The Curve

Getting to know The Curve and Flow

There’s lot’s of numbers in personal financial planning, so it can get overwhelming fast.  To keep the “overwhelmed factor” in its cage I hooked up with my good buddy and ad man extraordinaire Mike Edelstein to develop the graphic metaphors that you’ll see in this and other posts.

In my view of personal financial planning, ‘PFP’, you need to connect to two fundamental concepts: the Curve (aka ‘the plan curve’ and ‘nature’s curve’) and Flow.  Add a bit of knowing about the context in which they operate (see Financial Literacy Basics) and you’re off and running, I promise.

Ideally, our financial lives when plotted against time “should look like this.”  Let me explain. In everyone’s life there will come a time when we no longer can or want to work. That point is at the top of the curve just before it start’s descending down to the right. Simply stated when that time comes you’ll need to have put away enough money (top of the curve) to live out the rest of your life.

Let’s look it from nature’s perspective.

It’s really no different. The Plan Curve is Nature’s Curve. Squirrel’s store nuts during the summer to survive the winter.  In fact, they actually diversify by setting up multiple nut caches in case some are vandalized or destroyed. And bears beef up all spring, summer and fall so they can hibernate through the winter. Nature will run her course whether you’re aboard or not.  That’s why I call it the “Plan Curve” and your curve should follow Nature’s Curve.

Say hello to Flow

Flow represents the sum total of all your financial transactions to date.  The path it traveled to get to there is your curve. Think of Flow as a point on a road map. It’s the location you’ve reached by a particular day.  The Plan Curve is where you should have been. To bring this all together I’m going to introduce you to a client named Scott and describe his financial journey – which you’ll see reflected in his curve.

Scott’s Flow followed the orange path. In his early 20’s Scott decided he wanted to be a public advocate and attend law school. To go to school he needed to borrow, so his flow headed down and away from the Curve. After graduating he landed a job in NYC’s advocate’s office.  The pay wasn’t great, NYC’s an expensive place to live, so his Flow headed south. At 34, Scott, scored in two big ways. First, his uncle Pete died and left him a sizable inheritance. His flow shot due north, back towards the plan curve. Next, he married Barbara a corporate attorney working for one of New York’s white shoe firms. She was making big money.  Now their Flow continued to rise toward the plan curve. Scott and Barbara were leading the good life.  It looked like their financial life would be sweet. Scott, however, was approached by his friend Tom who had what seemed like an incredible real estate deal and invited Scott along for the ride. Scott accepted. Before too long the deal went south and with it his Flow starting descending.  Then Barbara lost her job.  Needless to say their Flow sunk further. Tensions mounted and reached a peak when Barbara sued for divorce. Scott was 53 and his prospects looked dim. I met Scott when he was 54. By then he had gotten over the divorce and was dating Judy.  With a new take on life he asked me to help get his financial life in order.  He had a new reality and wanted me to help get his financial life in order. His goal was financial independence by 65. I helped him develop the plan (see dotted lines from 55 to 65) and created the benchmarks we use to track it. It’s a couple of years in now and he’s on the way.

For more on this subject check out the Curve+ and Financial Literacy Basics categories.

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57 Responses to The Curve

  1. Alison Wong says:

    I wanted to express my gratitude for coming in and talking to us about saving our finances. I am sure we all have heard from one person or another, to save save save. And even though we hear this, we tend to not realize how much this saved up money can accumulate to. Saving money has been something I have done for years, but investing always seems a bit too risky. Of course we hear of the failure stories and the disappointments associated with the stock market, but we hardly hear of the success stories. I guess the thought that you can start out with a certain amount of money, and leave with nothing often scares people. But if you start out with a certain amount of money and triple it – that would be fantastic.

    But overall, thank you for coming to our school. I appreciate the time you took to help us high-school teens to learn how to save wisely.

  2. Andrew Dublin says:

    Hey Mr. Sanders,
    I just wanted to thank you for taking time out of your busy schedule to visit LaGuardia and teach our economics classes! I learned a lot about basic principles of economics that I never paid attention to or even overlooked. (One thing in particular that stands out in my mind is the Malthusian Catastrophic Theory–I find that to be very interesting!) The thing that resonated with me the most from your discussion was the importance of creativity to the functioning of society and the nation at large (that’s why I’m so happy Obama is investing money in mathematics and science education; we need creative minds to keep our country going!).
    Again, thank you for your time and expertise!

    Andrew Dublin

    • Andrew,

      Thanks for commenting. From my perspective creativity will be key to turning around the current economic situation. I’m glad your digesting the basic principles.

