One of my most vivid memories from my high school basketball career didn’t happen in front of a large crowd. In fact, the crowd was essentially non-existent, but that didn’t matter. Here’s the setting:
Each summer, our varsity basketball team would attend camp as a team. The week at camp would consist of teams playing other teams from around the state, and in many ways, it gave players and coaches the opportunity to get some valuable game experience before fall sports began. It also allowed college coaches to come to one location and scout for in-state talent.
One of our scheduled games that year was a very good team from Georgia. It was a back and forth battle that came down to the wire; and when we took the lead with less than 4 seconds to go, I felt victory was imminent.
They got the ball inbounds, and an opposing player heaved a prayer from the opposite foul line… NET. Game Over. We lost.
This story isn’t new to the sports world. I’ve witnessed hail marys and buzzer beaters countless times. The anticipation of a game-winning play can be palpable for both athletes and fans. These moments of triumph are played over and over again on highlight reels, and commentators will use replay technology to deconstruct every second in an attempt to explain the action in a way that normalizes it.
Want to know a secret? No team ever begins a contest hoping for a hail mary pass or a buzzer beater. You’ll never see a coach prepare their team to play every beat of the game in hopes that they will miraculously pull out the win at the last second. These moments do happen, of course, but have you considered how they come to be?
I used to think it came down to chance or simply bad luck. In some cases, that may be true, but this kind of thinking often ignores the entire game up until the final minutes. After years of playing and watching sports, I’ve evolved in my thinking when it comes to last second wins.
These moments are often the culmination of many factors that go unnoticed during a game. Sure, the tv shows will replay the “game-winning moment” over and over again, but why not review the entire game to find out what went wrong? what went right?
This is the secret to these moments–they are born from small, sometimes unnoticed, actions that are repeated over and over again. It’s the compounding effect of those actions, good or bad, that end up with a final moment of truth. You already know what I’m talking about if you’re a sports fan. We’ve all seen the meltdowns when nothing seems to go right. It’s like a team is caught in quicksand, and things continue to spiral downward no matter what they try to do. On the other hand, we’ve seen players and teams find themselves in “the zone” where every thing seems to go just right.
This kind of drama is exciting if you’re into sports. It’s not exciting or even desirable if you’re planning for financial goals like planning for retirement or creating retirement income. Things may not always go our way when planning for the future, but I imagine that no one wants to leave a major financial goal up to a hail mary pass.
“If you genuinely care about the goal, you’ll focus on the system.” – James Clear
As a financial planner, I believe the quote from James Clear is what financial planning is all about. We all will go through different seasons in life, and it’s normal for our financial priorities to shift from time to time. It’s even possible for our core values to shift as we get older. That doesn’t stop us from creating, working, and adjusting our plans.
Financial planning, at its core, begins with an exploration of self. That may come as a surprise because it seems that some people think it begins with selecting investment options or considering a 401k rollover.
A better place to start is to ask yourself—What do you really want? This question may seem a bit odd, but here’s a couple of examples of what I mean:
Bob tells me he wants to buy a new boat, and he wants financial advice on how to save for it. Bob doesn’t really want the actual boat. He wants the experiences of going fishing with his sons. He wants to take his wife Judy for sunset cruises around the lake because it’s her favorite way to spend time together. Having a boat will allow him to join the marina club, where several of his other good friends are members; and they’ll get to attend social events together. Thus, Bob may be saving for a new boat, but he’s not really after the boat itself.
Suzie tells me she wants to have a vacation home at the beach. It’s not the actual property that she’s after. She knows that having a beach house once she reaches retirement age will bring her adult children out for vacations in the summer, and she’ll get to spend time with her children and grandchildren. Some of Suzie’s best friends have also moved to the coast, and having a home at the beach will bring her closer to those friends that she misses in her daily life. Finally, having a beach home might be the catalyst for her husband, Don, to consider downsizing their large home and spending more time at the coast in their happy place. Suzie wants the house, but not for the sake of having the house. It’s much more than that.
Take a moment and consider what you are really after. Your daily actions and decisions can be more important that you realize. Those small choices compound over time.
Our first goal with financial planning is to help you get clear about your values, objectives, and priorities. Then we build the system in a way that aligns your (human/financial/social) capital with what is most important to you.
To give you an idea of a few ways that financial planning can have a long-term positive impact on your financial future, let’s take a peek at this string of tweets by Shane Parrish, another great writer who publishes content on Farnam Street blog.
Shane wrote this string of tweets when discussing probabilistic thinking. In effect, he’s talking about how we think about the likelihood of events and their occurrence. I’ve highlighted several of the comments that correlate directly to long-term financial planning.
As a financial advisor, here is my commentary on Shane’s lessons:
Lesson 1: Tiny errors do compound. Consistent planning allows for these errors to be discovered and corrected.
Lesson 2: Our own knowledge is uncertain, and we are prone to overconfidence and confirmation bias. Financial planning conversations allows a trusted advisor, one who knows your values and goals, to be an objective listener when you are facing important decisions like claiming social security, positioning a retirement account, or evaluating various forms of risk management.
Lesson 3: We get probability wrong– a lot. Not a single wealth manager forecasted that we’d have a global pandemic in 2020. Focusing on financial details is important. However, having a financial plan that is flexible and built for some uncertainty can be a tremendous asset for your financial future.
Lesson 4: Impact. The technical side of planning isn’t very exciting, but having the tools to measure the impact of certain events is useful information. Many investors have trained themselves to be calm when the market gets volatile. This is a good trait to have. However, we have to equally consider the impact of seeing market volatility hit our investment choices at the wrong time. This can be catastrophic. Long-term financial planning allows for monitoring and adjusting your investments so you can stay in the game.
Sports are fun and exciting. As a player and a fan, I’ve experienced the highs and lows of last second wins and losses. It’s thrilling. I don’t want my financial life to be like that. I bet you don’t either. That’s why we create financial plans and work them diligently. Our goal is to stay disciplined for the long-run because those rewarding goals like paying off debt, funding college, or retirement planning are too important to leave to a buzzer beater.
If you are saving for retirement, building a financial plan, or are considering investment help; let’s make sure that 2020 hasn’t taken you off track. If you don’t have a financial plan, reach out to our team to get started!
*If you want a real example of a small error in my own life– normally I publish my newsletter on Mondays. This week, I didn’t write over the weekend, and I left it up to chance that I could get it done by Monday. This was a hail mary on my part. As you can see, I didn’t make it. Lesson learned.