You Can’t Wing It

I have a relative who lives his entire life in “day to day” mode. Everything seems to happen to him by accident. His kids were unplanned (big oops since he can’t really afford them) and he has no career path but instead takes jobs randomly. He has no long term financial plan (or savings) so when something goes wrong, it’s a total crisis. Everything from vacations to simple errands are done on whims. While there’s nothing wrong with having a little spontaneity in your life, going through life without a plan is not going to help you achieve financial success. While there are rare stories of people inheriting or winning millions of dollars, most people don’t get rich that way (and those that do will eventually lose it all without a plan). Most people get rich by thinking and planning ahead.

The biggest problem with not planning ahead financially is that your entire life becomes a crisis. Everything from a dead car battery to a broken refrigerator becomes a huge deal. If you don’t know where the money for repairs or unexpected expenses is going to come from, you run around in a panic trying scrape money together. It gets worse when something really big happens like a death or illness in the family. If you don’t have a plan for dealing with the expenses, the estate, or the lost income, you can quickly find yourself hundreds of thousands of dollars in debt with no way to dig out. Talk about living life in a panic. Dodging bill collectors, always looking for spare change under the couch cushions, and living in fear of what will go wrong next is no way to live. It’s too stressful.

You’ll never get ahead this way. Running from one crisis to the next uses up all of your energy. Your money flies through your fingers too fast for you to figure out what to do with it. If you have a plan, on the other hand, you always know where the money for things is going to come from. When you wake up in the morning to find the fridge has died, you’re still inconvenienced because you have to go choose a new one and wait for delivery, but you don’t compound that by wondering where the money is going to come from. When someone gets sick or dies, you’re able to deal with the emotions involved instead of freaking out about the money. Having a plan frees you from the crisis mentality and gives you room to breathe. Things are still stressful, but they will get back to normal more quickly.

Beyond the crises of everyday life, a long term plan is the only way to prepare yourself for retirement, paying for education, or your own medical care. You can’t just wake up when you’re sixty and say, “I think I’ll retire today” or “It’s time to pay for junior’s college, I’ll just write a check.” To do that successfully requires thinking about it and planning for it for decades. You can’t just wing it. You have to know how much money you’ll need, how to save wisely, and where in your budget that money will come from. If you’re seeking to protect your assets from disability or disease, you need to have planned for it by purchasing insurance and saving. Financial success is all the result of a long-term plan.

Sometimes even the best laid plans fall through, unfortunately. You can make a lot of plans and still end up in trouble if the expenses exceed your plan or something really terrible happens. But the fact that a plan may not work out isn’t a reason not to plan. Let’s say you have a plan to save a million dollars saved for retirement and, for whatever reason, you don’t make it. You only get to $800,000. You still have $800,000. That’s far better than the $0 you would have had with no plan. Planning will save you more often than it will leave you stranded. So make a plan, stick to it, and tweak it as you go along and you needs change. You’ll be far better off than people like my relative who just wing it.

(Photo courtesy of Robert S. Donovan)