The Tragedy Within Us
I (Tim) began writing this post with a different subject in mind (we will write about it in another post to come). As I began to write, my fingers just moved on their own and I wrote something completely different. Stories always begin with interesting subjects and I couldn’t think of anything more interesting than financial planning. It is a complex idea that is both full of love and tragedy. Enjoy!
Financial planning is a fickle beast that is layered with complexities not only from the money point-of-view, but an emotional one as well. To be able to plan appropriately one must self-actualize and recognize every decision is not always about the dollar; however, every decision has a tradeoff. Some decisions that are made can be over-analyzed, some could have “YOLO” rationalization, and others may have an impact only seen years later. The fickleness of planning usually drives people to avoid it or to fall back on the rationale of “I just don’t understand money,” leading to no plan at all.
There is a reason why we at LBW feel wealth management and development should be seen as a profession – it is because financial planning has so many moving parts. To truly understand how to optimize and effectively plan for the unknown takes time, patience, research, and a specific skill set. One must first understand the technical side of planning. The next step is to begin to understand human nature and our subconscious ability to be irrational. From there one must recognize the complex decision tree and the “multi-financial planning universes” that could exist depending on decisions made. Next, a planner must recognize that everyone is different and that the blueprint for one individual may rhyme but will most likely not match another individual’s plan. Only then can a planner begin to boil down the necessities and key points of a never-ending puzzle to come up with a calibrated plan that lives and breaths even well past the individual's life here on earth.
Planning is a mixture of science and art – it is truly the most beautiful and complex puzzle that will never be complete. However, for an individual to see the steps and process needed to achieve their goals is nothing short of difficult. We know this because we plan for ourselves and recognize the utmost difficulties of trying to plan for a future that is unknown. Planning is not living in the future or dwelling on the past. It is living for today with a grasp on the future and true respect for the past. It is the ability to recognize that what lies ahead is truly the blackness of space but knowing we have a jet pack to at least move us forward.
Planning is uncomfortable, time-consuming hard work and, at times, is defeating. How does someone know when they will get fired from a job? How does someone know when their house will flood? How does someone know when they will eventually pass away? If the future was known, then these questions would no longer exist and unfortunately, they do, meaning the only consistency within planning is inconsistency.
Understanding one’s self and grasping the future ahead is only one side of the difficulty in planning. Another layer is born when we attempt to measure our success. The measurement of success is just as subjective as someone’s favorite color. It depends on how someone defines the measurement of success. The typical route is to compare to others. This, in itself, can derail a plan from its tracks. However, a good planner should not underestimate the difficulty of not trying to “Keep up with the Kardashians”. Our current society only lends itself to this type of measurement stick. In order to get away from it, an individual must truly understand and be comfortable with the goals and objectives they have set forth for themselves and/or family and celebrate their accomplishments, regardless of size, when they have been achieved.
As Sir Isaac Newton eloquently stated, “For every action, there is an equal and opposite reaction,” and this could be a cornerstone for financial planning. Financial planning only lives in the grey, it does not know black or white. From time to time it may lean to one side or the other, but there never is a truly right answer because the answer can change over time. Instead of being focused on the outcomes of decisions, it is paramount to think about the decision-making process. For example, a family may have taken a trip to Alaska and in order to do so, they took money out of their emergency fund. A few months after the trip their water heater broke and they did not have enough to buy a new one, so they used a credit card with a 0% interest rate but had to pay $700/mo. in order to pay it off in the appropriate time frame. That $700 came from their savings, which means they were unable to fund their savings. In order to fund their savings after the card was paid off, the parents had to cut back on date nights, an important time for them to work on their relationship. Suddenly the decision to go on the family trip seems irrational and not worth it a few months later. On the other hand, they had a fantastic, once-in-a-lifetime trip with their kids. They were able to catch king salmon and halibut. They saw humpback whales and were splashed by their tails – it was truly priceless. But was it worth it? The answer to this question could be a yes or no depending on when the question was asked and who was asked. However, the question we would want to ask is “did you understand the tradeoff when going on the trip?” If the answer was “yes” and the parents understood something like this could happen, then how could we argue it was a wrong decision?
Financial planning is not a thing or a piece of paper, it truly is a complex web of our everyday decisions. It breathes, lives, and evolves over time. It can be comforting, frustrating, exhausting, humbling, devastating, and/or completely satisfying. It is life. Life has no answers and can take us in a million directions. As we make decisions, gain new experiences, and get older, we mature, evolve, and gain a new perspective on the world and ourselves. Life is grey and it always will be. If we grasp this, we can begin to control our own destiny. It’s in our control to have hard conversations with ourselves and our loved ones; to not compare our goals and objectives to others; to find comfort in the decisions we made in the past because we recognized the tradeoff, and to make decisions in the present knowing the possible outcomes in the future. If we can do this, then we can plan, and we can make sure the puzzle never prematurely ends.