“The perfect financial plan isn’t the one that looks like it gets you there the fastest. It’s the one that gets you there under the most circumstances.”
– Kyle J Christensen
By Kyle J Christensen, Founder, Principles-Based Planner, Unique Advantage
Unique Advantage Monthly Client Email – March 2025
10-12 minute read
Ok, so, maybe the title of this article is a little misleading and should have been “The Most Perfect Financial Plan,” because I believe no one actually has a perfect financial plan. By that I mean that I don’t believe anyone’s plan can’t use some sort of improvement, even my own! Perfection is something we can constantly strive for but are unlikely to obtain in this lifetime. Having a perfect financial plan would likely require perfect foresight into the future, which none of us have. The next best thing would be to have a more perfect plan. My goal with this article is to help spark some ideas within you as to what you could do to make your plan much better.
What are the elements to “the most perfect financial plan?” And what all does a financial plan entail? Simply put, a person’s financial plan is made up of 1) Income (earned, passive, mostly-passive, government benefits, etc), 2) money management (budgeting, tracking, etc), 3) debt management, 4) tax mitigation, 5) savings, 6) protection (insurance and legal), and 7) investments.
1) The first ingredient to a perfect financial plan would be to have income. As Tobey Keith says, “You gotta getcha some.” Without income, nothing else works well. For many, this means initially investing in the obtainment of specialized training or education. It’s proven that specialization creates wealth, not generalization. I think this is an important point, which we will come back to when we get to the area of investments. In one of the classic financial books, Think and Grow Rich (Hill), it states:
“There are two kinds of knowledge. One is general, the other is specialized. General knowledge, no matter how great in quantity or variety it may be, is of but little use in the accumulation of money.”
…
“Before you can sure of your ability to transmute DESIRE into money its monetary equivalent, you will require SPECIALIZED KNOWLEDGE of the service, merchandise, or profession which you intend to offer in return for fortune.”
Not only do we need to have the ability to generate income, but we have to be able to generate more than what is necessary to simply survive. Sure, there will be times when survival is the goal (i.e. if you are a medical resident earning almost nothing for a period of time), but somehow you have to go beyond just “making ends meet.”
Sources of income can be your job or profession, Social Security, and/or income from businesses and investments. Ideally, over time, more and more of your income should be generated passively or mostly passively from businesses and investments. Ultimately, financial freedom is caused by income generated from real assets (businesses and investments).
2) The next ingredient to a perfect financial plan is money management. Parkinson’s Law states that we will consume whatever amount we get. That’s our natural tendency. And in today’s world, it’s easier than ever before to spend everything you earn (thanks Amazon Prime!). It’s true, you can spend any amount of money you earn, AND you can come up with any sort of justification for doing so. Trust me!
There are people who “need” to fly first class and “need” to buy Starbucks every day. The idea that, “I would save more if I just made more money…” is a lie. The statistics show that the more people make, the more they spend. Higher income doesn’t usually equate to higher profitability, UNLESS a person intentionally works against this natural tendency. Author Mike Michalowicz (Profit First) explains:
“If there is one thing that will forever change your relationship with money, it is the understanding of Parkinson’s Law. You need to intentionally make less toothpaste (money) available to brush your teeth (to operate your business). When there is less, you will automatically run your business more frugally (that’s good) and you will run your business far more innovatively (that’s great!).“
Everyone knows that if a business doesn’t pay close attention to all inflows and outflows, it will fail. Doesn’t that rule also apply to us individually? Absolutely! Why is it that the large majority of Americans do not track all of their income and all of their expenditures? The reason is because it’s work. And this will be terrible to say, but people don’t like to work (for the most part). They seek comfort and ease, not discomfort and work. So, even though it’s significantly easier today than at any other time in the history of the world to track all income and expenses, most people don’t (and most simply won’t). I think the phrase “ignorance is bliss” may apply here. Most Americans simply want to spend money without planning ahead or being accountable to anything. The downside of being on autopilot financially, is that money issues have a way of forcing us to pay attention, eventually.
The best financial plans have active and intentional money management. They know where the money is going and where it went. In fact, they purposely direct where their money goes and intentionally deprive their spending.
