The Monding Framework at a Glance

The Monding Framework is about financial freedom, financial security and financial independence. It brings clarity to your finances. And it helps you do more with your money, making your life safer, more enjoyable and better overall.

Step by step, you take control of your personal finances. This is an essential point. No one else knows yourself and your ideas as well as you do. No one else can really understand your key concerns and articulate them as clearly as you can. That’s why you should definitely control your finances yourself. And the framework will help you do that.

Now, that’s a pretty big undertaking. What exactly does the framework provide to make it as easy, clear and convenient to do as possible?

Bird’s Eye View of the Framework

From a distance, the framework consists of 3 main parts. There is the process, the goals, and the financial building blocks. These parts are accompanied by clear explanations, useful tools, and practical examples to help you work with them easily and effectively. That’s actually all there is.

The parts and components of the framework fit together well to deliver a reasonable solution to your personal finances. You can start with a simple and minimalist financial plan that you can set up in about half an hour and start implementing right away. Later, you can always change, expand, or reduce your concepts as needed. The framework is like a construction kit from which you pick and choose the pieces that fit and make sense for you.

The Process

The process of managing your personal finances has 4 phases with a total of 14 steps. Getting started may require some initial effort and basic decisions on your part. However, there are many tools and examples to help you stay on track. Here is a quick run-through of the phases and steps.

The PLAN Phase

In the PLAN phase, you determine what you want to achieve.

Clarify: Determine where you are today.
Aspire: Define the direction you want to take by setting general goals.
Specify: Work out the goals in detail so that they are concrete and measurable.

The DO Phase

In the DO phase, you develop and implement your personal financial plan.

Design: Find the right financial building blocks to meet your goals.
Schedule: Draw up the schedule for the next steps.
Execute: Execute the financial plan and invest your money.

The CHECK Phase

In the CHECK phase, you examine how your investments have developed and what the overall situation looks like.

Collect: Compile the current data on your investments.
Compare: Compare the current status of your financial investments with your goals.
Assess: Examine risks, the economic situation and economic trends.
Report: Prepare a clear overview of all results.

The ACT Phase

In the ACT phase, you bring together all the results, decide what needs to be improved and act accordingly.

Prioritize: Decide which goals require more or less money.
Mitigate: Decide how you want to deal with risks and the general situation.
Balance: Reallocate some of your money if necessary – or do nothing.
Realign: Recognize changes in your life and your circumstances that should be taken into account in the next run.

The Iteration

Your personal finances are not done after one year, but rather remain relevant for the long term. That’s why the 4 phases are repeated over and over again. It will make you stay on top of your finances and ensure that your financial plan is always in line with your current situation which usually changes over time.

Here’s an example. Say you have a teenage child and you’re saving money for college. As time goes by, your child excels in school and wins a scholarship (best case scenario). Suddenly, the amount you need to save for college is significantly reduced, and you could allocate some money to prepare for retirement or fund other important goals. Clearly, your financial plan needs an update.

And that’s why you should repeat the 4 phases every once in a while, and keep everything updated as your life and the circumstances evolve.

The Step Levels

Besides that, the process is quite flexible. Most steps and components offer up to 3 levels, which differ in terms of effort, scope and details.

The simple level leads quickly to a useful result with as little effort as possible.
The intermediate level lets you take a closer look at some aspects. This means a little more effort, which typically brings deeper insights and detailed results.
The comprehensive level considers pretty much everything on the topic and takes a, well, comprehensive look. You would examine things down to the nitty-gritties.

Usually, the levels build on each other. If you start with the simple level for a specific component and want to use the intermediate level later, you can reuse the existing results from the simple level. Something will be added, but the existing results will still be useful.

Of course, this also works the other way. For example, if the details in the comprehensive level seem to become overwhelming, you can switch to one of the simpler levels and reduce effort and details.

Which level should you use? That depends on your time, your commitment, and the complexity of your situation. If you are unsure, then just start with the simple level. This will familiarize you with the topic. If you want to know more about a topic, or if you feel that more details would be useful, you can move on to the intermediate or comprehensive level.

