Accept What You Don’t Know

Managing finances is a largely predictive art, but sometimes we have to admit that our crystal ball doesn’t always function properly. It can be incredibly challenging to picture what our lives will look like in the space of a few years, let alone timeframes measured in decades. If you are asked to estimate what your income and expenses will be twenty or thirty years away, there is almost no way the numbers will still be accurate when you get there, even after adjusting for inflation.

How many things can change in the span of twenty or thirty years? Just go back that far in your own history and honestly ask how much of your current situation you could have accurately predicted. Go back even ten years and ask the same question. Does this mean we should throw our hands up and say “oh well, I guess there’s no use trying to plan”? No, but we also realize that it is unhelpful, and potentially detrimental to try to include too much detail in our long-term planning.

We can’t honestly say that we know what’s going to happen to us tomorrow, but we have a pretty good idea. The further we drift from today, the less likely we are to create accurate estimates. A good rule of thumb is to use a five-year window when determining how detailed your planning should be. When the goal falls within the span of the next five years, the planning can be far more detailed. When the goal falls outside the five-year span, we have to be increasingly broad with our assumptions.

When we try to make too many assumptions about the future we run the risk of establishing a plan that only works one way and fails under all other circumstances. The plan should be fluid and adaptable to embrace the reality that our lives are going to change.