How Many Variables Should Govern Your Financial Planning?

There are dozens of variables you might want to include in your plan. You should not assume they all matter to the same extent. For the ones that don’t matter much, you can notice them but not treat them as crucial factors.

Everyone should have a list. The list can break down into matter, don’t matter, and cannot control. Not everyone will have the same list and many will have a short term list that’s different.. For example paying off the mortgage might precede the retirement fund.

Ones that matter

  • Income and how it will change in the future.
  • Lifestyle and saving
    • Cost of children
  • Debt management
  • Health


  • Reasonable investment returns
  • Income taxes
  • Inflation
  • What your partner emphasizes

Things that don’t matter much

  • What happened in the past
  • Things not tightly connected to the present or of low probability.
    • Possible inheritance 40 years from now
    • Lottery wins

Things you cannot personally control

  • Premature death of you, or your family.
  • Government actions like taxation and regulation
  • Economic growth or failure of your employer
  • Weather and climate
  • Some health conditions
  • Divorce

What all that means

Ones that matter

You plan with what you know and can find out. Salary and prospects of promotion or bonuses. Living costs in three classes. Fixed like rent or mortgage payments. Semi-fixed. Could change but not right away. Like municipal taxes. Variable. Things you can change right now. Like how often you take the kids to McDonalds, or how much you crank up the air conditioning.

There should be several mini-plans. Like education costs. Like debt management. Like retirement plan. All of these will be paid for with money that could have been lifestyle spending. Don’t fall into the trap of emphasizing the present over the future.

You should learn how to invest in general. You won’t turn into a CFA so find something that will work. Do not overestimate your skill or believe newsletter publishers. Most people do better with a tool like an index fund in the beginning and learn about investing as they proceed.

Understand Income taxes in general. The principle idea is marginal tax rate, the tax on the next dollar of income, matters. Average tax rate is usually published to confuse.

Know about inflation and how you would adjust.

Ones you cannot control

You should have a list. It is fairly long and you address them to the extent you can deal with them.

Premature death is an example. You cannot solve many of the problems other than financial. Arrange life insurance. Same rule for potential disability.

Government action is more likely to affect your business, your employer, or your investments. You should try to anticipate the possibilities and assess options should one occur. Plan B. Some people think climate change is a huge and existential issue. Most of the news is unsupported by objective evidence. Even if most of it is true, there is little effect in the short run. All of the projections do not, and should not rely on possible inventions in the future. The reality is, there will be some. People adapt when problems are slow to evolve. You can be somewhat responsible now, but don’t expect large systemic problems to be amenable to instant solution.

Some health problems are systemic. Don’t expect instant fixes. Exercise, diet, understand supplements, pay attention to genetics. Have a physician. Do what you can. Get some exercise. Follow a sound diet. Drive more carefully. Avoid drugs and excessive booze. All common sense.

Divorce is a relationship issue some of the time. Understand how relationships work and behave accordingly. Sometimes there is not much you can do about it.

The takeaway

  • Most of financial planning is assumptions and arithmetic. Don’t overcomplicate it.
  • There are lots of tools and techniques that can help you. Inventing your own solutions is usually too costly.
  • Be aware of some things and well-educated on others. If you have something that matters, and you can control, understand it more deeply.
  • Do what you are good at and find helpers for the rest.
  • Know that planning is not an event. It is a process. You will be doing it forever. Might as well learn how early.

Businesses and families have some similarity. Think this idea through.

“As a leader, you’ve got to live in three time zones simultaneously, the past, the present, and the future. Everything you do has got to honor the past, deliver in the present, set the table for a more prosperous future. And as you think that way, that’s why trust building becomes mission-critical.”  — Former Campbell Soup CEO, Doug Conant

I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email 

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