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Financial Planning: Predicting or Positioning?

Ken Teegardin

How is anyone supposed to do any financial planning these days?

After all, we don’t know if taxes are doing down, the affordable care act is going away, jobs are coming back or a border fence is going up!

How are we supposed to know what to do next?

Really? Is it really that difficult?

Or are you just stuck because your concept of financial planning is proving to be fatally flawed?

I find many people harbor an almost secret hope that the financial planning process is actually going to allow them to successfully engage in financial predicting. Somehow I’m going to find just the right financial planner who has a secret store of knowledge about the financial future. That way I can buy the right stocks, know when financial panics are about to set in and when to buy and sell gold.

Anyone who lets you believe he can do that is as a financial witch doctor. Ignore him.

If seeing into the future was a requirement to take action, our country never would have declared its independence or fought a war against aggressors. If precise prognostication was a requirement for action, no business would ever be started. No athlete would devote years of their life for a chance at Olympic gold.

Financial prediction is a favorite pass time of the talking heads on TV, but is a waste of your time.

Rather than fixate on predicting your financial future, focus on positioning yourself to best handle whatever future comes your way.

Here are some basic ways to financially position yourself for an optimized outcome…no matter what the future holds:

(1) Protect yourself and your stuff. Unforeseen disaster can strike at any time. Make sure you and a licensed professional assess all your major areas of exposure and buy insurance to cover yourself. You’ll be glad you did.

(2) Under spend and over save. Nothing creates economic equilibrium and financial peace like spending less than you make and saving more than anyone you know. If you are not saving 15% of your income, promise yourself that you’ll work with someone to make that a top priority – in most cases I’ve seen, you can get there in five years or less.

(3) Upgrade your work & life skills. Nothing is so certain in the workplace today as change. What are you doing to make sure you are valuable to your current employer (or your future one)? Your boss’s assessment of your value is directly reflected in your paycheck (or should be). Make sure you are giving her plenty of reasons to make it larger.

Ignore that voice in your head that wants certainty about the future before you act.

Because good financial planning has nothing to do with predicting the future, and everything to do with positioning yourself to best handle your future…no matter what it is.

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.
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