How To Repair
3 Fatal Flaws In Your
Financial Plan
Practical Steps to Help You Build
More Long-Term Savings
Prepared by Gratus Capital
A Wealth Management & Financial Advisory Services Firm
Table of Contents
1
FAILURE TO BUDGET AND SAVE
2
FAILURE TO KEEP BUDGETS “REAL”
3
FAILURE TO ADJUST AND REBALANCE
PORTFOLIOS
If it’s been months or even years since you’ve
looked at your budget, you’re not alone. However,
what typically precedes an enjoyable and financially
comfortable retirement is a realistic budget and
savings plan. Learn steps to help accumulate longterm savings.
When was the last time you took a hard look at
your budget? Could you be overspending? To adhere
to a budget, it’s important to address the issues
surrounding why you’re not able to stick to a budget.
Learn steps to help you improve your saving habits.
Intertwined within your financial plan are your
life aspirations and a clear understanding of how
you’ll maintain your budget and save for the future.
However, the rebalancing of your financial portfolio
is often overlooked. Learn steps to help you adjust
accordingly.
Achilles had his heel. The Titanic
had brittle steel. The 1996 Braves
had home-field hubris...
Point is, we’ve all got flaws. And so do most
financial plans.
In working with hundreds of families and
individuals (many of them quite astute and
financially savvy), there are a few flaws we
continue to see within many financial plans.
What’s more, they all have the potential to
derail your long-term financial goals.
This guide explores each flaw and concludes
with a list of action items to help resolve it.
The Three Most
Common Flaws in Your
Financial Plan:
Failure to
budget and save
Failure to
keep budgets REAL
Failure to
adjust and rebalance
financial portfolios
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Financial Planning
If you’re concerned about your financial plan,
you’re not alone. According to a recent Harris
Poll, approximately 58 percent of Americans
believe their financial planning efforts need
improvement.1
We couldn’t agree more.
In reality, healthy financial plans are generally
underscored by good saving habits. Yet, lack
of saving is the most common and detrimental
flaw of them all.
Let’s take a closer look
at how we can fix this
problem…
Flaw #1
Failure to Save
and Budget
According to the National Foundation
for Credit Counseling, only 39 percent
of adults have a budget and keep
close track of their spending.2
limiting their ability to experience an enjoyable
retirement. HSBC found that people tend to
prioritize short term goals. If forced to choose
between saving for retirement or going on a
yearly vacation, 43% of people opt to save for a
vacation and only 50% save for retirement.3
At Gratus Capital, we’ve heard many reasons
over the years why people don’t budget. Some of
the most common include: lack of time, preferring
not to know, or lack of confidence in making
For example, like you, many of our clients work
very hard. They rise most days and go to work.
In turn, they feel they have a right to purchase
a new car (since they spend so many hours
commuting in one) or dine out several times a
week. Certainly these feelings are real; however,
each of these expenses reduces savings and
can place an individual further and further from
accomplishing their financial goals.
financial decisions.
The Real Reason Why You’re
Not Saving
In reality, the primary reason why most people
fail to budget (and save) is because of their
feelings of entitlement. Now, are we suggesting
that you feel privileged somehow? Certainly not.
What’s more, the problem is compounded
because most people underestimate the amount
of money they need to save in order to retire.
Instead, our use of the word entitlement is
related to all of your years of hard work and
compounded feelings of wanting something in
return for it. These self-imposed expectations
underscore why most people don’t save,
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Over half of households
age 55 to 64
have little or no retirement
savings, and many
have few other financial
resources.4
United States Government Accountability Office
IMPROVEMENT STEPS
Try the following steps to help you improve your budgeting and saving situation:
1. Determine how much you need
to save.
2. Try to save 15-20 percent of your
net income.
Most people do this exercise backwards. They
typically decide what they want to spend, and
then save the rest. Unfortunately, this is a very
ineffective approach and often leaves you with
very little savings in the long term. A recent
2015 HSBC study found that many people
expect their retirement savings to last for 18
years, but in reality, their savings would only
last for 10.3
At Gratus Capital, we recommend that your
total savings should be comprised of no less
than two types of savings accounts:
To build a robust financial portfolio, swap this
thought process around. Instead, ask yourself:
How much savings do I need in order to
accomplish my long-term financial goals and
afford retirement?
