Why We Plan

Planning always involves some sort of model building. Even if it is not done formally, the idea of planning is to discover what will happen if certain steps are taken. Once organized, plans are tested against various conditions that could happen.

Planning adds value

Danish philosopher explains how the value arises.

“Life can only be understood backwards,
but it must be lived forwards”

We don’t understand the future until we live it. A model is a hack to avoid living to see what could happen. Planning gives us a way to examine what might happen and then look backwards. It’s a way to create future events so we can derive better ways to go forward.

There are many applications. Some you already do:

  1. Annual cash flow budget
  2. Business  or career plans
  3. Long-term financial plan
  4. Education funding plan
  5. Retirement plan

Some you may not have started yet

  1. Estate plan
  2. Career Change

A plan can be part of a bigger plan

An estate plan includes a retirement plan, an education plan, a business plan and an annual budget. It is a serious mistake to think of an estate plan as just a distribution thing. What ends up in your estate is a function of all the other decisions you make in life.

The accumulation part of your estate plan provides long range guidance and it most easily identifies possible changes. Narrow planning often produces conflicts.

How to start

Identify the important variables. You may not get all of them right at first but plans evolve.

It is usually a problem to select too many variables. If you have too many you will tend to select data that supports you idea of the future. Those plans are not helpful. To some extent they are a form of confirmation bias. They will be either very right or very wrong. Planning ideally puts you in the middle with the opportunity to change as you learn more.

Having many variables makes the model harder to manage. Harder to manage means it’s easier to stop.

People tend to do things that are easier. Start small and add variables as you develop a need for nuance.

The bits to take away

Start early and evolve your plan as you go.

Understand the idea of models and planning as the way to look backwards before you have to live the future.

Planning discovers opportunities you can’t see as early you would like.


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I build strategy and fact-based estate and income plans. The plans identify alternate ways and alternate timing to achieve both spending and estate distribution goals. In the past I have been a planner with a large insurance, employee benefits, and investment agency, 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. I have appeared on more than 100 television shows on financial planning, have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, Banks – from CIBC to the Business Development Bank.

Be in touch at 705-927-4770 or by email to don@moneyfyi.com

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