Posted in Money
Without a plan, a financial vision becomes impossible. Without preparation for problems that will arise, one should expect their vision to be completely derailed. The financial contrast between order and structure versus chaos and randomness shows on the budget, balance sheet, and financial results that a person achieves. What people see is the end-result, what they don’t see is the vision, plan and preparation.
Before we plan our actions steps, we must first have a vision that we’re building. Without a financial vision, we can’t plan or prepare for anything, as we are aimless.
If we asked most people how they planned something, they would state what they want to do, such as a Millennial worker stating, “I plan to pay off all my student loans this year.” In general, financial advisers recommend building a list of plans that make-up a vision. Unfortunately, this is seldom how life works – life has enough surprises for all of us and it will find ways to derail whatever plans we have. One of my favorite idioms I hear from people is, “Sometimes things in life don’t work out the way you planned them to” because it reflects a lack of vision and an inability to prepare for calamity against one’s plans – but if we’re honest, it’s easy to feel this way and let life do it to us. In reality, we should expect life to throw as many obstacles as it can.
Life will attempt to derail our plans – this is inevitable. The difference between the successful and the failures is the former know this when they plan; the latter don’t.
When we make financial plans, we must also prepare for the contingency if those financial plans fail, are encumbered, or are challenged. Using the above example of student loans, the Millennial worker should expect several financial emergencies throughout the year that will prevent his goal of paying off his loans – is he prepared for those contingencies?
When a person tells us that their plan failed, more often than not, it actually indicates that they didn’t understand the planning involved before their plan. For an example, paying off student loans is the step after having a sound emergency fund, otherwise one emergency may prevent a person from paying off a student loan and cause them to lose energy when they feel like a failure (psychologically, this happens frequently with money).
I see this example with my courses on a regular basis: sound digital security is the pre-step before ever touching a crypto-token and making bank (or doing anything else financial in the digital world), yet more people are interested in trying to get results quick without practicing solid security, when they may lose everything because their security practices are putting them in harm’s way.
Since premium students get unlimited access to all courses, the number of premium students should be similar. The reason that we don’t see this is most people put the wrong step first and overestimate their ability to prevent digital compromises – even though these can generate more losses than a bad investment, since a stop order won’t prevent these.
This is exactly how most people manage their financial plans – they’re putting the wrong steps first and when their plan fails, they quit.
When you have a list of plans, ask the following questions:
The latter question is also key because it helps prevent discouragement; if we are truly committed to our vision, then when we experience a failure with a financial plan, we’ll realize that it’s only an event that can be overcome. So the Millennial worker didn’t pay his student loans when he was 27; since that’s a part of his vision, he can do it at 28.
Another way we can solve this is using numbers for our plans: suppose the Millennial worker aims to pay off a $10,000 student loan and we know that events may occur to stop this. One tactic is to overshoot the plan by one-third, provided that your plans are numerical. In this example, he would multiple the $10,000 student loan by 1.34 (we’re keeping applied mathematicians happy here) and aim to pay off $13,400, even though that’s over the loan amount. If no emergencies arise, he will have the loan paid off early. Another example of this with savings: suppose that a person is trying to save $100,000 in one year and wants to hit that goal regardless of what life may throw at him. Like the Millennial worker, he can multiple the amount he’s planning to save by 1.34 and overshoot the plan – there is a high probability that this will be enough to meet his plan.
During my first year of raising chickens as a kid, I waited until the chicks were old enough to keep in our backyard, but failed to plan for a dog attach on them – which unfortunately happens in the country. My plan of letting the chicks free range as they were older failed to prepare for “what happens if a dog attacks?” The result hurt a lot: 10 of the 12 chicks I raised were killed (oddly enough, a hen and a rooster survived, even though I only had 2 roosters). Losing 10 chicks, especially when you’re young and money is scarce, is painful. However, my dad and I learned from this failure: we created a chicken pin where the fence was sunk into the ground, which prevented dogs from digging under the fence. In addition, when we built the chicken coops, we built roosts for the chickens that a dog wouldn’t be able to climb. I never had a dog kill a chicken again.
My original plans for the chicks I raised was a poor plan and failure had to teach me that I hadn’t accounted for all events that could occur. While failure feels painful, we should remember that failure is our greatest teacher – it shows us what we failed to prepare for. If we accept humility and learn our lesson from the failure, we will do even better the next time. Failure is not an enemy – it’s a great teacher.
In the United States, some people like to say “take it easy” while I like to say, “press on and stay focused.” The latter is more indicative of reality than the former because taking it easy isn’t preparing for what will happen eventually; easy should never be trusted or pursued, unless we have a small vision. By contrast, we should expect and prepare for what’s coming. We won’t be shocked; we’ll be ready and that readiness will be the reason we get the spectacular results we do.