This savings goal now becomes the foundation
of your financial plan.
One, the savings in your company-sponsored
retirement plan, such as a 401(k) or 403(b),
which you should be maximizing. Or, in the
case of self-employment, maximizing a Keogh
plan or similar.
Two, a savings account through an automated
cash management system. Specifically, additional
funds are taken from your checking account
automatically each month and invested in
the financial marketplace, above and beyond
your 401(k) or 403(b) savings. Consider it an
emergency fund; however, it’s so much more
than that, since you’re investing and trying to
grow your principal.

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A 2011 HSBC study found that
those with financial
strategies accumulated
250% more
retirement
savings
than those without a plan.5
Not Enough People Have Financial Advisers and New
Research Shows They Should | Forbes
3. Apply all (or most) future raises
to your long-term savings.
If you’re unable to save up to 20 percent, then
try applying all future raises to your savings.
For example, let’s say you’re presently limited
to saving 10 percent of your income, given your
current expenses. However, you just received
a three percent raise. This raise is additional
income above your past earnings. Therefore,
it’s the perfect time to add this newfound three
percent to your long-term savings. Said another
way, you can now afford to save more.
4. Automate all savings.
We can’t stress this step enough. Leave the
decision to save money each month up to
automation. By doing so, you’ll remove the
temptation and the manual effort of saving.
A key mantra at Gratus Capital: Save first, then spend.
However, for this approach to be effective, it’s
important to predispose yourself to this plan
and thought process. What’s more, if you’re
married or living-as-married, both of you need
to agree to this plan before you receive the raise.
You’ll need to approach bonuses or other
windfalls, such as an inheritance, with the same
thoughtfulness. Agree beforehand to save a
certain percentage, or ideally, all of it.
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Flaw #2
Failure to Keep
Budgets REAL
To meet your long-term financial goals, such as having enough money
to travel regularly during retirement, you need to routinely monitor your
spending. Said another way, give your spending a reality check.
Therefore, the key question is:
The Entitlement Creep
Are you remaining within your budget or failing
to stick with your plan?
Sometimes it can be difficult for parents when
it comes to saving, especially after they’re done
paying for their children’s camps, music lessons,
college educations and so on. Investopedia
found that by age 40, many Americans have only
saved an estimated median of $63,000. This
figure is well below the recommended balance
of $165,000.5
To adhere to a budget, it’s important to address the
issues surrounding why you’re not able to stick
to a budget. For example, if you’re unhappy with
your spending restrictions, then your current
budget won’t be effective for the long term.
To improve your saving habits, isolate what it is
about your budget that makes you unhappy.
For Example:
Let’s say you want to buy a boat, but it’s not in
the budget. Certainly, if you have the funds, then
you could reallocate them to purchase the boat.
The entitlement issue tends to encroach right
about the time when parents become empty
nesters. Why? Because many have been making
ongoing sacrifices while raising their families,
and now that their children are all grown up,
they’d like to spend more. Seems reasonable.
However, in doing so, you’re now changing the
roadmap that you originally defined within your
financial plan. The result is that you’ll need to
forgo somewhere else in order to make up for
this extra spending.
Unfortunately, if these same parents were not
good savers while raising their families, then
they need to work overtime to save money,
particularly since future years of being able to
earn money could be limited.
One solution is to work longer. It’s not always a
favorable one; however, it’s a common one when
individuals feel they need to spend more today
in lieu of saving for tomorrow.
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“Statistically, most
Americans are
dangerously behind
at this point, [by age 40]
with an estimated median
savings of only $63,000 – a
sum that falls well short
of conservative benchmarks
of a nest egg behind three
times their annual salaries.6
The Average Retirement Savings by Age
for 2016 | Investopedia
IMPROVEMENT STEPS
1. Try to refrain from accumulating
credit card debt.
Quite often, the interest rates that you pay
to carry credit card debt are higher than
investment and savings interest rates, placing
you in a negative financial situation.
Here’s a good rule-of-thumb: If you need to use
a credit card in order to afford a purchase, then
in most cases, you cannot afford the item in the
first place. Strengthen your financial future by
learning to go without.
