People misunderstand financial planning at a fundamental level. They see methods and think those are their plan. They are not. A working financial plan grows from inherent beliefs and tendencies.
Methods or tools or concepts are refinement. They usually will make a plan moderately more efficient and that is good. Efficiency here means you can reach a goal sooner or more safely or you can have resources to attach to some other goal. Success is more likely.
Without the intuitive tendencies, the best method in the world will not work. No financial plan together with brilliant methods will save situations like these:
There are other tendencies that offset this kind of thinking. People who hold these automatically succeed, even without fancy tools. They may not do perfectly well, but they will do well enough:
People who have the right underlying beliefs about their financial life are unlikely to fail. It is more about how you think about things and less about the detail of methods.
Here is a thought expressed by “The Keeper” of Talos 4 in Star Trek, the original series, “The Menagerie, Part 2” aired on 24 November 1966.
“Wrong thinking is punishable. Right thinking will be as quickly rewarded.”
The same rule applies to financial planning. Be sure you organize your thoughts before you organize the tools.
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.