moneyFYI
Financial Freedom Is Merely Organized Common Sense
Make It Simpler
Rules and details result in conflicts and inconsistencies. Conflicts and inconsistencies make life less bearable, more confusing and error-prone.
When constructing a financial plan, or any plan for that matter, resist the inclination for precision. Your plan deals with the future and precision is, by definition, impossible. Precise prediction is an oxymoron. Anything could happen. Physicist Erwin Schrodinger postulated that if a thing is not specifically prohibited, it will eventually happen. So too with financial outcomes.
The future, especially the financial future is complicated. Even complex. We cannot intuit complexity. We know too few facts and little about their interaction. Complexity is fundamentally imprecise. Hear mathematician Lotfi Zadeh, “As complexity rises, precise statements lose meaning and meaningful statements lose precision.” Not exactly the stuff of certainty.
There are defenses.
- Build plans that can change. There is little risk in a decision that can be reversed for an affordable price.
- Build plans based upon tendencies not upon “facts.” History does not repeat exactly but there is a pattern of sorts. The return in the stock market has been reasonably consistent over long periods.
- Include a review and revise function.
- Include an outside mind to be your conscience, motivator or co-creator.
- Know what you are trying to accomplish and when.
- Be willing to change your mind about your vision if circumstances demand that.
Most of all, understand what you are doing and why. People have known for centuries that we must not make our lives over-complicated. In his book, Walden, Henry David Thoreau, has noted:
“Our life is frittered away by detail. Simplify, simplify.”
Good advice.
Mistrust plans that are complex. The complexity can easily hide their flaws.
Contact: don@moneyfyi.com
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
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