      Jay

  3. Jessie Chen says:

    Hey Mr. Sanders,

    Thank you for coming in to talk to us on friday! I really enjoyed the discussions and the topics you talked to us about in economics. I still remember the first question in particular about the hypothetical situation of being able to have “anything and everything” and if we would be concerned with personal finance if this were true. I really thought that was a great way to start the lesson because it was a question that probably never really crossed our minds. I also enjoyed the comparisons to nature, especially being a science person, it made a lot of concepts and ideas a lot easier to understand.

    Thank you so much! I really enjoyed the lesson!

    Jessie

    • Jessie,

      It’s wise of you to focus on that first question. Contemplating opposing positions tends to expand and refine our thinking.

      If time permits check out my post on Imagine. The author propositions what a world with a virtually free and unlimited source of energy might be…..

      Thanks for taking the time to comment.

      Jay

  4. Michael Petruso says:

    Thank you for your visit to my economics class on Friday. From what you were talking about, it was clear to me that you have a true understanding of how an economy can successfully function. I did not get a chance to ask you this after my class ended, but I wanted to know if you are you an advocator of Keynesian or Austrian economics?

    • Michael,

      It was my pleasure. Was it you to whom I spoke about your economic paper? As to your question; re Austrian school I would say sympathetic. Re Keynes very much less so.

      I wrote a brief intro post related to Ayn Rand’s Atlas Shrugged, (have you read her?) at https://jaysanderscpa.com/2011/03/05/imagine/ which I’d be curious to get your reaction to. As I may have mentioned in your class I’m a big fan of Alexis de Tocqueville. While a major proponent of American style democracy he warns of democracy’s darker side which in its quest for equality at all cost can lead to a greatly diminished individual and citizenry. I’ve got an interesting piece in PDF format by Swiss economist and Jungian, Eugen Bohler, who describes the conflict inherent between the modern economic state and the individual. If interested let me know and I’ll email it to you.

      Thanks for taking the time to comment and question.

      Jay

  5. Diana Lin says:

    Dear Mr. Sanders,

    Thank you so much for coming to LaGuardia and speaking to us about economics! You brought up such interesting topics – especially the tips on compound interest! I have learned so much from your engaging advice; now, viewing your blog, I see even more great points on making good money decision. Thus, I will definitely visit your blog often. It was really a pleasure to meet you and I hope that you will come visit us soon!

    Sincerely,
    Diana Lin

  6. Amanda Saw says:

    Mr. Sanders,
    Thank you for taking the time off your busy schedule to invest in us, the new generation of children, and to make sure that we know something that you hadn’t: to deposit money and to let it grow so that we won’t have to fret about money during retirement.

    Amanda

  7. Saveliy Kelebeyev says:

    Hey Mr. Sanders,
    Thank you for coming to LaGuardia. Compound interest blew my mind away. I still can’t believe that $55,000 can turn into ~$ 3.4 million. That is crazy!! The questions assigned for homework allowed me to prepare for your lecture better and absorb more information. Additionally, I like the plan curve above, for it is sooo simple to understand. Once again thank you for coming.
    -Saveliy

  8. Denisse Garcia says:

    Hello Mr. Sanders. My name is Denisse and I am from Ms. LaSalle’s 5th period class. Unfortunately, I was not able to attend school that day since I had a college interview. I really would have liked to hear what you had to say about economics. I aspire to be the CEO of a major company by the time I am 40 so I need all the financia advice I can get. What kind of savings pan do you think I should apply to my curve to maintain a constant flow upwards (disregarding possible emergencies)?

    • Denisse,

      Sorry you missed the class. It’s great that you want to be a CEO of a major company by 40 and I wish you the best of luck. RE savings 1st step is to start putting away money in a savings account, next learn something about investing and then move some money into mutual funds. Good online source for learning about the markets is Money Chimp. Check out this link http://www.moneychimp.com/articles/risk/riskintro.htm

      Jay

  9. Kimberley Caviedes says:

    Thank you for coming into our Economics class and teaching us new lessons. Who new one could make so much money by saving and investing! It was a shocker…

    -Kimberley Caviedes

  10. Patricia Zhang says:

    Hi Mr. Sanders,

    Thank you so much for coming and speaking to my Economics class. Any financial matter seems otherworldly when we have yet to see or experience it. The example you used was regarding savings was very eye-opening. It was pretty amazing how only $20 a week can accumulate to such a nice fortune. Things like that motivate me to start saving and investing for the future instead of pretending it’s too hard to understand or care about.

    Also, I really enjoyed your focus on creativity, on how when there are less resources, people have to think harder. It puts the responsibility on us, the current and future generations, to build the next great thing to carry our economy forward, especially when things are rough now.

