Financial management

Want to build more wealth? ‘Strategy stacking’ is the key

- May 2, 2023 4 MIN READ
Young plants growing out of stacks of coins grow your business on a budget concept

During my career as a financial planner, I’ve worked with a variety of clients, including those who are self-employed. The thing that I notice time and again is that they’re motivated and busy people and their focus is on meeting the needs of their own clients. That’s a great set of values and behaviours for creating and sustaining a successful business, but somewhere along the way you need to think about yourself and your own personal financial goals and needs, writes Luke Smith, author of Smart Money Strategy.

In its simplest form, strategy stacking is a process I created to put together different financial planning strategies for my own financial planning clients. The financial planning strategies you stack (or don’t stack) will impact the outcomes you achieve.

You might think you need to stack all the financial planning strategies you can in order to maximise the probability of achieving your goals. That approach more often than results in a more over-complicated financial life. It’s better to stack the right financial planning strategies at the right time.

Let’s look at some of the fundamental principles you need to adhere to, to get financial planning strategy stacking working in your favour.

Like any good plan, you need to set goals

Having a focus on your own goals makes a world of difference. Your only obligation in your adult financial life is to yourself, your spouse and your kids if you have them.

Your goals should reflect what’s most important to you, or your ‘why’. And just like business goals, you probably should set some short, medium and long-term goals for your financial life.

Here are some examples:

  • Short-term goals might be to save some money to invest, or to pay down a credit card or personal loan.
  • Medium-term goals might be to save a home deposit or pay off a personal loan for a car.
  • Long-term goals might be to pay off a mortgage or retire comfortably when you’re ready to give up working.

Setting goals creates focus. Sure, there are things you can do immediately to start the pathway to short-term goals, but there are things you can start immediately to achieve medium and long-term goals too.

Don’t be too short-term focused at the expense of taking actions on your medium- and long-term goals.

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Have and keep good financial foundations

I’ve genuinely lost count of the number of clients I’ve had sitting across the desk from me who earn great money, but don’t know where it goes.

Paying attention to your spending doesn’t mean that you have to give up the things you love, like a morning coffee on your way to work, either. It’s not like a diet. It’s about getting more value out of the money you earn.

Here are my five key financial foundations:

  • Respect your earnings – over your lifetime you’ll earn a lot, don’t take it for granted.
  • Pay attention to your spending – get the most value you can out of all your spending.
  • The cost of money is interest – if you’re paying it or earning it, make sure you get the best deal you can find.
  • Be realistic – there’s a real danger in being too over-confident and in being too conservative. Stay within your own comfort zone.
  • Reward yourself – when you achieve a financial goal, go and celebrate it. For example it might be going out for a nice dinner or getting concert tickets for every $25,000 that’s saved into super or paid off a home loan.

Without getting the foundations right from the outset and checking them on an ongoing basis, you’re going to put any strategy stack you build at risk. Good foundations are key to good performing strategy stacks.

Start stacking your strategies for success

Once you’ve sorted your foundations, it’s time to get strategy stacking. Start with the basic stack.

The basic stack is your budget. It’s where spending meets earnings. Understanding what you earn and where it goes is essential if you genuinely want to stack the odds in your favour. The basic stack is the floor of your financial house. All the strategies you stack go on this floor. So, spend some time understanding and adjusting your basic stack so you give yourself the best chance of success.

Once the basic stack is sorted, move on to exploring the framing strategies, investment strategies, superannuation strategies, retirement strategies, wealth protection strategies and estate planning strategies that can help you meet your goals.

Remember, five or six well-stacked strategies might be more solid and less complex than 30 awkwardly-stacked strategies that are complex and hard to manage.

Remember to assess, execute, review, refine and repeat. By this I mean that strategy stacking is not set and forget. How you’re travelling towards your financial goals is something you’ve got to check in with from time to time. Make adjustments and educate yourself or seek financial planning advice if you need to.

Read more advice from money experts in our Financial Management section.


This article was first published on Kochie’s Business Builders, read the original here.

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