A financial plan on the back of a napkin

Many people score poorly on financial literacy tests. In real life, they make real mistakes too. Often those money missteps are emotionally driven decisions.

If this is you, don’t beat yourself up. Think of it this way: When driving, you should look in the rearview mirror, but you can’t stay focused there. You have to watch what’s ahead.

To help you move forward in your finances, my pick for this month’s Color of Money Book Club is “The One-Page Financial Plan: A Simple Way to Be Smart About Your Money” (Portfolio, $24.95) by Carl Richards, who is a certified financial planner and a columnist for The New York Times. Richards is best known for his simple cocktail napkin sketches about money.

Before you get deep into the book, Richards does some truth telling that I’ll admit surprised me given his background. He lost his home in 2010. He borrowed too much to start a business and then the housing crash came.

Like so many others, he ended up having to sell his house in a short sale, meaning the bank allowed him to sell it for less than what was owed on the mortgage.

You are probably wondering how someone who makes a living advising other people on their finances could find himself in such a position.

“Yes, I’m a financial adviser,” he writes. “But in the heat of the moment, when my income was rising rapidly, when home prices were soaring with no sign of stopping, I wasn’t thinking like one. I’m also human, and a big part of being human involves irrationality.”

I appreciated Richards’ honesty and humbling himself, acknowledging his mistake and then using that experience to help people avoid the same detour. “Financial success is more about behavior than it is about skill,” he writes.

Richards is a man of simplicity, hence the one-page plan. It’s a strategy to get you to determine what really matters to you. So grab a Sharpie and a piece of paper, he suggests. Write down three to five action items. You might write, “Save for a house” or “Pay off my house before I retire” (that’s on my plan). Keep in mind, the list is “a snapshot not an instruction book,” Richards writes.

Don’t worry, there are details in the book — how to create a net worth statement and a budget, tips for saving, spending wisely, paying down debt and finding a good financial adviser. You’ll get guidance on turning your wishes into measurable and attainable goals. But all of that comes after you answer the most important money question: “Why is money important to you?”

“Recognizing what really matters to you is the first step toward making financial decisions that are in sync with your values,” Richards writes.

And here’s something I like about Richards’ philosophy. We need to recognize that much of our financial planning involves guesswork, and that’s OK. “It’s tempting to believe that there’s someone out there who can rescue us from our uncertainty, someone with sophisticated-enough algorithms or a brilliant research staff. But there isn’t. … Financial planning boils down to making the best guess we can about goals that will help us live the life we want.”

Also, let go of goals if you find you can’t meet them. Seriously.

“No matter how good our guesses, we may have to confront a hard truth: We won’t have enough money to reach all of our goals.”

Amen to that. My family and I wanted our own pool without going into debt. I have arthritis and water aerobics are easier on my joints. I wanted to be able to swim on my schedule, not one posted at a center. For 10 years, my husband and I had the pool on our list. But we finally realized we couldn’t afford it and still save for our top priorities. So we let go of that goal. This year, we became members of a local — affordable — swimming club.

You have to be prepared to change. Your one-page financial plan is your best estimation at the time it is written. You may not achieve everything. You may make mistakes, or life happens. But keep focused on the road ahead. As Richards writes, this process is “about being honest about where you want to go, getting really clear about where you are now, and then making your best guesses about how to narrow the gap between the two.”