I am a mediocre planner (I view my Father as the most incredible planner). However, knowing that I am not that good at planning gives me a peculiar talent in that I can spot (easily) flaws in other folks’ plans. I think of myself as a “risk editor” for projects. I see bad financial planners all the time.
Let me explain. If a good planner looks at your plan, they will overlay their fastidiousness onto your plan and assume you have “dotted all the I’s and crossed all the T’s”, which is a dangerous assumption for many scenarios. Most plans I have seen do not get down to most of the gritty details needed to make it an actual plan (e.g. Dates on which you will make deposits, pay bills, what you will do with found money), and that is where most of them fail.
For someone like me, who has failed at planning so many things in my life (not just financial things), I quickly see these flaws in other folks’ plans because I overlay my shortcomings and just start asking questions about something (in a financial context):
- Did you think about what would happen if you lost your job?
- What if you or your wife had a catastrophic illness next week? How would your plan work?
- Paying off your credit cards is here, but are you going to keep using those credit cards? You don’t seem to mention that in your plan.
- What if interest rates suddenly jumped to 6% in 6 months? Can your plan withstand that kind of stress?
- Are you being overly optimistic with your plans? Few of us plan to realize our shortcomings.
Most folks hate when I do this because they answer me the same way my daughters did when I asked questions like, “Did you pack your runners?”, when going to an out-of-town basketball tourney. The answer is “YES, I DID!” (Read that with a snarky, sarcastic tone), and then we get to the tourney, and the shoes (in fact) are still at home.
Is there hope for Bad Financial Planners?
I am not telling you to find a bad financial planner and use their plan. What I am saying is to create a financial plan and then have someone you trust (or a real financial planner) review it to see if there are risks or details that you have overlooked. Different sets of eyes can sometimes see new things.
Once you have a plan, treat it as a living document, review, revise, and update
“Hope for the best… expect the worst…” -Mel Brooks
Words to live by…
And a plan with flawns can be better than no plan at all!
In my own case, I always planned very well for the long term but my short term (less than 5 years) was “fragile” in case SHTF. I kept every $ thigth (every loose dollar was used for investing or reducing our debt).
Recently, I solved this bulding a “3 months of expenses” EF. We got good insurances, COL is about 50-60% of our income, debt level is 20% of NW etc.