3) The next ingredient to a perfect plan is the avoidance/elimination of unproductive debt and the wise use of productive debt. I don’t like the words “good debt” and “bad debt.” Debt is neither good nor bad. It is, however, productive or unproductive. Productive debt increases your cash flow. Unproductive debt decreases your cash flow (or profit). A good example of productive debt is debt that is used to increase a person’s pay (i.e. certifications, mentorship programs, professional training, trade skills, formal education, loan for a business, loan for an investment property, etc). Unproductive debt is usually the result of overspending, lack of intentionality or consciousness, and uncontrolled lifestyle (Parkinson’s Law).
The perfect plan avoids unproductive debt by constantly and consistently saving money and maintain a high level of liquidity (cash). Everyone will experience unforeseen events in life. Life throws curveballs. Everyone will need to replace vehicles, roofs on houses, dishwashers, and almost all other capital goods. They have a shelf life and when it expires, they break down and need to be replaced (this is called planned obsolescence). Technology changes, which over time forces us to adopt and purchase the new technology. Are people saving enough for these things? If they aren’t, they will go into unproductive debt.
For the most part, people should pay off their unproductive debt (exceptions may be where the interest on the debt is lower than annual inflation – but even that’s still just a maybe). But, we shouldn’t approach debt elimination like some people do with their diets (an all or nothing approach). Paying off debt should not be at the sacrifice of all of the other financial principles. Paying off debt should not be instead of saving money. Saving money is addressing part of the root cause of the debt in the first place. So, strictly focusing on paying off debt alone, and sacrificing saving, is simply addressing the symptoms and not the disease itself. A perfect plan makes sacrifices in lifestyle in order to pay off unproductive debt, not savings and protection.
The perfect plan intentionally restricts money that is spent, by prioritizing saving and protection first (as well as charitable donations), and then living on the remainder. Doing this avoids almost all unproductive debt over a lifetime.
4) A perfect plan minimizes taxes where appropriate but is more focused on the long-term objective of financial freedom than it is on the short-term decrease in taxes. Sure, taxes are a major expense throughout our lifetime. Maybe we’ll get to the point where the Federal Income Tax gets eliminated (it was meant to only be temporary when it started in 1913). For those that think it’s impossible, you don’t have to have an incredible imagination. Currently there are nine states in the country that do not have an income tax. And interestingly, two of the top revenue-generating states have no income tax (Florida and Texas). It’s also interesting to note that California, which has the highest revenue (mostly from income taxes) is also one of the states in the most trouble financially (according to California’s Fiscal Outlook for ‘24-’25, California is expected to have a deficit of $68 billion). So, income taxes for governments don’t actually equate to financial stability.
In the meantime, we have to deal with taxes. Some people would like to pay no taxes and are constantly looking for ways to reduce it for this year. The problem is that this mentality often creates bigger tax problems in the future and results in giving up control and use of significant funds for long periods of time. For example, people deducting contributions into retirement plans may see a decrease in the amount of taxes they owe this year but eventually will be forced to pay the tax on the money in the future. When I ask people what they think will happen to the tax rates over time, almost all say that they believe taxes will increase. Couple that with the fact that even if tax rates didn’t increase, but your investments perform well, and you actually make more money in the future, you will still pay more in tax.
Sometimes the best time to pay the tax is now. When people do everything they can to avoid tax this year, they are also, oftentimes, giving up control and use of their money for very long periods of time (sometimes several decades). There are a myriad of problems associated with this, including: Opportunity Costs, lack of cash flow, lack of expertise in where the money is invested, lack of influence over the performance of the investments, and so on.
Consider this, Long-Term Capital Gains Rates are as low as I’ve seen them in my entire career (more than 25 years). The highest rate is 20%. Someone making millions of dollars per year only pays 20% on long- term capital gains. So, the point is, our goal shouldn’t be so much reducing our income as it should be changing where it’s coming from. I’d recommend reading Rich Dad’s Cash Flow Quadrant for some great information about this change in paradigm.
