Because our clients are of the human variety, a lot of them want some certainty in their planning. They want to know that this decision will turn out right, or that they will be able to achieve this or that goal.
And while I think I’m pretty darn good at my job, that certainty is simply not something I can provide.
I believe that the most successful planning happens when you, in fact, acknowledge that you can’t be certain, find a way to be okay with that, and do the work anyways.
Life Is Uncertain. 60 Years from Now Is Definitely Uncertain. Hell, Tomorrow is Uncertain.
I’m currently enrolled in a professional program about retirement incoming planning. One of the repeated lessons is that in the traditional 30-year time frame of retirement planning (65-95), so much can happen.
Imagine how much more can happen if you are currently 35 years old and trying to make financial decisions that can impact the rest of your life.
In my teens, I was trained in Transcendental Meditation. (No, I didn’t develop a practice of it, though I wish I had. Also, you can imagine how popular I was in high school…) That training included a theory of how we humans make decisions.
We like to think we make decisions by taking in a list of pros and cons and rationally comparing the two, doing some sort of mental math, and then out pops a decision that can be traced back, in a straightforward, logical way, to the original inputs.
This, to be delicate about it, is a crock.
How we make decisions is really more like: we take in a bunch of input, it all sits in our brain, mixing and stewing for a while…and eventually, a decision arises out of that stew. A decision that we are pretty darn attached to. How’d we arrive at that decision? Mmmm, honestly, couldn’t tell you; but it feels right.
If that is, in fact, pretty close to how we make decisions, then conceiving of financial planning (or any kind of planning, really) as a process for steadily, rationally, inexorably marching towards a specific, known goal is just silly.
I believe planning is, realistically, more about managing known risks, building resilience, and positioning yourself to take advantage of opportunities when they arise.
Do you want to have a kid?
Do you want to leave the tech industry?
Do you want to move to another state?
Do you want to buy a home?
Do you want to get married?
Do you want to change jobs?
I can tell you from years of working with clients, your answers to these questions can change on a dime. I want us to put ourselves in a position to actually “execute” on these decisions once we make them, and oftentimes we don’t have a whole lotta warning that we want to do it.
And that’s just talking about the uncertainty in our own hearts and minds. What about all the certainty in the outside world?
What will interest rates be in 5 years?
Will your company go IPO?
Will you get sick?
Will you receive an inheritance?
Will Southern California still be habitable by humans or will the desert have reclaimed it?
So much of the clarity or certainty around these issues appears only at the last minute.
I don’t know. You don’t know. Nobody knows.
Need further “proof”? Let’s look backwards:
- Did you know or even expect that your company stock price would drop as much as it did in the last year?
- Did you know or even expect that your RSU income would shrink as much as it has in the last year?
- Did you know or even expect that you’d get laid off in the last few months?
Not Knowing What Will Happen Is Scary.
If we had certainty, then we’d know, without a doubt, what to do now. Without certainty, we can’t be sure that what we’re doing right now is the right thing.
When it comes to financial decisions like “How much should I be saving?” this lack of certainty can be painful.
It is hard to not know. Even aside from the logistical difficulty it creates when you go to plan for anything, <armchair psychology moment> we crave certainty to the point that it’s actually painful to not have it.
Man, would I love to know what’s going to happen in the next few…ever. With my children. With my marriage. With my kids’ schools. With my employees. In my business. In my clients’ lives. In the overall economy. With the climate. I hate that I can’t know.
I have lost at least one client because I couldn’t figure out how to reconcile her need for certainty and my inability to provide it.
In Lieu of Certainty, Manage Risks and Build Resilience.
If we can’t know what will happen, and we’re afraid that we won’t be prepared for whatever does happen, it strikes me that we need to make ourselves generally resilient, in the spirit of preparing us for…whatever.
At Flow, we believe that financial planning is a combination of managing risks, building resilience, and planning for opportunities.
Manage Financial Risks.
How do you manage risks in your financial life? Nothing here will likely surprise you. It’s possible you haven’t done these things, but most people have heard of them before.
- Build a robust cash cushion. Save more than you think you need to. Trust me, in a crunch, you will love your cash so much you’ll want to marry it. (I will, however, also caution against saving everything as cash. We have many prospective clients who reach out to us in part because they’ve built up a gigantic cash pile and don’t know what to do with it.)
- Get the right insurance policies: life, health, disability, auto, renter’s/homeowner’s, liability, etc.
- Draft your estate planning documents with an attorney.
- Get other legal documents drafted whenever you’re engaging in a big financial transaction (ex., buying a home, getting married) with another person.
Build Resilience Outside of Your Money.
I have noticed in the tech community a tendency to overly rely on money as not only a measure of personal success, but also as a source of resilience and strength.
We tend to forget about or downplay all the other parts of our lives that can help us respond to whatever life throws at us: our relationships, our education, our skills, our creativity, our ability to adapt to different circumstances, our work ethic, our professional network, and so on.
I think the Covid-19 pandemic taught us the importance of many of these things…often because of their absence, especially during quarantine.
Pulling from my own work and through my work with clients, here are some ideas about non-financial ways to build resilience:
- Spiritual/Emotional. Fill your own cup. Meditate. Journal. Spend time under the trees. Go to church/synagogue/the mosque.
- Romantic Relationships. Have regular date nights. Go to couples counseling. Meet regularly with one another to talk about what you need. Make a habit of telling the other person what you appreciate about them.
- Friendships. Call your friends. Go out to coffee. Send texts. Go on a hike together. Pay attention (which, by the way, is my favorite definition of “love”).
- Career. Get a mentor. Network regularly. Build skills. Go to conferences. Take classes.
- Physical health. Eat right. Move your body. Close your eyes before 10 pm.
- Cognitive health. If you’re my 80-year-old mother, do crossword puzzles and Wordle (competing with your granddaughter) every day. For others of us, read books, take classes about interesting subjects, start learning how to throw pottery or plant a garden.
In addition to being good things in and of themselves, all these things are, conveniently, things you can control. You can’t control what interest rates are, what the climate does, what other people do, what tax rates are, how your company stock performs, etcetera, etcetera, etceteraaaahhhh.
You can control all these elements of building resilience in your life. And while uncertainty feels bad, control, one might say a sense of agency, feels good.
Planning…Living Requires Faith.
I’m a financial planner. Planning is kinda my jam. I clearly think it’s valuable. The way I see it, we make the best plan with what we can know now and with our best guesses for what will happen in the future.
And then we rely—we have to rely—on our ability to Figure It Out in the future when things inevitably change. That is what I mean by “faith.”
As I discussed above, I think it’s important to do what we can to minimize risks. But as Carl Richards, a thought leader (and I say that sincerely) in the financial-planning profession says, “Risk is what’s left over after you think you’ve thought of everything.”
Uncertainty is scary and unpleasant. At the same time, it’s unavoidable. What do you need to do in order to accept that reality and also move forward in planning and living your life?
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Disclaimer: This article is provided for educational, general information, and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Flow Financial Planning, LLC, and all rights are reserved. Read the full Disclaimer.