There’s an interesting thing that happens as someone’s financial life becomes more complicated. It’s pretty natural to assume the planning should become more complicated right along with it. And sometimes it should.
There are situations where more sophisticated tax planning, estate strategies or investment approaches make sense. But before getting there, we still have to answer the questions that really drive the plan.
How much does your lifestyle cost? What income will you have in retirement? How much does the portfolio need to provide? What major expenses are coming? How much liquidity should you maintain? What happens if a spouse passes away or needs care? And ultimately, what do you want to happen with the wealth you’ve accumulated?
Those aren’t especially exciting questions, but they determine a lot of what comes next.
Being from Charlotte and a Panthers fan, I see a similar idea when I listen to Panthers coach Dave Canales. He’ll talk about getting back to the simple things they can improve—blocking, tackling, doing the fundamentals well—and there’s something about that approach that translates pretty naturally to financial planning.
The other part that gets overlooked is execution.
Most people understand the basic idea of diversification. Understanding it when everything is calm is one thing. Sticking with it when one part of the portfolio hasn’t been doing what you hoped, while something else seems to be doing very well, is different.
The same thing happens when markets are falling. Knowing that the plan was built with difficult markets in mind doesn’t necessarily make it comfortable to live through one.
That’s where a lot of the real work happens.
Complexity can certainly have a place in a good financial plan. I just think it should have to earn its way in. There should be a reason for it, and we should be able to explain what problem it’s solving.
Because over a financial lifetime, consistently doing the important things well may matter a lot more than constantly finding something new to do.
That’s the focus of this week’s episode of Wisdom for Your Wisdom Years.
