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Why Your Plan is More Important Than Your Investments

Why relying on others to do your planning will never work

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summary

  • A personal plan matters more than any investment product.

  • Don’t let advisors think for you—build your own strategy.

  • Financial vehicles are tools, not the destination.


When Wall Street handles our investing for us, they make a lot of money. One of the tricks they use is to convince us that we’re not smart enough to handle our own investments. By keeping us ignorant, many of these experts thrive. As long as people are handing over control of their financial future to others, then advisors such as financial planners and stock brokers will have a lot of job security.

Please make no mistake; there are good advisors out there who are willing to work with hands-on investors. It just takes a special breed of advisor because it requires a lot more work for them to give you the help you deserve.

For financial advisors, though, it’s much easier—and often professionally safer—to advise clients to conform to their company’s boilerplate strategies than to create a strategy that fits a client’s goals.

But it’s not only the fault of the advisor. As a society, we have been conditioned to entrust “qualified” strangers with our financial future, and ask minimal questions - if any at all. Which is perfectly convenient because, as coincidence would have it, the questions we need to ask are indeed uncomfortable. 

Ask the hard questions

A while back, Robert Kiyosaki was a guest on an investment radio program in San Francisco. During the show, a man called asking for advice on investing.

“I’m 42 years old. I have a good job, but I don’t have any money. My mother has a house with almost $700,000 in equity. She said I could borrow some of that to begin investing. What should I invest in? Stocks or real estate?”

“Do you have a plan?“ Robert asked

“I don’t need one,” he said. “I just want you to tell me what to invest in. I have the money, and I’m ready to go! I just need to know what market you think is best.”

“If you’re 42 and have a good job,” Robert began, “Why do you have no money? If you lose your mother’s equity money, can she continue to afford the house with the added debt? And if you lose your job or the market crashes, can you afford to live at the current lifestyle you have?”

“That’s none of your business,” he said. “You don’t need to dig into my personal life. All I want is investment advice, not personal advice.”

Investment advice is personal advice

One of the most important things rich dad ever taught was that investing is a plan, not a product or a procedure. He also said, “Investing is a very personal plan.” So, he believed that all investment advice also required personal advice.

Rich dad often compared investment products to cars. The reason why there are so many cars is because different people have different needs. For instance, a single person might not need a nine-passenger van, but a family with five kids might. A farmer would rather have a truck than a sports car.

“That is why investment products are called investment vehicles,” said rich dad. “They get you from point A to point B, from where you are financially to where you want to be.”

For each person, the plan will be different, depending on various personal goals, details, and realities. That is why it’s important to have a personal plan, and why, if you need advice, you need an advisor who understands your personal situation.

The vehicle is not the plan

Most people focus on investment vehicles as if they were the plan. But imagine going to a ticket counter and asking for a plane ticket but not knowing where you wanted to go. It wouldn’t be very productive—and it would be costly.

That’s how most people invest. They look for the vehicle like stocks, bonds, mutual funds, real estate, and focus on those rather than on their investment plan. They should instead make a plan and then choose the right vehicles to achieve that plan.

Don’t fall in love with your vehicle

This is also why rich dad cautioned against falling in love with your vehicle. On most trips, he pointed out you don’t own your vehicles; you simply use them for the time needed. For instance, you don’t own the plane you use to get from point A to point B. And you don’t own the cars you rent or the train you purchased a ticket for. They are useful for a time and purpose, but not for everything.

Many people fall in love with their investment vehicle. They think that stocks or real estate are the best way to invest and the only way to be successful. Again, this is a focus on a vehicle rather than a plan. Fall in love with your plan and use whatever vehicles are necessary to accomplish it.

Financial education is the key

Having a financial education is the key differentiator here. For example, someone who knows little to nothing about investing will think that the vehicle will get them rich, and lean into fruitless efforts (like a 401(k) or similar retirement plan) or financial advisors to get them rich. 

But someone with a financial education will understand that neither of those (or others alike) involve individual strategizing at all. Within these plans, it’s typical that your only options are to choose from a handful of pre-made funds. That kind of push-button investing doesn’t make you smarter. 

As long as people remain in the dark about how to take care of their own money, they will probably never demand anything more than what they are getting right now. We have become trained to accept whatever these companies give us. The longer they can keep us uneducated, the more money they will make. It’s the perfect business model if you’re in the 401(k) or mutual fund business.

The truth is, it takes almost zero expertise to manage these funds since they are typically tied to the overall stock market—or a specific portion of it. This means they are betting your future on the luck of the market with virtually no additional management to protect your investment.

Our worst enemy isn’t ignorance–it’s apathy

What may be even worse for investors is not caring about what’s happening to their account. Isn’t it a lot easier to pick up the mail, pull out another quarterly statement, shake your head again at the poor results, and do nothing about it—than to contemplate the alternative?

Because asking tough questions and doing something about it can seem difficult and overwhelming. Apathy is easy, but it can cost you a bundle in the long run.

Is it because we’re lazy? Or maybe we think that somehow a hero on a white horse will ride in at the last minute and add several zeros to the numbers on that quarterly statement? In this story, there is no savior but you. No one but you has the reasons and motivation to change the way the story ends.

If we can somehow get past the apathy that is holding us back to proactively take care of our own money, we can point ourselves toward the future we truly desire.

Ignorance puts you at serious risk

What you don’t know CAN hurt you—and probably will hurt you at some point.

This is especially true of investments. The people with the most knowledge will win the most money. The people with little knowledge will lose the most money.

Placing our money in investments you know little about, such as 401(k)s and mutual funds, means that we are giving up control. And giving up control puts us at risk.

What’s your plan?

So, do you have a plan? What vehicles will you need to meet that plan? If you’re not sure of the answer to those questions, a great place to start your plan is by increasing your financial intelligence through financial education. Attend an online webinar

Victory comes to you personally. It is an individual battle. And you have to choose for yourself whether or not you are willing to enter that battle and win.


And as always, there’s no better day to begin your financial journey than today.

Original publish date: March 25, 2014

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