Four elements of an ideal financial plan

Question: What would you say are the elements of the ideal financial plan? What should we be shooting for?

Answer: You want to move from "Me at work" to "My money at work" as quickly as possible and with as little risk as possible.

Unless you were born with the proverbial silver spoon in the mouth, you begin your career poor, broke and possibly even in debt. As the bumper sticker says, "I owe, I owe, it's off to work I go!"

Since you had no money, you went to work to trade your labor for a paycheck. 100% of your income came from "earned income," that for which you worked.

If you hope to ever retire, you're going to have to figure out how to move to the other side of the continuum, which is "My money at work." Somehow, you must amass enough wealth to allow the money to work, paying you an "unearned" income. Then you won't work - your money will.

Sounds nice, doesn't it?

You could try to one-in-a-gazillion chance of playing the lottery. Or you could do what everyone else does, which is plan, save, invest and keep going.

Let me offer four guiding principles you should consider when putting together your "Getting My Money to Work" plan:

1. Build wealth carefully - through good planning, not just risk-taking. Any bozo can figure out that the higher rate of return you earn, the more money you'll have. But seeking a higher rate of return often means taking more risk - sometimes more than you realized. Anyone who lived through the last five years recognizes that their attitudes toward investment risk are much different today than they were five years ago.

Good planning not only seeks to grow your money, but also seeks to save money by plugging the leaks in your financial boat.

2. Enjoy wealth care free - by having a retirement spending plan. Plan to spend and enjoy your money without fear of running out. The fear of loss increases as a person gets older. Without a well-conceived spending plan in retirement, you may hoard your money for fear of running out.

But money that is not spent is never worth anything. Actually, all money gets spent - either by you, or perhaps by someone you love…or maybe by someone you've never met.

3. Pass wealth caringly. Once you've enjoyed your money during your lifetime, pass it on to someone you love. Hearses don't have luggage racks or trailer hitches. You can't take it with you. So if you've had the privilege of enjoying your money during your lifetime, why not plan to give what's left to someone or some cause about which you care deeply?

Failure to plan may mean the government, a financial institution, another wealthy person or even a company may get more of your inheritance than your children will. So plan.

4. Preserve wealth cautiously. You need to have an all-terrain plan - one that is rugged. Financial planners tend to be optimistic. I sure am. But a good financial plan needs a touch of paranoia and pessimism. Lots can go wrong!

You might die early, become disabled, get sued, get sick, have a wreck, experience bankruptcy or lose your job. Will your plan stand these stresses?

It is human nature to want to know "where is the finish line?" How soon can you move from "Me at work" to "My money at work?"

No one can say, any more than a doctor can tell a 45-year-old man how healthy he will be in twenty years. But that doctor can tell the 45-year old what to do to maintain the best health possible for him.

You should adopt that same approach to financial planning - maximize the opportunities available to you and you'll be reaching the finish line before you know it.