At my chess club in college (how cool is that?), we played each player for about 30 minutes or so in a blitz-style (quick game) format, so it resulted in playing about 2 games in each 30-minute round. One time I got paired up with a woman who had won a worldwide tournament, and she was one of the best chess players in the world. For our 30-minute round, we must have played six or seven games. She beat me so quickly each time, and I couldn’t do anything about it. Her ability to prioritize each piece according to their strength and position relative to my pieces was unlike anything I’ve ever seen. It was a long 30 minutes.
The first step to playing chess is to learn how the pieces move. This translates to financial planning, in that one of the first steps to financial planning is learning the rules for all the different kinds of accounts available. Oftentimes, that’s where people stop. They learn about a few accounts, like retirement plans, bank accounts, stocks, mutual funds, etc., and then they believe they have a plan if they have a few of these accounts or products. Just like me playing the famous chess woman, I knew how the chess pieces moved, and I even had the same chess pieces that she had. She quite simply knew how to use the pieces better than I did; her strategy was superior to mine.
So in financial planning, there isn’t a product or an account that makes a plan. And my IRA isn’t better than your IRA. The difference between a strong plan and a weak plan isn’t stock picks or account styles. The difference is a strong plan uses the available tools in the most effective way possible. It’s using the accounts and products and rules together, prioritizing each piece according to their strength and position relative to your goals and values. Does your plan have a solid strategy behind it or does your future depend on a few scattered pieces that are expected to perform beyond their capabilities?