5) The perfect plan is one in which the person saves constantly and consistently. Highly successful people have highly successful habits. They constantly look for opportunities to increase their savings too. These habits are what leads them to consistent and enduring success. Saving should be a habit. It should not be something that you have to think a lot about. It should be automatic and systematic. Most people are terrible savers (for reasons we’ve already addressed). How does a perfect plan deal with savings? It happens first. Not last, after all other expenses are paid. It’s THE priority. Without success in saving, a person will not achieve any other success financially (at least, not for long). And people who were good at saving, and then stop saving, end up failing as well.
Tony Robbins stated this about the “decision” of saving, in his book, Money Master the Game:
“As you can see, the “machine” can’t start working until you make the most important financial decisions of your life. The decision? What portion of your paycheck you get to keep. How much will you pay yourself – off the top, before you spend a single dollar on your day-to-day living expenses?”
Tony didn’t just make that up! He discovered that this was “the most important financial decision of your life” after interviewing the richest people in the world. That’s what they told him! And who are we to argue with the most financially successful people in the world today about the importance of this “decision”.
When you pay yourself first, you force yourself to live on what remains. “What can I afford?” becomes an easier question to answer. If buying “the thing” (whatever it is) will cause me to pay myself less (to save less money) then, I can’t afford it. Plain and simple.
One last thing regarding saving: Saving and investing aren’t the same thing. So, regularly putting money into a retirement account or automatically investing into anything is not saving. They are not the same word, and they don’t mean the same thing. Financial institutions try to convince us that they are the same thing. They’re not. Saving is LIQUID, GUARANTEED, AND ACCESSIBLE. No investment has all three of those characteristics. Therefore, no investment of any kind can perform the vital role that savings plays. I’m not at all suggesting that people should not invest. I am saying they aren’t the same thing and don’t do the same thing.
Mindlessly (automatically) investing is also not really investing, by the way. It’s gambling. Look up the definitions of those two words and you’ll see that I’m right.
A perfect plan has a great habit of saving sufficiently (at least 15% of gross income) and has built up and maintains a large amount of liquidity. The reasons are because life is unpredictable, that things happen that we do not expect, that things wear out and need to be replaced, and that opportunities come and go. And if you aren’t prepared to take advantage of those opportunities, you will miss them. And if you aren’t prepared for the financial curveballs of life, you will be in debt (unproductive).
6) A perfect plan has Maximum Protection. Financial protection is the “ugly part of the building.” It’s the foundation. But everyone knows that if a foundation isn’t done right, the building will fall. And it doesn’t matter how nice the building is or how expensive the furniture inside is. If the foundation is done poorly, it will fail.
The perfect financial plan isn’t the one that looks like it gets you there the fastest. It’s the one that gets you there under the most circumstances. No one would want to get on an airplane that cut out all safety measures in order to fly faster. So, why do so many people try to cut out financial protections in order to put a few more dollars into investments? It makes about as much sense, which is none at all.
I get it though, almost the entire financial world (all of the “experts”) is telling you to minimize your protection (“only pay for what you need”) in order to maximize your contributions to Wall Street or other investments. Protection isn’t as exciting as investments, so it’s easy for most people to be persuaded to cut corners and trim down their protection in order to do what’s more exciting. Doing so, however, is placing a lot of faith in your ability to predict the future and time everything.
In my 25 years of experience in financial planning, working with hundreds of people across the nation, I can say that few people are well prepared for the things that can go wrong in a person’s financial life. They usually don’t think those things are going to happen to them. Or they think it’s going to cost too much (aka take away too much from their ability to invest or spend). In most cases, however, they really don’t know their options. They aren’t experts in the protection area of their finances. Combine all three of these “reasons” and it’s easy to see why people aren’t prepared.
A perfect plan is one that works under the most circumstances. The things that can go wrong include: death, disability, accident, illness, injury, property damage, lawsuit, natural events, government shutdowns, job loss, decreases in income, and so on.
A perfect plan transfers the risk of many of these things over to massive financial institutions for a comparatively small price (compared to the potential benefit). This is called insurance. A lot of people think, mistakenly, that rich people buy as little insurance as possible. The exact opposite is true. In fact, no one owns more insurance than banks and financial institutions. And no one owns/controls more wealth than they do. So, maybe there’s something there for us to glean.