2. Delay gratification.
3. Meet as a family once a month.
If you’re having a difficult time cutting back on
your spending, try this exercise:
If you continue to have difficulty maintaining
your budget, then schedule a family meeting
at the beginning of each month. Discuss your
financial goals as a family, so that everyone
understands what the long-term goals are,
helping to make everyone more inherently
accountable. This meeting should be at a
recurring time and mandatory. By working as
a cohesive family unit, you’ll likely save more.
For 30 days, each time you decide to spend, ask
yourself, “Is this something that I absolutely have
to have today or can I wait until next month?”
By doing so, you’ll see a natural decrease in your
spending because you consciously weigh the
true need of the expense.
Try this exercise for 30-to-90 days and you’ll
likely be able to cut back on your spending as
much as 20-to-30 percent, increasing your
savings by the same amount.
In trying to be “real” with maintaining a budget,
the reality is that we need both psychological and
emotional tools to help us. Most people are not
successful in trying to simply cut back. Instead,
you’ll likely have more success in decreasing your
spending by defining reasons to do so.
Ultimately, you’ll need to challenge your mindset
and commit fully to your savings strategy. To do
so requires goals and reasons that motivate you.
Find the latter, and you’ll become a better saver.
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Flaw #3
Failure to Adjust
Plans and Rebalance
Financial Portfolios
IMPROVEMENT STEPS
Life happens. Milestones arrive.
Financial markets go up and down.
It’s a fact of life. Therefore, it’s
imperative to revisit your financial
plan in order to ensure that your
personal goals and risk thresholds
haven’t changed and that your
savings is on target.
1. Utilize automated rebalancing.
Not surprisingly, we have found that
individuals who have a financial advisor tend
to save more. There are many reasons, but
a key reason is that an advisor helps keep
you from making financial mistakes. Also, an
advisor helps hold you accountable.
2. Consult with a financial advisor.
For individuals who do not have a financial
advisor, we often hear that the key reasons
they don’t adjust and rebalance their
portfolios is because they either feel like it
isn’t the right time, or they simply don’t know
what to do.
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If you manage your own financial portfolio, then
invest in financial vehicles that offer automated
rebalancing. For example, perhaps you’re
investing in an asset allocation fund which
typically includes a combination of stocks, bonds
and cash. If automatic rebalancing is a feature,
then the fund would automatically adjust to
meet the portfolio’s original risk parameters and
objectives.
Clearly, we’re biased. Still, if you’re not making
time to actively revisit your financial plan
and rebalance your portfolio, then seek the
assistance of a financial advisor. It’s imperative
to keep a close eye on your financial portfolio in
order to maintain diversification and preserve
your investments for the long term.
Beyond Flaws
If you’re seeking to make an immediate positive impact on your financial
future, then do the following:
• Prioritize saving over spending and automate the process.
• When you do, you’ll help yourself grow wealthy over time.
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At Gratus Capital, our clients
receive a disciplined and
structured process that
helps them save and prepare
for retirement. If you have
questions or concerns
about the financial health
and circumstances of your
life, please contact us for
a complimentary wealth
management consultation.
Our priority is helping others
to maximize wealth and
achieve lifetime goals.
Keep in Touch
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Call to schedule a meeting with a Gratus Capital wealth advisor:
404.961.6000
Meanwhile, learn more about our experienced team and award-winning services:
www.gratuscapital.com
Authored by:
Kevin Woods, CFP®
Director of Financial Planning
The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action,
you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or
your business.
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4
5
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http://www.cnbc.com/2015/04/29/one-third-of-americans-lack-a-future-financial-plan-study.html
https://www.nfcc.org/wp-content/uploads/2013/06/NFCC_2014-FinancialLiteracySurvey_FINAL.pdf
www.hsbc.com/~/media/hsbc-com/newsroomassets/2015/pdf/global-report-artwork
http://www.gao.gov/assets/680/670153.pdf
http://www.forbes.com/sites/jamiehopkins/2014/08/28/not-enough-people-have-financial-advisers-and-new-research-shows-they-should/#62f446957648
http://www.investopedia.com/articles/personal-finance/011216/average-retirement-savings-age-2016.asp
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