We so desperately try to nail down certainty in every area of our life but this pesky thing known as reality gets in our way. The realities of life refuse to conform to our desire for certainty. We make plans for our lives and then reality “happens” and throws a monkey wrench into our plans. Here are some real-life examples of reality refusing to bow to the plans of two of our clients:
- In late 2021 they contracted to have a new home built with an anticipated completion date of fall 2022. They budgeted for a mortgage of around 3% but now rates are closer to 7% and they cannot afford the mortgage.
- He was retiring in late 2019 and booked a once-in-a-lifetime 3-week trip with his spouse for April of 2020. COVID hit and the trip had to be canceled.
These are a couple of dramatic examples but in reality… it is just life! This is the way the world has always worked. As a child, we just deal with it without any worries but as we get older we kind of begin to believe that we have control (certainty) of the circumstances in our lives. After all, we made plans, then contingency plans, and yet we did not have a plan for the changing reality of life.
So we look for someone to blame. The government. The markets. The democrats. The republicans.
Let me offer another suggestion, STOP reacting to uncertainty and start planning for it. Instead of spending our time, effort, resources & energy trying to make the unpredictable/changing realities of life conform to our desire for certainty. (hint: you cannot do it). Maybe we could use our time, energy & resources at becoming better at navigating uncertainty (or resilient). The effort to change reality has never worked… so stop trying.
What does this look like in our financial life?
- Be a resilient person. The American Psychological Association defines a resilient person as someone who can successfully adapt to difficult or challenging life experiences. Risk is what’s left over after you think you have thought of everything.
- Be mentally, emotionally & financially prepared for bumps in the road of life… they are unavoidable.
- We cannot predict what or when life’s realities will happen to us.
- In 2021 no one predicted 2022 would bring a war in Ukraine, +8% inflation, higher mortgage rates, etc.
- In 2019 no one predicted 2020 would bring a worldwide COVID epidemic, travel bans, economies shut down.
- Have an emergency fund equal to at least 6 months expenses.
- Work to pay off all non mortgage debts and stay debt free.
- Make sure you are saving enough for retirement.
- If you have a retirement investment plan, stick with it even when markets get crazy. If your financial planner is any good he/she planned for down markets. Talk with them and trust them if they have experience navigating tough markets.
Dave Conley, CFP