Insurance and legal protections are not about predicting whether or not those things will happen. They are simply about being prepared and having the best possible outcome if and when they do. Because bad things happen to people all the time, people that weren’t expecting them to happen. Unfortunately, a person cannot change their protection when they need it. They can only change it BEFORE they need it. So, when people ask me if they “really need that amount of coverage,” the only correct answer is “I don’t know.” The flip side of that answer is that neither do you. We (you included) cannot predict the future, what things will happen, when they will happen, how much they will cost, how long they will affect you, or anything else. What we can predict is that everyone will experience things that they didn’t expect. The best plan doesn’t try to predict those things, it’s simply prepared, in the best manner possible for them. If you don’t know what you can do to maximize your protection, don’t wait! Find out from a Principles-Based Financial Planner® what you can do to make improvements. Timing is everything, and timing is almost never what you expect it to be.
7) The perfect plan invests in real assets. The financial industry is selling you “fake assets.” How do we know this? That’s quite a bold and accusatory statement, right? Well, let’s first define what an asset is. If you look at a Balance Sheet, there are two columns, one is for Liabilities and the other is for Assets. Robert Kiyosaki (who has gone a tiny bit crazy lately) gives us a great definition in the majority of his books. He tells us that the direction of the cash flow shows us what is a liability and what is an asset. It’s a brilliantly simple explanation. Things that cause money to flow away from us are liabilities. Things that cause money to flow towards us are assets.
For the most part, financial institutions only create financial products that are designed to have money flow to them and not to us. Therefore, what financial institutions create, for the most part (almost all), are fake assets that only produce cash flow to the financial institution.
Imagine if you got a job and the employer said, “We’re going to pay you, but it will only be via quarterly statements. You’ll be able to see what we’re paying you by watching your account values increase over time. And, when you reach 65 years old, you can start to pull some of that money out of the account and use it. Ok?” Uh, no. Not ok. No one would go for that, EVER! But, and it’s a big but, most people actually do fall for this. It’s become “normal.” Not in people’s employment, but in people’s so-called investments. People have become perfectly willing and happy to get paid by a quarterly statement of account values, versus actually receiving any money at all.
Here’s the bottom line, a perfect plan invests in real assets, assets that produce income back to you. Becoming financially free has much less to do with the value of the assets than it does the cash flow from the assets. Just as a person would not be satisfied with a job that paid in quarterly statements of asset values, a person cannot become financially free based on dots on a screen or a printout of account values. Somehow it must translate into income.
The biggest problem with investing in real assets is that it requires real time, effort, knowledge, and money on the part of the investor. Again, if something requires extra work, most people won’t be willing to do it. So, most people won’t invest in real assets. They’re going to be happy, at least temporarily, investing in counterfeit assets offered by financial institutions. Why? Because they are easy, require little time, little effort, little knowledge, and little initial money.
We live in a day when the alternative to real investing is super tempting. If you could do almost nothing, other than writing a check, and supposedly accomplish the same thing as someone who has to take the chance to start a business, borrow money for the business, hire and deal with employees, which option would you choose? Most would choose the easy path. I’m here to tell you that the easy path does not exist. It’s a mirage. And the more people fall for this lie, the more damage it does to our society. The idea of getting something for nothing (or almost nothing) should be seriously avoided like the plague, because it is a plague on society and will cause the downfall of it.
I have a quote on the wall in my office by Booker T. Washington, which says, “Nothing ever comes to one, that is worth having, except as a result of hard work.” All of the technological and financial advances in the world will never get rid of this eternal principle. The moment people stop believing in this, is the moment we descend into disaster. Nothing is free.
A perfect plan understands and believes in the principle of work. It understands what real investing looks and feels like. It can’t be fooled by fake alternatives. It’s not afraid of sacrificing time and effort. In fact, it knows that that’s the only real path. A plan that does not require true sacrifice does not have the power to make you financially free.
Kyle J. Christensen
P. S.
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