A Serious Question In Financial Planning

Many people are hesitant to make decisions about financial products. There is a reason. It arises from a simple presentation error. They can’t always and easily tell what it’s for.

Starting in the middle doesn’t work.

The order of things in planning is vision-strategy-tactics-logistics.

  • The problem, opportunity or wish I want to solve.
  • What are the factors and resources that I must consider when addressing that reason?
  • The methods available that can connect my resources to the purpose efficiently.
  • What do I do to apply the methods?

What If I start with methods without a clear idea of my vision or strategic factors?

Chaos, right? I can’t tell how effective the solution is regarding my life’s purpose. There is no guarantee that a perfectly designed, efficient method or tool will add value to my life. The question you must address in the context of the method is, “In my context, what’s it for?”

That question allows you to assess the purpose, the method and the priority asses allocation all at once.

When is the question helpful?

Surprisingly, for much more common than just financial decisions.

Education is one area that would benefit significantly from identifying the purpose and how the particular subject addresses that purpose.

Think about these questions:

What is math for? Probably you have some ideas. Would it be better if you learned particular applications in the context of purpose and resources? Take compound interest. Would people find it more useful if they knew the rule of 72? Money doubles in as many years as comes out by dividing 72 by the interest rate. Fun fact, but what if you extended it to notice that you get five doubles if you earn 9% for 40 years?

AND most notably, the last double earns more than all the doubles before it. That fact could change behaviour. Maybe you start saving sooner. Perhaps you avoid debt which is the other side of someone else’s investment. Who is paying their returns? Education should be about modifying behaviour towards more productive outcomes.

What is history for? Most of us can recite all sorts of facts. Are they useful? Maybe if you are playing Trivial Pursuit. The what’s it for question forces us to address meaning. That leads to other thoughts. How many wars are armed robbery on a gigantic scale? How well do dictatorships work for the population at large? How long does fundamental change take in society? What happens when you amend the income tax rate? None of those questions are hard to answer if you look for what history means. They have little to do with predicting the future. It does give you a framework, though, and that is a planning advantage.

What is biology for? You may have noticed the human body does not come with an owner’s manual. Most people don’t know where their liver is or what it does. We fit into our natural environment better when we have an intuitive sense of how it works. We need bees because. We shouldn’t drink to excess because. We should notice how intense farming harms the soil.

Everything is a trade-off. You can have one thing now but at a future cost. That wisdom helps you address priorities.

There are many more. Why study another language? What’s music about? How do teams work best? What makes up good writing and persuasive speaking? What are physics and chemistry all about, and why do I care?

All of them lead to one purpose. How does knowing meaning help me make better life choices?

Where to start

Beginning with the idea of what’s it for will help you create the realm of the problem or opportunity. Once that is clear enough, the methods to achieve a solution can be understood in that context.

It is not helpful to say, “Your ability to earn an income is your most valuable resource, and you insure other valuable things you possess; you should therefore insure the value of your income.” It is helpful to say, “What happens to your family if you can no longer provide the income they need to live the life you have chosen for them?” One statement is just rational. The second is about emotion and potential events.

The potential solution is still to be decided. Just start the process.

People seldom use reason and logic to change their worldview. The person needs to know the emotion-based why. They will use reason and logic to select among alternatives when they want to solve the problem. After the fact, they will use both emotion and reason to explain why they did what they did. They will remember why.

The bits to take away

If people start with the tool and see no reason for using it, they will assign little value to it.

They will forget why they used it if they did and likely stop.

Going from the general to the particular is more valuable than the other way. It is a little harder to begin but much easier in the longer run.

Florida is introducing financial literacy as a course in high school. Well done! Young people have very low financial literacy because they have been exposed to neither the general nor the particular case.


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I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve 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, and Banks – from CIBC to the Business Development Bank.

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

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