Captured By Detail

Some tasks require attention to detail, but that is not a good place to start with planning.  Planning is about flow and possibilities and tendencies.  Detail comes later when the critical aspect is choosing tactics and implementing.  Even then too much detail gets in the way.

When preparing a budget, many people overvalue detail.  Probably because collecting them is relatively easy.  Consider food as a subject.  A reasonable breakdown could be food at home and food not at home.  That breakdown could provide actionable information.  Breaking down food at home into vegetables, fruit, meat, canned goods, sauces, pasta and spices would add little. 

Think about something just deep enough to grasp its meaning.  Anything beyond that wastes your time, at least in the beginning.  If something becomes outside your parameters you may need some detail to find what happened and how to repair it.  Look back at your inputs in greater detail.  Maybe the price of peanut butter doubled, or coffee sky-rocketed because of a drought.   Maybe groceries are up because the exchange rate has changed and a lot of our food comes from the United States.  

Anyone can find more detail, finer detail or more nuanced, but it seldom adds much value.   You want meaning before you decide how to act.

In late September 2016, a new record for the number of digits of Pi was announced.  12.1 trillion.  They only quit there because they ran out of disk space to record their exciting find.

Does that matter?  Maybe to some, but I think they did it because they could, not because it had any value.

Wikipedia says the diameter of the known universe is about 92 billion light-years.  That makes the circumference 92 billion times Pi light-years.  If I know Pi to 48 decimal places I can calculate the circumference to an accuracy of plus or minus 1 hydrogen nucleus.  With 32,  I can get it right give or take half an inch. You might wonder what the rest of those decimal digits are for?

Same thing with budgets and financial planning.  More details add little in the beginning. 

You can build a reasonable financial plan if you break spending related to income into 3 parts.

  1. What I lose to governments
  2. What I save for the future, borrow or pay for debt
  3. What I consume.

Planning should revolve around preserving consumption, because consumption defines lifestyle.  Knowing every detail about it will not help much with strategy and strategy is important because it is about meaning.

In the beginning you must get strategy rightish.  Details won’t help.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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