“Perfect Today” < “Less Wrong Tomorrow”

Carl Richards is a Certified Financial Planner™ and creator of the Sketch Guy column, appearing weekly in The New York Times since 2010.  The following article is reproduced with permission from his weekly newsletter and his website can be found here.

Greetings, Carl here.

Real Financial Planning is not about being right today, it’s about being less wrong tomorrow.

Airline pilots know this. For years, every time I met one, I would ask two questions.

The first was, “Do you prepare a flight plan for every single flight?” And every pilot I asked answered “Yes.” The second was, “How often does the flight go exactly as you planned?” To which they always answered “Never.”

This should come as no surprise. The flight always differs from the plan because life is unpredictable, and no matter how hard we try, we never have all the information we need about the future before we start.

Think about what we are trying to do when we create a financial plan that might span 30 years or more. We have to guess about rates of return, inflation, taxes, goals, a date of death, and on and on. There is no way to get that 100% right.

In fact, the only thing we know for sure about any good financial plan the moment we finish designing it is that it’s wrong. We just don’t know exactly how… yet.

So instead of being worried about getting everything right, we do the best we can to create a plan, and then we accept the reality that financial plans are worthless without the ongoing process of planning.

It’s the course corrections over time that allow us to narrow in the potential range of outcomes and reach our goal. Real Financial Planning is a process, not an event.


P.S. As always, if you want to use this week’s sketch, you can buy it here.