Either way, the choice is yours.

The Goals

In steps 2 and 3, you set your personal goals. This is extremely important for 3 reasons.

Goals provide clarity and guidance. Every time you are about to take a decision, you should ask yourself what it means for your goals and which path is likely to yield better results at lower risk. This goal-based analysis helps you make better decisions. You always know exactly why you are doing something one way and not another.
Goals make things more binding. According to scientific studies, the likelihood of achieving them increases simply by formulating them precisely and putting them down in writing. Having done that, you have not actually achieved the goal yet, but the likelihood of doing so has significantly increased. I think that’s worth it.
Goals allow to measure what you have done so far and how close you are to achieving your goals. This is only possible with clear definitions and hard numbers. You can explicitly see that you have achieved 42 % of a (measurable) goal, and according to the plan, only 40% was planned at this point. Great, it’s going really well. Unfortunately, the opposite may also happen from time to time. As you spot difficulties in time, you can act and adapt before it’s too late.

Ultimately, the whole framework stands for knowing your goals and working systematically to achieve them. You actively take charge of your life and continually improve your situation by spending money on the things that really matter in your life.

Financial Building Blocks

There are a plethora of investments and financial products you can put your money into. Just to name a few, think real estate, stocks, gold, insurance, and more. How do you deal with all these choices and still keep things in perspective?

The real question is rather what you need to get closer to your goals. Well, actually you are looking for investments that have predictable behavior and predictable characteristics. This is the only way to ensure solid planning and execution. It could be an investment that…

…reliably increases in value in the long term.
…pays out money regularly and generates reliable income.
…retains its current value in almost any case.
…protects against the financial consequences of life risks (illness, accidents, liabilities, …).

Unfortunately, there is no single investment that can do all this at once. We need to come up with a smart idea. What if we were to pick certain investments with due diligence, and add strict rules how to handle them? Could we build something that behaves as predictably as possible at least?

These thoughts lead to the concept of financial building blocks that implement the idea of (almost) predictable behavior. Here are a few examples.

A broadly diversified ETF that follows a long-term trend should also increase in value over the long term. Unfortunately, it can fluctuate in value and often pays nothing.
Dividend stocks, selected according to a clever set of rules, pay regular dividends. Unfortunately, they can fluctuate in value and may change characteristics and payments over time.
Liability insurance protects against the financial consequences of some mishaps. Unfortunately, it costs money instead of making money.

For the mathematicians in the audience, let me give a precise definition.

A financial building block combines one or more financial products or assets with sets of rules in such a way that the building block has a high probability of delivering an expected financial outcome. This allows financial building blocks to be used systematically to support and achieve specific personal goals.

The concept of financial building blocks focuses on predictability. And different financial building blocks will have different characteristics and evolve differently over time. This is great because we can choose the ones that best match your goals. And goals with different characteristics require financial building blocks with different characteristics as well.

Additions and Enhancements

It’s hard enough dealing with your personal finances. Some help would be appreciated, and it is readily available. You will find explanations, tools, and examples in the Monding framework.

Simple and Clear Explanations

All topics in the Monding framework are described and explained in rich detail. There are articles, images, diagrams, and the future may additionally bring videos, podcasts and other media.

Powerful Tools

The tools will help you complete your personal finance tasks quickly and efficiently. There are elaborated spreadsheet tables, clear overviews and summaries, checklists, templates, specific suggestions to use, and much more.

Practical Examples

In addition to descriptions and illustrations, some topics include comprehensive real-world examples. You will find analyses, estimates and calculations, and even filled templates or data-filled spreadsheets that gives you a full-blown idea of how to use the concepts and tools in practice.

What’s next?

The best way to get familiar with the framework is to start working with it by yourself. For example, there is a quick run-through that will get you to your first financial plan in less than half an hour. In addition, you could also have a look at a fully worked example that walks you through the process step by step.