


During strong trending bull markets like the one we are currently experiencing, investors tend to forget that devastating market events do happen: The Great Depression, the 1974 Bear Market and The Great Recession, where US stocks dropped about 55% just 10 years ago. Most important, these stock market events had a significant negative impact on an individual's retirement plan.

People who focus on their comprehensive plan as the driver to investment strategy are consistently the most successful. They have a specific "reason" for investing the way they do and they have discipline to follow that plan. Those individuals who focus on out-performing the market frequently fail to do so and generally find themselves out of sorts when determining asset allocation, risk level, time horizon, expense planning, asset location, and frankly, when and how to retire.

These portfolio factors should be driven by one's comprehensive custom financial plan – which we call a Wealth Plan (or Wealth Empowerment Roadmap™). As I tell my clients, "Anyone can run out of money no matter how much they have."


  • What does a Wealth Empowerment Roadmap™ look like? Where should you start? I think the most important starting point is to determine your "why." Why is money important to you? When you know your "why," the "how" becomes so much easier to answer. That is, your financial/wealth plan should get direction or spring from your “why.”
  • Why do you want to accumulate wealth?
  • Why have you created the wealth that you have?
  • Why do you want to retire?
  • Why do you invest?


When you know why, the how is a step-by-step and somewhat formulaic process. Ultimately, your investment strategy ought to spring from your "why."


Although we strongly encourage you to consult with a qualified financial advisor, preferably a CFP (Certified Financial Planner®), it is possible to create and monitor your own plan. The most important aspect of a financial plan is setting goals – short-, mid- and long-term. Paying off debt, saving for college, and planning for retirement are all goals that you should consider in your financial plan.

Essentially, there are six steps to creating a financial/wealth plan:


  1. Identify your current financial status. This entails a thorough accounting of everything you own, your current income, the taxes you pay and the amount you can save and invest.


  1. Develop your financial/life goals. These goals should be very specific and customized to you and your spouse (if you're married). We encourage you to even identify what you plan to do after retirement, not just when you want to retire and on how much.


  1. Identify possible strategies and courses of action. Research all the possible approaches to achieving your goals and objectives (e.g. investment options, tax strategies, retirement plans available, etc.).


  1. Evaluate alternatives. Once you have identified the options worth considering, then you need to evaluate them to determine if and how they might fit into your plan. 


  1. Create, document and implement your wealth plan. Act on the alternatives you determined were suitable for your plan.


  1. Review and revise your plan. Possibly the most important step is the ongoing review and adjustment of your plan, depending upon changing circumstances, goals and even risk temperament.


As you begin creating your personal financial plan, the stronger your "why," the greater likelihood that the plan will become a reality. Good luck!




Peter F. Tedstrom is a Partner of a financial planning-based wealth management firm that offers independent investment management advice and financial services in a family office environment. Since 1988, the firm has provided individuals and families, business owners, executives and entrepreneurs throughout the United States with customized wealth plans tailored to help pursue their unique and specific goals. Mr. Tedstrom is a 32-year veteran of the field.



All content and photo provided in this blog is supplied by Peter F. Tedstrom and is for informational purposes only. Barclays makes no representations as to the accuracy or completeness of any information contained in the blog or found by following any link within this blog.


Image credit: Shutterstock


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