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Financial Planning, Not Fortune Telling

Financial Planning, Not Fortune Telling

The future has not been written. That’s your opportunity

Crystal BallThe New York Times had a great column last week on the futility of trying to predict the future or believing that someone can. The column addressed our desire to predict the contours of a post COVID-19 world. As I read it, I realized it is directly relevant to your finances — and to what we do at Old Peak to help our clients.

The argument of the column is simple — and, in my mind, spot on. Humans are desperate to divine the future, or to find someone who can. We hate uncertainty. Yet the future is unknowable. More specifically, the author wrote, “the future doesn’t exist. It will exist only after we have made it.”

Careful planning in the face of uncertainty is the opportunity for each of us with our personal finances. That’s why Old Peak exists: to help each client create the financial future they want, instead of worrying about what the future will bring.

Here are three examples of financial planning through uncertainty:

  1. No one knows if they will need expensive nursing care for two or three years, or even more. It’s possible. So ask yourself if you can afford it. If you cannot, seriously consider buying long-term care insurance.
  2. No one knows if the stock market will crash just when you need to start withdrawing for retirement spending. So ask yourself: if it does, do you have enough of a cushion of bonds and cash to wait out the recovery? If you don’t, consider modifying your investment mix.
  3. No one knows if they will pass away or become incapacitated in 2020. But if you do, is your estate plan ready, authorizing someone to make decisions for you or distribute your estate to your heirs as you would have wished?

 

Financial planning is not about fortune-telling. No one knows what the stock market will do next month or next year. Don’t bother asking.

Financial planning is about understanding which bad outcomes could damage your finances, and protecting against them.

I will hazard one prediction: if you do that, you’ll sleep a lot better at night.

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