    Thank you again for teaching our class.

    -Patricia Zhang

  11. Mariana Palacios says:

    Mr. Sanders,

    Thank you for taking the time to come speak to my class about something that we should all be fully informed about. Like the cycles in nature, our personal financing can also have its ups and downs and it is necessary to prepare for tough times and a better future. We all found your lesson very informative and it has motivated many of us, including myself to think about ways to invest our money and let it grow. I only wish that other students could benefit from speakers like you, especially since we are about to face intimidating college fees. Once again, thank you for your time and patience with us!

    -Mariana Palacios

  12. Ariana Nicoletta says:

    Hey, Mr.Sanders,
    Thank you so much for taking the time to come and visit my class and I! I think that it’s great that you still come and visit LaGuardia even after your children have left. I have being having some trouble in economics class, what with the financial terms and attempting to get through the economy labyrinth safely (my attempt hasn’t been good so far). However, you explained everything in a concise manner that made a challenging topic easy to understand. I now have more confidence in my economic knowledge. Thank you so much again!
    Sincerely,
    Ariana Nicoletta

  13. Anastasia,

    Creation done well is art, great observation.

    Thanks for commenting.

    Jay

  14. Anastasia Martinova says:

    Hi Mr. Sanders,

    Thank you so much for coming to LaGuardia and letting the classes in on some really helpful financial laws and tips. I thought your presentation was very thoughful, engaging, and especially relevant during our senior year of high school, as many of us knew very little about personal and large-scale finance. I really enjoyed the personal aspect you brought to your presentation; it was fascinating to hear about your shift in career choice, and how history still impacts your financial decisions and serves to solidify several financial laws.

    As Becky said, I especially enjoyed your emphasis on creativity, and how it can get people out of business standstills and dilemmas. Your presentation motivated me to explore finance and perhaps even view it as an art.

    Thank you again for time and enthusiasm!

    -Anastasia Martinova

  15. Becky,

    It was my pleasure. Creativity does matter big time!

    Thanks again.

    Jay

  16. Becky Li says:

    Hi Mr. Sanders!
    I really appreciate the time you put into coming to visit and teach our class on Friday. When you said the words “financial terms,” I was scared. I was afraid that I would get lost and confused because economics is so hard to understand at times, but you made it easier to comprehend. I love the little lesson about how creativity really matters in economy because from Obama’s State of the Union Address, he had said that sparking the creativity and innovative minds of people is what we can do to help change the economy.
    With that in mind, when you told us the story of how Malthus had wrongly predicted about how the population would stop growing, I really saw how creativity matters in the world. Creativity leads to progress. I think that now, I really would be “creative” with my money and save more than $20 each week since I want more than a few million dollars for retirement!

    Thank you so much for taking your time to visit us!

    Sincerely,
    Becky Li

  17. Karina,

    That’s music to my ears. First step is to not consume, save. Second step is to learn about investing and move money from savings to other assets like stocks and bonds. Check out my post https://jaysanderscpa.com/2011/01/09/curve-components-part-4/ to learn about the Dalbar study which tracks investor psychology.

    Thanks for commenting.

    Jay

  18. Karina Diaz says:

    Hi Mr. Sanders,

    I wanted to thank you for coming in on Friday and talking to my class! Because of your lesson, I will open a savings account and take a certain percentage of the money I make to put away; with time maybe I will even try my hand at investing. I was going to wait until I had a steady job to do this, but why wait?

    Thanks again,
    Karina D.

  19. Jennifer,

    Sounds like you hit the nail on the head. Thanks. If you have any other questions or followups just let me know.

    Thanks.

    Jay

  20. Jennifer Jeng says:

    Mr. Sanders,
    It was a pleasure to hear you speak to our class on Friday. Like Ms. LaSalle always tells us, terms and concepts of our economy can be pretty confusing to think about and to comprehend. I’m glad that you were able to help me understand the fundamental laws of economics, and for opening my eyes to the fact that I could save up to millions in my retirement fund! Time to start putting money away in my piggy bank! Thanks so much for stopping by!
    Jennifer Jeng

  21. Christopher Reddick says:

    Hey Mr. Sanders,
    I really want to thank you for coming to LaGuardia HS and giving us a lesson on personal economics. In reading the above information and checking out the curves, I have to say I love the variations of the “flow” you created. I would love to say that the images helped me understand the curve better, but I have to admit they were the main thing that got me really reading it in the first place. Great job!!! Thanks again 🙂
    Chris

  22. Monica Lai says:

    Hey Mr. Sanders,

    Thanks for coming to my economics class on Friday and enlightening a newbie like myself to how I should approach my financial future. I never knew that $20 week could make such a difference and a huge impact when I retire! The case on Scott was very nice touch. It makes the reality of finance more tangable and relatable than just another typical case scenario.

