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| Last night’s post was an accidental re-post of our November 5th newsletter, “Overnight” version 2.0 under the wrong title. Here is the sequel, expanding on the topic of Good Decisions.
Good DecisionsMy most recent newsletter, “Overnight” version 2.0 (about becoming and overnight financial success) was one of the most read and shared of my recent publications. If you haven’t read it, read it now. The feedback from “Overnight” tells me to expand on a related topic of making good business, personal, and financial decisions. The plan outlined in this newsletter has been used by my business clients and modified and used by families. The initial purpose is to execute significant and rapid debt reduction. The plan works! I have walked through it with my clients thousands of times. The planning process that I use includes (in reverse order) four steps:
I call this plan the Automatic and Systematic Planning Process. I think I developed this planning method, but frankly, I’ve used it for so many years that I do not remember the early days of how this planning process evolved. There is so much common sense in the process that it seems disrespectful to claim creation rights to the Automatic and Systematic Planning Process. Automatic When appropriate, use automatic payments, such as recurring bank drafts, automatic bill payments, and anything else that can be automated. Make it automatic. For example, the technology exists to make the time clock obsolete. Likewise for auto mileage logs. In the construction trades, tracking employees and jobs can be, to a large degree, automated. Automatic operations significantly reduce the potential for human error or interference with the plan. Automatic processes minimize the need to make decisions. Make decisions but make fewer of them. There is a famous story about a meeting between President Bush and President Elect Obama in which President Bush explained this process of ‘automatic decision making’ to then President Elect Obama. President Bush told Mr. Obama that he only owned two suits – a gray suit and a blue suit – of which he had nine each. On day one, Barbara laid out the gray. The next day, she laid out the blue. He told Mr. Obama, ‘Barbara even lays out my shirt and tie. I never have to think about what I’m going to wear. I save my decision making for bigger issues. Your job, as President, is to make decisions.’ If you look at photos and videos of President Obama, he always wore a dark gray or a dark blue suit on alternating days as did President Bush. Automatic processes have other advantages The larger economy understands automatic processes Systematic Another example is the Roth IRA. I particularly like Roth IRA accounts when they are available. A Roth IRA account is a “system”. You fund a Roth IRA, and the Roth IRA invests the funds in a planned and systematic program. The Roth IRA can be funded in an automatic or un-automatic manner. For example, you can write an annual check for up to $6,000 ($7,000 if you’re age 50 or older), deposit that amount into a Roth IRA account and let the Roth IRA system take over. A far better alternative is to have an automatic monthly bank draft in the amount of $500 deposited into a Roth IRA account. A Roth IRA is more effective if it is automatically funded. Business systems always work better with an automated front-end. You can invent your own systems Automatic and Systematic: An Example
Deliberate Deliberate behavior and deliberate decisions will put you in charge of your finances! Deliberate is a public word. In business or family decision making, deliberate requires consultation and discussion within your business and, possibly, with outside counselors such as your CPA. The most productive of these discussions are the three-to-five-person discussion clusters that form around a business issue. These ad hoc, informal meetings most often accomplish the real management work. The formal written business flow chart and the informal decision-making structure are always very different! Once a decision is reached, the automatic-systematic structure to support the decision is designed and installed. The deliberate behavior drives the creation of the automatic-systematic support structure. The automatic-systematic support structure is easily modified as it evolves to support the deliberate decision-making. Premeditated Why does Widgets Inc. exist? What is its long-term mission? The premeditation determines how to best accomplish that mission, your mission. The mission may not change. How to best accomplish that mission will change. What is your mission? The mission of our CPA firm is two-fold and well understood. Many of you have heard me explain our mission in plain English.
Every client tax return, audit, consulting engagement is, to some degree, focused on our primary issue: the financial success of our clients. Our second goal is to offer a quality lifestyle for our employees and staff. The CPA industry – primarily through overwork – has a very bad reputation of destroying its employees and staff, particularly its young staff. Overwork is not the only weapon the CPA industry uses to undermine a healthy work environment. These are our goals. This is the DNA of our CPA Firm. What is your goal? You must answer that question. The answer to that question will color your deliberations and how you establish your automatic systems. Hint: making enough money to take care of my family is, by itself, not strong enough. You need to have more substance to your goals. Conclusion
Sincerely, Steve Richardson, CPA
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