Sometimes people attribute power to things that cannot deliver.
“As far as the laws of mathematics refer to reality, they are not certain and as far as they are certain, they do not refer to reality.”
Try that sentence again and replace “the laws of mathematics” with “our ideas about the future.” Certainly true.
Try that sentence once again and replace “the laws of mathematics” with “our financial plans.”
Still true. Financial plans are not reality and failing to notice that imperils their outcome. Financial plans adapt to reality, they do not establish it. People who think they have completed a financial plan are wrong. No financial plan is finished until a year or two after the planner’s demise.
Financial plans are less like Euclidian geometry and more like quantum mechanics. Geometry is determinative while quantum mechanics is predictive. Financial plans can work successfully without knowing all the details so long as they reflect the tendencies imposed by the rest of the world. Just like you do not need to know where every photon is to create a laser. Sufficiently strong probabilities create operationally feasible plans.
So what are some of the tendencies that we can employ?
In summary. It works if you have clear and reasonable goals, save some, invest and stay invested, manage your lifestyle, manage risk, remain disciplined, learn about the real world, have an advisor as a conscience and guide, focus on the the rest of your life plan and treat money as a tool not a goal.
How easy is that?
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.