I am going to go out on a limb and guess that you spend a lot more time on “your portfolio” than you do on “your plan.” Which stocks should I own? Am I in the top-performing sectors? Will international stocks continue to outperform domestic? Is it time to sell my five-star mutual fund that has slipped to a three-star?

From here on out, forget about “the portfolio,” and start focusing on “the plan.” This means turning away from Wall Street (and yes, the daily monitoring of your account balance) and starting to pay attention to the personal financial-planning decisions that are in your control and actually will determine whether you reach your financial goals.

If you look at what is unfolding in the financial services industry, Wall Street is begrudgingly putting less emphasis on “the portfolio” and ramping up its “financial planning” offerings as well.

The price of a portfolio, otherwise known as the “expense ratio” for mutual funds, is being driven to zero as firms like Fidelity, Schwab, and Vanguard stumble over themselves to provide these offerings at the lowest price. At the same time, these same firms are putting enormous resources toward planning tools that allow investors clarity on what needs to be done to reach financial goals.

Are you ready to embrace the same? Are you ready to focus not on sectors, stocks, and stars, but on your 1) saving and spending, 2) your asset allocation, and 3) your personal inflation rate? Let’s look at these three components of your financial plan and how they will impact your financial future.

The chief purpose of a financial plan is the clarity it provides on whether or not your saving (while working) or spending (if retired) is tracking to reach your financial goal. If this is your first attempt at building a financial plan, don’t be surprised if you aren’t on track. That is OK. That is what a plan is all about: creating awareness that is now present at the decision-making table of your future saving and spending choices.

Creating a financial plan is critical for your asset allocation decision. It allows you the opportunity to study how your portfolio should be allocated between stocks and bonds, and the impact volatility has in pursuit of higher returns. This is especially critical for investors who are approaching retirement, and beginning to think about the transition from saving to spending one’s money.

In the current market environment, with persistent low-interest rates on bonds and CDs, for almost all investors, allocating a healthy portion to common stocks is essential for a portfolio’s sustainability over a lifetime of investing.

But the danger in allocating too much to common stocks is the potential impact a bear market has during the drawdown of your portfolio, especially during the years immediately following retirement. In short, do you have enough of your portfolio allocated to bonds/fixed income to cover living expenses so you never have to sell stocks in a bear market to pay the electrical bill?

In creating your financial plan and fine-tuning the various inputs that go into this document, you will soon discover that one of the major factors of the lifetime sustainability of your portfolio is the inflation rate you enter into the plan. No, I am not talking about the CPI issued by the Bureau of Labor Statistics reporting the monthly change in prices paid by consumers. It is your very own personal inflation rate that takes into account your increased spending year over year. Take a look at the impact a 4 percent personal inflation rate has compared to a 2 percent change to determine whether it is worth your while to track this figure.

Your personal financial plan allows you the opportunity to take charge of your financial future. Serious investors wouldn’t have it any other way. Would you?

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