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A Plan Won't Help You...Planning Will

"Changes aren't permanent, but change is."

-Neil Peart; "Tom Sawyer" by Rush


Traffic is bumper to bumper, moving at about 5 miles-per-hour. I just picked my wife up from work and we have a plan to go pick up her grandmother and bring her to her lake cabin for the weekend. To do that we have to travel an hour southeast, then bring her two hours northeast from there. It's an easy drive and it's well worth it.

If everything goes according to our plan, we'll get to her place at 4:30 and be up at the lake at 6:30, just in time to make dinner. Unfortunately, it decided to snow - heavily - on travel day. We know it's going to take longer but it shouldn't be too bad. I put directions into my map app on my phone to see how long it's estimated to take. It says an hour and a half. That's better than I thought.

As we travel, slowly, the ETA time on the app never changes even though we are making progress. Our ETA of 5:05 pm remains even after being on the road for 45 minutes. Later the ETA finally changes, in the wrong direction. The ETA changes to 5:15, then 5:30, then finally 6 pm, when we arrive.

Frustrated, my wife and I wonder how the estimated time of arrival could be so wrong on our app. It turns out, the calculation is based on traffic conditions at the time of the calculation. As the day progressed closer and closer to 5:00, more and more people got off of work and hit the roads, adding to the congestion. We made our decision based on a calculation that was outdated as soon as it was calculated.

Because of this wrinkle, we have to change our plan. Instead of trying to drive up to northern Wisconsin in the dark, in dangerous, slow driving conditions, we decide to stay in town until morning.

In personal finance, we can make a plan, but something in that plan will change the moment we're done with the plan - just like traffic calculations and driving directions. The step-by-step instructions of the plan work only if nothing changes. Similarly, if we were hung up on our plan of getting to the lake that night and then eating dinner, we would have been disappointed. Being flexible and planning on the fly helped us make the best of our situation. The same is true with personal finance.

ongoing planning is more important than a plan


When people think about planning they tend to think about getting a plan. A plan includes step-by-step instructions that will get us to our ideal future, whatever that is for us at the time. It could be a plan to get from point A to point B, like us trying to get to the lake. It could be a plan to get a new job. It could be a plan to pay for college for our children, or to save for retirement when we no longer have a paycheck to fund our lifestyle. Whatever the "plan" is, it's static. It's like back when we would get driving directions online and print out the instructions. Those instructions can't change. Yes, they are based on getting you to where you want to go given what you know at the time, but the plan won't change when new information gets introduced. You won't know if a faster route becomes available.

The Future Doesn't Care About Your Plan

New information gets introduced that wasn't considered in our plans because new information is in the future, and the future is unknown.

Not only is the future unknown, it's unknowable. Something in our original plan will be "wrong" through no fault of our own. The future doesn't care that we make plans.

Something Will Be Wrong

Because the future is unknowable, some assumption, goal, or idea is going to be wrong in our plans. Traffic conditions change, our lifestyle changes, our jobs change, our goals change, markets don't return what we think, laws change, companies go out of business, new products are invented. There are literally thousands of ways for our plan to be wrong.

The path between where we are and where we want to go is never a straight line.

Plans Are Inaccurate

There's an old saying that once you drive a new car off the lot it loses much of its value. The same is true of static plans. You know something will change, you're just not sure what. As time progresses, there is more and more time to have something in the plan change.

Without revisiting your plans, they quickly become obsolete.