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Life is made up of many unexpected moments, both those that are good, as well as those, not so good. This is exactly what financial planning is about; helping you navigate a path towards your goals, especially when things “go bump in the night”.
A few years ago, a documentary film about former Secretary of Defense Donald Rumsfeld was made bearing the title The Unknown Known. Think about how this concept applies to your financial life. There are “known knowns”, things that you know. There are also, “known unknowns”, things you don’t know. But the real danger comes from what Rumsfeld called “unknown knowns”, the things we don’t know that we don’t know . Assuming you have mastered that tongue-twisting phrase, let’s proceed.
Surprise is a synonym for unexpected. Most of us don’t really like surprises, yet each day is full of them. The stopped traffic on the way to work; the colder (or warmer) weather; the latest revelation in the financial, sports or political worlds...all of these can satisfy the definition of “surprises”. Everyone has an opinion about what might be expected in each of these realms, but opinions are not facts.
Okay, so you accept that daily life can often differ from what you expect. The core of this concept also forms the core of financial planning . Notice, the active tense of the word... planning . A static financial plan contains all sorts of assumptions that become inaccurate over time because of life’s unexpected moments. The way events are ordered, the sequence of how things happen, cannot be predicted . Not by us, not by anyone.
Transforming a rational plan into financial planning starts with a regular review, discipline, and course corrections. This is why financial planning is most valuable when provided within the context of a long-term advisory relationship .