In the ever-evolving landscape of project management, two distinct methodologies have risen to prominence: the rigid, sequential Waterfall approach and the dynamic, adaptive Agile framework. Drawing parallels between the software development realm and the world of personal finance might seem like an unconventional leap, but let's connect the dots between the Waterfall and Agile project management approaches and their surprising relevance to financial planning in a world outside of a model or spreadsheet.
Waterfall: A Sequential Saga
Picture a cascading waterfall, each phase rigidly flowing into the next – requirements, design, implementation, testing, deployment, and maintenance. This linear structure appears logical, offering a clear path from initiation to completion.It made a lot of sense when times called for selling a stack of discs with your software on it for people to send load into their computers and download. Yet, the Waterfall method falls short in today's fast-paced, ever-shifting digital landscape. The sequential nature of this approach leaves little room for adaptation, making it akin to steering a ship through rocky waters without the ability to adjust course. Any unexpected turbulence in the development process can have cascading effects, leading to delays, increased costs, and less than ideal outcomes.
In the realm of personal finance, the Waterfall method can sometimes feel like attempting to consume the entire financial elephant in one monumental gulp. The linear progression from setting long-term goals to retirement planning can be overwhelming, akin to trying to devour an entire elephant in a single sitting. The sheer magnitude of the task can paralyze us, making it challenging to take the first bite and get any momentum toward progress.
Agile: Built to Navigate Uncertainty
In contrast, Agile methodology gives the nimbleness required to navigate the unpredictable currents of modern software development. Agile, like a white-water rafting expedition, encourages iterative progress, continuous feedback, and the flexibility to adjust as the water itself changes. This approach divides the project into smaller, manageable chunks, allowing for incremental development and regular reassessment of priorities. The Agile methodology thrives in an environment where change is not just anticipated but embraced. The ability to pivot quickly in response to evolving requirements is Agile's secret sauce.
Well that was “informative”, but what’s the point? You probably aren’t reading this looking for advice on a software build. What is in abundance of in trying to plan out our lives across the next 10, 20, 50 years from now? Lots and lots of uncertainty. Agile’s principles can transform the way we approach financial planning. Traditional financial plans often resemble the Waterfall model, meticulously crafted with a linear path from today to retirement. Life doesn’t go in a straight-line! So why plan as if it is does?
ID Your Life’s Priorities
It always starts with figuring out what is important to you. Notice we don’t say “goals” here. We want to start with priorities and what values are most important to you. Goals are those specific things that come out of those first identified priorities and values. Too often when you get told “Tell me your (financial) goals” our brains revert back to what we think we are supposed to do and say rather than what we really want out of life. A great place to start is laying out your vision of what you want to make of Your Story in a few sentences. Where are you? Who are you with? What are you doing? Where did you just come from?
Sprinting in the Right Direction
In Agile development, teams tackle projects in sprints, focusing on specific tasks and goals within a defined, relatively small, time frame. One bite of the elephant at a time. Instead of fixating on the entire journey, Agile financial planning encourages individuals to set short-term objectives, chew through them, and reassess before taking the next bite. This approach allows for those inevitable pivots that we encounter in life, because you're taking it one step at a time, but also doesn’t result in the overwhelming and paralyzing feeling of having to figure everything out all at once. You can get some momentum and progress in the right direction one bit at a time and before long, by stringing together a lot of these small projects you’ve built out an amazing path for yourself.
Rocks First
Identify those things that you can control, that serve as the biggest levers to get you in the direction of those priorities. In personal finance many times that includes things like increasing your savings rate, reducing unnecessary expenses, making adjustments to how you invest to be more tax smart over the long term [believe it or not sometimes it makes sense to pay more in taxes today, to save a lot more down the road!]. At more extreme levels depending on what you want out of life, it may mean selling a house and downsizing or moving to a different part of the country or changing a career.
Focus on Progress
Focus on moving toward achieving those priorities. A lot of financial planning takes time. It isn’t easy to see the results between where you start and finally get to. It can be frustrating that you haven’t gotten there yet. Like we said earlier a lot of where you want to go is actually going to change over the long run, that’s okay, it’s expected. So focus on the positive progress and direction of that improvement in the short-term. Those changes will compound over time and when you look back down the road suddenly you’ve gone a long way.
Continually Update Your Financial Roadmap
Regularly reflect on what went well, what could be improved, and how to improve for the next iteration. Agile projects are dynamic, with the roadmap continually evolving based on feedback and changing requirements. Apply this dynamic approach to your financial roadmap. Life is full of twists and turns, and your financial plan should be flexible enough to accommodate unexpected events. Regularly update your plan to reflect changes in income, expenses, health, family circumstances, priorities, etc.
Embracing the Agile Mindset
For some, the idea of Agile is a struggle, because it doesn’t lay out the clear path all the way to the finish line all at once. I can relate to that, I’d love that too if it was realistic. BUT if you can recognize that when trying to plan and navigate an unknowable future, embracing that things are going to change, then Agile is the framework that makes more sense to get you to your version of success. If you can step back, it really is just common sense to match how you plan to the reality of the situation. Agile financial planning acknowledges the fluidity of life and empower ourselves to navigate the unpredictable currents with resilience and adaptability.
Here at Life First Wealth, our Agile Financial Planning system goes beyond more traditional, static models by embracing a proactive and collaborative approach between the client and the planner. Regular check-ins become the heartbeat of this methodology, fostering open communication and ensuring that the financial plan remains tuned to our client’s needs and their Best Life. The collaborative nature of Agile financial planning transforms the relationship between planner and client into a dynamic partnership, where insights and feedback flow freely.
At the heart of our Agile Financial Planning system lies a keen focus on the intersection of the things that matter and things you can control. In the spirit of focused, targeted sprints, the approach hones in on specific planning areas that result in the most significant impact on an your life. Just as Agile development teams tackle high-priority tasks in short, iterative bursts, Agile financial planning concentrates efforts on the financial elements that matter most. This targeted strategy not only accelerates positive results but also allows for quick adjustments, ensuring that the financial roadmap aligns with your ever-changing life.