Wise man and wise guy do not mean the same thing. Similarly, too big to fail has a specific meaning and it is not merely scale different from too small to fail. When selecting goals, choosing tactics and implementing your choices you need to notice the difference. Too big to fail is the way governments behave and the Healthcare mess in the US is a good example.
Learn from the mistakes of others when you can, it is cheaper.
Your financial plans should not be so tightly integrated that only the whole matters. Your plans should be composed of modules that are mutually supporting. They should be specific to your perceived needs and wishes. They should each be capable of being understood by themselves. The connections to other parts should be clear. The costs and choices imposed to allow the connectivity should be known. For example, owning a more expensive form of life insurance that provides investment options that provide an advantage.
US healthcare has four clear components and they can provide a bit of isnight to your financial plans.
There is the public interface – the thing that you and others see. The array of possible plans. Maybe a bit like your standard of living. This can be managed day to day and minor adjustments are permitted. You have limits to what can be done. Like you cannot stop eating.
Like Healthcare.gov this layer has to connect to other deeper and less visible components.
Security and privacy must build in to healthcare and those ideas have some interest for you. In the individual case, they are maybe more like your standards. The ideas that govern your life. The things that you will not adjust.
Another important part of Healthcare.gov is the method for providing price assistance. Security and privacy are key interfaces here. Possibly these will make it impossible for the flow to happen easily. In your case, this part is analogous to the parts of your plan that transfer money either to the past by way of debt payments or to the future by way of investment and savings. The similarity is that the money is not available for the present lifestyle and the process of deciding must address the issue of standard of living now versus standard of living in the future. The future also includes lumpy expenditures like education.
The last part of healthcare.gov is the interface with the providers such as insurers and with medical providers like hospitals and physicians. Your plan should include interfaces with professionals and various investment products.
In the government situation, if any part fails the entire thing must stop until it is remedied. If security becomes a problem the whole thing will stop. If the information fails to transfer accurately, stop. If the product is unacceptable to the customer, revise and restart, just like you would do if you could not support your lifestyle choices.
The principal difference between the system the government has and what you will have is the government’s system must all work, all the time and it cannot discontinue.
Your plan is different. Each part is smaller and less complex. There are fewer objectives for each piece. Improvement is sought not avoided. Changes in one part will not cause a rippling catastrophe in some other part. You can see how it fits. By being small and agile, your plan will always succeed if you work at it, because the elements are clear, easy to understand and work collectively
Try to avoid financial plans created by others wherein you must give up understanding, or control, or the ability to change, or control of timing and emphasis. Especially do not hide the way the pieces work together to achieve your strategic goals.
Your plan and each of its components, should be too small to fail.
It is harder but these plans seldom fail completely. It is not so clear what will happen to healthcare.gov and its sisters but we can be sure that if it does fail, no one will admit it or call it a failure.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
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