Financial Planning is NOT a Puzzle

Every year starting at the Thanksgiving holiday through the New Year, my family works on puzzles. It started with a gift from a family member from San Francisco who brought a puzzle of the Golden Gate Bridge to our Turkey Day celebration, and we’ve been hooked ever since. This involves Ted and I puzzling over our early morning coffee, and staying up way past our bedtime trying to get “just one more piece.” The kids also get in on the game, lured away from their devices by the challenge. Our youngest gets the honor of placing the final three or four pieces, so everyone loves it! You know what is less than awesome though??? Working on a 1,000-piece puzzle, and then realizing one piece is missing! Ughhhhhhh!

The thing about a puzzle is that there is only one correct outcome. If one piece is missing, the puzzle can never be completed. (I’m looking at you, gnome puzzle of Christmas 2017). The puzzle looks ok, but it’s impossible to ignore the glaring hole. My youngest, Teddy, has the right idea though—Legos® are his favorite! That kid builds the most amazing creations; each one is different and unique and awesome in its own way. Half the time they get broken, and he just reconfigures his creation into something new and exciting.

I used to tell clients that financial planning is like building a puzzle, but I was wrong. That's not accurate. Financial planning is like building a Lego® creation—there is more than one way to put the pieces together, and create a strategy to help meet a family’s goals! Everyone has their own set of Lego® building blocks. This is where art joins the science of investing. Sometimes we recommend Roth IRAs, and sometimes we don’t. Sometimes we recommend taking social security payments at 62, sometimes we recommend waiting. Sometimes we recommend paying off a mortgage, sometimes we recommend deploying the cash for a different purpose. None of these financial choices are universally good or bad; they are tools which may be used to achieve various goals. Some folks have blue Legos®, and some have yellow Legos®—what works for one may not work for another due to countless factors.

When you think about financial decision making, the best decision isn’t always obvious, or even one that results in a positive economic outcome! If we only made decisions based on getting the highest possible return, then nobody would go on vacation or have a kid… both of which rarely result in anything but money paid out. Not to mention, the frequency of outside events that impact your plan are often unexpected. Like Legos®, sometimes a plan gets knocked over by a job loss or other life-change. Or, you may just find some new Legos® hidden under the sofa! The beauty of Legos® is that you can reinvent or build upon your creation, often times resulting in an even better outcome. The key is that all of the pieces must work together requiring a holistic strategy... investments are only one consideration.

Often times only investments and market returns are contemplated in regard to financial decisions, dramatically limiting the scope of impact. However, there’s a whole pile of Legos® that need to be considered and carefully crafted together. No matter the foundation from which you’re starting, developing your personal financial plan will empower you to optimize your outcomes. Are you ready to start building your plan and living your best life? We’d love to help you get started… and avoid stepping on a rogue Lego®!