The Paradox of Planning

It finally happened. I was in 9th grade and I got the phone number of that girl on whom I had a crush. Man, that is awkward phrasing, but respect the rules of grammar I must. Okay, I’m done.

So anyway, I’m 15 years old and there is FINALLY a way to speak with that girl outside of school. There’s a glimmer of hope. And what does a guy like me do when there’s a glimmer of hope? He plans!

I kid you not, I wrote up a list of conversation topics that I knew she’d find interesting. I didn’t have a lot of experience talking to girls, and I didn’t want that to be too obvious. Her sports, our classes, who knows what else. I was ready, and I couldn’t afford any gaps in the conversation.

First chat – flawless. Nice job, Ben. You just won yourself a second phone conversation. For you Gen-Z-ers out there, this was back when people spoke on the phone. A lot.

I was off to the races, but before long things started to get stale. You see, it turns out, following my handy-dandy list and talking through the same topics every time she graced me with her telephonic presence was a road to relational ruin. She literally complained that we always talked about the same things. Way to stick to the plan, idiot.

Man Plans, God Laughs

My execution of my plan was a great success, until it wasn’t. I was so worried about running out of interesting conversation topics and audibly gasping for air like the fish out of water I was, that I neglected to read and react to the situation as it unfolded.

Rumi has some applicable advice on this front: “Let the wellrope pull you out. / Then let the wellrope go.” I was so attached to my plan that I forgot that it was only meant to get me to the next phase. It was like I forgot to get off the chairlift and started heading back down the mountain.

The same is true for financial planning. The only thing you know about your current forecast of the future is that it’s wrong. So how on Earth could your plan be expected to be a one-and-done thing?

The future is unpredictable. It’s our job to do the best we can with the information we have at this moment, while leaving the door open to tweaking and improving the plan as time goes on.

Avoiding Fragility

It’s incredibly important to stay nimble with your plan for your financial future. If you were planning on earning the same amount until retiring at 67, and then suddenly you got a 50% raise, would you keep on working until 67 because “that was the plan?”

Let’s hope not. Unless work isn’t about the money for you. Then, you do you.

Likewise, imagine if you cracked the code of retiring early and hung up your Golden Handcuffs at age 45 right before the market experienced incontinence in its bed. Would you accept a lower standard of living forever just because no longer working was “the plan?”

You’re an able-minded 45-year-old with plenty to offer. If you’re cool living on less, go for it. Otherwise, get back to work.

Our plans are frameworks within which we operate. They are based on assumptions about what the future will look like. If (and by “if” I mean “when”) the future doesn’t “behave itself,” you owe it to yourself to adjust your assumptions, and adjust your plan accordingly. Planning on spending $200/month on gas? What happens when there’s a war? What happens when your car no longer needs gas? Update your assumptions, then update your plan.

The Myth of a Binary Choice

I met someone at a conference recently (we’ll call him Tony) who knew what he wanted out of the next stage of his life, and knew that his current job wasn’t it. The problem was, he was a key person at his employer, and they had a history of a “don’t let the door hit you on the way out” approach to quitters.

It can be daunting to “turn your back” on people with whom you’ve worked for years. In Tony’s mind, it was either staying for a job at which he excelled but didn’t love, or quitting to pursue his dream and never looking back.

When you’re planning your financial future, this kind of a departure might seem like an irreversible decision. It might seem like a decision point from which it will be hard to recover if you make the wrong choice. But there’s more here than meets the eye.

I brought up my experience leaving my former employer. Similar dynamics: if you’re going to a competitor it’s only prudent that they march you out the same day you resign. My departure was different. I wasn’t going to a competitor, I was going to move across the country to build something new.

I cared about my colleagues. So I told my boss I was leaving, and then I stuck around for another three months. I trained up my replacement. I made sure my knowledge was preserved within the institution.

This was eye-opening for Tony. Your exit doesn’t have to come with a Jerry Maguire quitting speech. You can take care of the people with whom you’ve shared your life and leave on the right terms. This preserves optionality for the future. Plus, it just feels better.

My Beef with FIRE

I’ve got no problem with the FI part of FIRE. Financial Independence is something from which everyone can benefit. It’s the RE part that sits a little uncomfortably with me. Retiring Early is NOT for everyone (myself included).

Work is a beautiful thing when it is done willingly for the right cause. Plus, I just can’t stand too much idleness. Maybe that’s just me, but I don’t think so. And if you’re reading this, I suspect you may be on the same page.

One formulation of the “FIRE” idea I’ve come to favor recently is “Work Optional.” I love this because it acknowledges that the answer to the question of work is not an unqualified “no.” The optionality contained within this formulation is beautiful because it acknowledges that some projects are worth it even when money is no object, while others are not. Work is not the enemy.

Like it or not, there’s no silver bullet. You could be Work Optional one year and then lose that privileged status. As much as I want there to be an always-and-forever solution to the “problem” of financial planning, there’s not. But if you follow the right process, you can get yourself into great financial shape to overcome whatever obstacles come your way.

The Winner’s Curse

Another problem with financial planning comes from the paradoxical nature of financial success. Put simply, the better off you become financially, the more difficult it can be to maintain the habits that got you there. That plan might not look so hot when everything around you is telling you not to sweat it.

For one example, if you’re living paycheck to paycheck and avoiding debt, then going on that $3,600 vacation at the end of the year requires you to diligently save $300/month. Otherwise, no vacation.

Once you’ve reached liftoff and have some money put away for the future, that visibility can be more difficult. The money is there, it’s just a question of whether you should spend it or not. The pain is abstract, while depriving yourself of $300/month that you’d otherwise spend is anything but abstract. It’s real.

Another example of this “Winner’s Curse” is the fact that the better you do financially, the less your finances appear to be under your control. If you have $1 million invested and you decide to save some money by bringing your own lunch to work, you might save $200 by the end of the month. But if your portfolio is up or down by $10k, you might ask yourself why you’re even bothering to save $200.

Like it or not, planning isn’t something you can set and forget. You need to react to the changes in the world around you, as well as the psychological influences that may be difficult to ignore once success comes your way. This requires the right process, and the right process involves a dynamic plan that can roll with the punches as life comes your way, while also continuing to demonstrate the efficacy of your actions today.

Conclusions

When it comes to your financial planning (or any other planning) don’t be that 9th grade version of me who doggedly cleaves to his plan with no appreciation for what’s going on around him.

As the facts on the ground change, update your assumptions accordingly. Then, update your actions to reflect the new assumptions. There’s no free lunch here, no permanent solution. You have to do the work. But if you do it the right way, you can relax into the way the world actually is instead of white-knuckling about how it “should be.”

Uncertainty is certain. Do the best you can with what you’ve got, and trust your future self to do what is right when better information comes along, and above all, enjoy the ride.

Ben Miller

Founder of ChroniFI

October 2022

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The foregoing are the opinions of the author and are for educational purposes only. They do not represent professional financial or investment advice. For financial advice, please consult a licensed financial professional.