    Thanks again,
    – Monica Lai

  23. Elizabeth Li says:

    Hi Mr. Sanders,

    Thanks for taking time out of your day to visit our class. I find it funny how a scholar/philosopher/writer such as Malthus could have thought that the population would stop growing within 50 years of his time. I guess he didn’t really take in account of the creativity the world possessed. It just goes to show how important it is to invest in science and the arts. I’m glad that you shared this information with us. You made it easy to compare Scott’s Flow to the Plan Curve. Haha, if Scott hadn’t invested in real estate, maybe he would have still been married to Barbara.

    Thanks again,
    Elizabeth

  24. Melanie Schweitzer says:

    Mr. Sanders,
    Thank you for visiting my economics class on Friday. I found it beneficial to hear what you had to say, and I am glad that we were directed to this web page, because it further clarifies what you mentioned in class. I really like your nature comparisons. I always find that I understand things better when they are in reference to other well-known and interesting topics. The information that you have shared has encouraged me to re-think my funds for the future. I never realized how much money I could have if I start saving small sums of it now.
    Thanks,
    Melanie

  25. Elizabeth Kramer says:

    Hello Mr. Sanders,

    I’m very glad I came to your website following your discussion- the explanations for some of the graphs (especially the “Scott’s Flow” one) are much more understandable than some of the brief outlines you gave. It’s much better for someone as myself- a rather financially-naive teenager- to get the entire meaning of such a chart/graph rather than the “gist” of it.

    On another note, I’d like to thank you for coming to LaGuardia to speak to us. I’ve become much more aware to the necessity of carefully monitoring my expenses to make sure I’ll be able to have enough for my metaphoric “autumn/winter”.

    Thanks!

    Elizabeth Kramer

  26. Michelle Stewart says:

    Hey Mr. Sanders,

    Thanks for visiting my class on Friday! I liked the bit on Malthus you gave. It’s interesting to see how much technology & creativity has been a vital part in our society and how it helps the planet sustain human life and gives us more options. It’s nice to prove him wrong and have successful businesses, like Google, up and running and having an incredible market value because it shows that innovation can go a long way. Also, on your blog here, I like the scenario about Scott that you have on here because it really makes the graphs more real instead of just seeing fluxuations.

    -Michelle Stewart

  27. Thalia Pignanelli says:

    Hey Mr. S,

    I learned a lot when you came to speak to my class. I’m definitely going to start putting money away every year and invest it to see it grow.

  28. Thanks Carolyn,

    It was my pleasure. As I replied to Maya don’t hesitate to get in touch with any follow ups or questions.

    Jay

  29. Carolyn Konopka says:

    Hello Mr. Sanders,
    Thank you for coming to LaGuardia and speaking to my economics class! It was very helpful, I had no idea that saving $20 a week could have such a big impact in my financial future. Your graphs here are very easy to understand, and like Maya I like the connection to nature.

    -Carolyn Konopka

  30. Maya Gonzalez says:

    Hi Mr. Sanders,

    Thank you for coming into our class and speaking to us! I really like your approach here; your explanations and analogies to nature helped me to understand much more clearly how to handle and understand personal finance.

    Thanks again,
    Maya

  31. David Goldstein says:

    Thank you for the information.
    I will study it further. It makes a lot of sense, and is easy to understand.
    David

  32. Thanks for the info — I’ll continue to read and follow your teachings!

    Best,

    Shanna

  33. Great examples and great content Jay! I like your very simple approach at making “PFP”, as you put it, easier for the average person to grasp. By the way, thank you for the articles you sent me. Both were very good reads.
    Have a great evening!
    Joshua

    • Thanks Joshua. If you’re interested I’m a big fan of de Tocqueville and I have a 50’s edition of Democracy in America Volume II with an original review by none other than John Stuart Mill. It’s rich. Mill’s review is itself a fantastic read. In any case I’ve scanned it so if you’d like to read it let me know and I’ll email it to you.

      Keep up the good work.

      Jay

  34. Bill,

    Thanks for the input. Keep up the good work at FamZoo.

    Jay

  35. Jay,

    I like the nice simple graphic and I think the term “Plan Curve” is pretty intuitive. “Flow” on the other hand doesn’t strike me as so “intuitive” – feels more like a “path”.

    Cheers,
    Bill

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