80 | The Story and the Numbers
This post is Part 3 of 3 of the "Building Resilience Instead of Grasping for Certainty" series.
If certainty is impossible to deliver, then why does the financial services industry continue trying to deliver it?
Certainty (or probability of success!) will increase if…
You can make a certain level of income for the next 30 years.
You spend a fixed amount inflated by 3% for the next 30 years.
You max out your 401k and/or Roth IRA every year for the next 30 years.
You achieve investment returns of 7.5% for the next 30 years.
In theory, this work of projecting and mapping out the future is supposed to help you do “financial planning” and oftentimes this process is called a “financial plan”.
In reality, this process encourages grasping for certainty, focuses on things that are out of your control, and transforms a "financial plan" into the next item on the long list of financial services "products" that perpetuate society’s tendency to over-spend (i.e. consume) or over-save (i.e. hoard).
This process or "product", like all those before it, pushes us further away from how we were designed to interact with our money.
Real financial planning is knowing that we can only build resilience to navigate through an uncertain future adjusting course when new information is learned and improving our relationship with money each step of the way.
Resilience looks like…
Generating income from something that leverages your natural gifts and skill sets, allows you to manage risk of burnout, has a long (or indefinite!) time horizon, and allows you to spend time doing things with the people that matter to you. Income that is a pleasure to generate is ineffable.
Spending in a manner that brings lasting contentment with an awareness that every dollar spent creates some degree of expectation for the future. The ability to adjust spending in the face of uncertainty and acknowledge the sneakiness of envy are the only cheat codes for contentment. Generosity often increases contentment, debt often decreases contentment, and spending that enhances relationships with others is an investment, not an expense.
Saving, on average, in proportion to your level of income and into buckets that will be accessible in the near and distant future when you need the dollars the most. Cash on hand provides flexibility in the short run and endurance for the long run. Saving is the tool that allows expectations to remain in check and facilitates the continual pursuit of "enough".
Investing in a manner that you believe in and in which you have a baseline understanding knowing that, regardless of strategy or plan, the only guarantees are that someone will always outperform you and that how you behave during the inevitable unsettling times will be the biggest determining factor in your lifetime returns. Owning businesses tends to increase potential returns, diversification tends to make the ride smoother, long horizons tend to increase the probability of positive returns, and above-average patience is a superpower.
Grasping for certainty is inflexible, rigid, exact, unrealistic, disappointed by course correction, fragile, and ironically abstract because it tells a story with numbers that does not match up with the lived experience.
Building resilience is flexible, fluid, imprecise, realistic, expects course correction, pliable, and ironically concrete because it tells a story with numbers that matches the lived experience.
Additional Reading
The Magic Certainty Button by Carl Richards
Endless Uncertainty by Morgan Housel
God at Work in an Uncertain World by Rev. Daniel Mason