The Offense & Defense Of Financial Planning


It’s almost football season, and after a few months away from the sport, many of us are itching to take our place in our favorite chair, ready to dissect offenses and defenses. Armchair quarterbacking is even easier than it used to be. Some rudimentary searching on your favorite search engine will often give you just enough expertise to sound smart.

Perhaps less enticing, but just as accessible, is true knowledge and understanding of how football plays work. Football at nearly every level relies on key tenets which can bring true appreciation of the sport.

Financial planning isn’t much different than football scheming. Planning has offensive and defensive components so, just like football, your financial plan should likely be comprehensive: excellent on “both sides of the ball.”

And, just like football, there are some key financial planning truths and tenets you should lean on as you establish financial goals and manage your team to achieve them. Here are a few basic components that should help make up your financial plan.

The Offense: QB1

If you’re doing your own planning, you’re the QB. It’s a job you can perform with pride – just keep your head on a swivel, and make sure you’re prepared. It seems that the competition gets quicker and smarter continuously. Make sure you rely on publications like “The Axiom” to stay up-to-date.

At Annex Wealth Management, our wealth manager serves as your QB. He or she get instructions from you, and then works on the field with the other members of the Annex Wealth Management team to execute your vision.

The Offense: The Trenches

Offense, simply put, means scoring enough to win. In financial planning, offense means having enough invested and saved to reach your goals.

Someone new to football might think that scoring is about flash and speed, but many football experts will tell you that offense is won “in the trenches.” Scoring tends to happen when your team wins its less “sexy” battles – on the line.

In planning, the equivalent of the offensive line is your savings strategy. True, saving doesn’t sound as “sexy” as making millions overnight by picking the hottest stock. But you may go your whole life and never pick that hot stock. Saving is something you can start today, and is a product of discipline and diligence.

Your financial plan offensive line consists of the following positions:

  • Retirement savings – As a rule of thumb you should be contributing 10-12% of your gross income in a retirement savings plan such as a 401(k), IRA or 403(b)
  • Emergency savings – Make a goal to accumulate 3 to 6 months of household expenses. These funds serve as a cushion in case of a job loss or those unplanned crises, like an expensive car repair. Planning in this manner can help you avoid a blitz from the blindside – debt when monthly cash flow is reduced.
  • Savings for other goals – Set aside funds for other goals too – even what seems unreachable or extravagant, whether a house, vacation or your dream car.

Great offensive line work requires unity, patience, and an understanding of the “whys.” Savings isn’t much different. Getting started in either area might not immediately net big results – so, if you don’t have 10-12 percent of your gross to set aside, start with what you can, and work towards your goal. Savings is finances in the trenches…the grind.

Offense: The Part Of The Team Everyone Talks About

Offense is more than the line: working in conjunction with the offensive line are the “skilled positions”: wide receivers, tight ends, and running backs. In your financial plan, these positions are occupied by your investment plan.

Just like football, this is the part of the team everyone typically loves to discuss. Headlines seem focused on the markets, and it seems your friends love telling you about their great stock pick. Everyone loves the idea of that long pass that gets you up the field quickly.

But investment planning could be the “three yards and a cloud of dust” running game of understanding your risk tolerance and risk appetite; knowing what you own – make sure all of your assets are working together through diversification followed by regular rebalancing.  This will help manage risk..

Investment management is a skilled position, and often, engaging a professional is important. The professional you work beside should be someone you can trust to run the routes you instruct. There are few things worse than one of your skilled players free-lancing and costing you. Find an advisor you can trust, someone skilled to help you make key investment decisions that are consistent with you and your retirement goals.

At Annex Wealth Management, our investment committee works to manage a balanced, forward-facing portfolio, while our planning team works to make sure your portfolio is in line with your risk tolerance and goals.

How is your team looking on the defensive side of the ball?  In football, most defenses are comprised of three key groups of players – the line, the linebackers, and the defensive backfield.

Defense: Hold The Line

Your financial defensive line is maintaining the proper amount of insurance in your financial plan. When an insurance plan is in place, you’re prepared for the unexpected and the plan will help address any impact of an unexpected event.

Most defensive lines have an anchor – and the center of your insurance plan should be anchored by disability coverage. Just like a nose tackle in the middle of the line, disability insurance is in the right “position” to replace your income if you get sick. Make sure your disability policy can replace at least 60% of your income if it is needed.

Right next to disability insurance on your defensive line is life insurance. The proper amount of life insurance will insure your income is replaced if you die, enabling those who are dependent on you to continue to pay your monthly living expenses until your projected retirement date.

On the end of the line are home, auto and liability insurance. Just like any other teammate, you want to make sure you don’t have a placeholder at any one position. You want the members of your team to do their job.

Make sure your home owners insurance is sufficient to replace your home in the event of loss. Discuss auto and umbrella policy limits with your financial planner and determine if you have sufficient coverage in case of an accident.

Defense: Read And React

Few positions on the field are as equally tied to planning and instinctive as the linebacker position. Linebackers are involved in almost every play, and often call the defense’s positioning.

Budgeting is your team’s linebackers. You’ll rely on your budget every day for guidance, and when you build it, it will require you to be honest and instinctive about what boundaries to set for yourself and how far you can push yourself.

Although there are no right or wrong ways to budget, here are three different ways you can budget:

Zero Based Budget – Zero based budgeting is a way of budgeting where your income minus your expenses equals zero. It forces you to be honest with yourself about every dollar you earn, and track where your money is going before you even get it, and then all your expenses: seasonal, monthly, taxes.

Saving From The Top –Zero based budgeting is a great tactic, but it does require a great amount of discipline and can be exhausting. Some experts suggest that if you struggle with discipline, automatically take money from your income and have it invested into your investing, savings or debt pay-off account. Everything else you receive is your “pay.”

Get App Help – There are plenty of helpful, highly-qualified apps and programs available to help you budget. At Annex Wealth Management, our secure technology allows you to put your banking and billing information into your overall financial plan, so you can have one comprehensive look at your entire financial picture. Mint, Quicken, Personal Capital, and EveryDollar are just a few apps out there that can help you get started and maintain this critical part of your team.

Defense: Anticipating The Future

In football, the defensive backfield can specialize in anticipating what will happen, and then turning the ball over. Your defensive backfield in your financial plan also specializes in turn overs: your estate plan.

A well-developed and executed estate plan anticipates possible outcomes, and then works to make sure your assets transfer efficiently to your heirs when you die. At cornerback should be a health care and financial power of attorney. This position “covers” you if you are unable to make your own decisions.

Special Teams: Forget Them, And They’ll Cost You

Special teams can make a difference in a football game and sometimes, be the difference between winning and losing. In your financial plan, the most important position on your special teams is tax planning.

It’s important to use the tax tools available to you to reduce your tax burden and help improve your plan. Knowing, understanding, and being able to implement basic concepts such as using a Roth or traditional IRA, to more complex ideas, like net unrealized appreciation and managing stock options.

Late in the game, you’ll find that excellence in special teams can be even more valuable. We’ve seen how, as retirement looms, professional tax planning – done in concert with your financial plan by our planning group – has sometimes had a massive impact financially and just in building peace of mind.

Other members of the special teams include long term care, social security and health care funding. As always, finding an advisor you can trust – someone who is committed to acting in your best interest – to work on your side and efficiently address these issues now and in the future.

It’s More Than A Game

Ask any football fan, and they’ll tell you – it’s more than a game. But financial planning has a genuine impact on your life, retirement, and the lives of those you love. It is more than a game. Assemble your team, and find an advisor you trust to help you on the path to victory.