The Red Book

As we get closer to the end of the year, we start to think about our annual planning session and making this year's entries in the 'Red Book'. This approach to personal planning is what we think is one of the key differentiators which enabled us to make the progress we've made in the past six years.

I've been doing some thinking to decide what made the difference, enabling us to go from what essentially was a significant negative position when we met to giving up serious work six years later? Some would argue that we were both at a senior level, in a peak lifetime earning period. There is also an argument that there were also a couple of nice bonuses during that period which made a difference. We made some money selling a house which we put into another.

Actually we both made decent money before meeting each other, but the relationship dynamics were different. Two peak wage earners together, I'm sure has made a difference. The bonuses I would discount as differentiators because they are not significantly different than normal bonuses for individuals doing what we do, and in fact, could be considered less as only one of us earned a bonus at a time rather than both. And given the time period, selling a house for more than what you paid for it was the norm. Even cumulatively, there are plenty of other folks who encountered all of the above events in the same period of time. So I don't really think those were differentiators or things that enabled a significant financial leap forward.

There were two things that I think made a difference - number 1, we didn't go out and have a burster buying cars, as a matter of fact we didn't buy any cars except the one in Florida which we paid cash for rather than financing. It would have been quite easy to 'treat' ourselves to a little sports car and all the attendant costs. I think the actual cost of a new car and it's impact on the ability to grow wealth is far more significant than commonly realised.

The second thing that has made a difference, and that which has made the biggest difference is our annual plan. Each year the two of us sit down together and identify what are the most important things or 'categories' in our lives. For each of those, we ask, 'At this time next year, if this could be great, what would it look like?' For example, one of the categories is our relationship, so we ask, 'At this time next year, if our relationship could be great, what would it be like?' That sets the goal or target for that category. We then set similar targets for our other categories - our children, our families, travel, personal development, business, financial, and health.

What's particularly interesting about this is the negotiation process for identifying what we would like to do and setting the targets. Often we want different things or one of us suggests something that the other is not enthusiastic about. This could easily move from being a fun and exciting activity to a battle without a couple of important rules - the 'I'm not really bothered' and the 'You have to come up with a better one' rules. If you're not really bothered about what the other person wants to do, go with it, try it - it could be fun (no martyr or 'if you get, then I get' behaviour either), but you do have to be sincerely not bothered about doing that thing. 'You have to come up with a better one' is the rule which states if you don't like the idea the other person has come up with, you have to come up with a better idea or reshape their idea so it is better. No 'I don't like that idea' or 'No, that doesn't work for me', you have to do the work to take the idea to the next level. Then if the other person doesn't like it, he has to do the same - make it better. This takes time and can be hard work, but ideas then shape and evolve into something much better. And rather than ending up with one person being excited over something and the other dragging their feet, you end up something great which the two of you can get really excited over!

With the targets for each category set, we then break down step by step how we are going to get to those targets. What calls need to be made, what research has to be done, what reservations need to be made, etc. That gives us both the targets and the plan for achieving those targets which is great, but a plan all by itself is just a piece of paper with writing on it. The key is to structure things so you deliver the plan. At the end of the planning session, we review all the activities and add those we can do soon to our to-do lists. That gets us off to a good start. We then work those to-do's.

That's a good start and some great momentum, but the key is keeping that momentum going throughout the year, not just during the planning session. For that we have Sunday morning Starbucks meetings where we take the plan and our to-do lists to Starbucks (or a park or just someplace out of the house that we like to go to). We have a coffee and review what to-do's are done and what to-do's from the plan need to be added to the list. We do this as needed, every week, two weeks or at a minimum every month.

Important thing on the to-do lists, these personal to-do lists have to be merged with the work to-do lists - otherwise work to-do's will always take priority and personal to-do's will be left till last (in other words, not done!).