In late March Balentine’s Director of Communications had the privilege of speaking with Carl Richards about his latest book The One Page Financial Plan. Carl Richards is an author and artist, perhaps best known for his napkin sketches. Balentine has long been a fan of Carl Richards’ message on overcoming psychological factors which oftentimes cause a disparity between returns earned by actual investors versus market benchmarks.
The One Page Financial Plan then is a logical next step for Richards, as it effectively counsels readers on how to bridge that so-called “behavior gap”. Over the course of five Market Notebook entries, we explain what our top five takeaways were from The One Page Financial Plan and our subsequent conversation with Richards.
4. No one can predict the future.
Perhaps next to their health, people worry about their money more than anything else. After all, who knows what the future will hold? When trying to answer this question, many fall into two extremes, illustrated best by Aesop’s fable of the ant and grasshopper. While the ants do not break their rigidity in storing up for winter, the grasshopper adopts a more YOLO approach to life and throws goal setting to the wind.
Today, many people find themselves living like the grasshopper. In a statistic quoted by Richards in this book and also by CEO Robert Balentine in his op-ed “Living Beyond our Means: We are a Financially Illiterate Nation,” the median retirement account balance is $3,000 for all working-age households in the country. However, no one can predict the future and the ants’ rigid way of living isn’t the most desirable either. Instead, Richard suggests that a middle of the road approach is best: “I’ve found that people have the most success when they abandon those two extreme approaches and instead admit that when it comes to the future, they don’t know exactly what will happen.”
Therefore, instead of being committed to predicting the future, be committed to the process of guessing. By having a methodical, repeatable process you are able to provide discipline to your decision-making process. To borrow from Jim Rohn, “discipline is the bridge between goals and accomplishment.” Richards suggests three questions to ask to help develop this procedure:
- What is the goal?
- When do you want it?
- How much will it cost?
Being able to make smart assumptions around these questions provides a good framework. In addition, Richards suggests making goals as SMART (Specific, Measurable, Attainable, Realistic and Timely) as possible. For example the goal “I want to ensure that my children will be able to attend private school and the college of their choice” is better than “I am committed to my child’s education”. Specifying private school and secondary education makes it easier to answer questions two and three than a generic statement.