How to optimize the energy we put into financial planning


“We all have finite amounts of energy,” said novelist Doris Lessing, “and I’m sure successful people have learned, either by instinct or consciously, to use their energy well instead of spilling it. “

Yes, it’s true, and if you want to know why financial resolutions are made (and broken) every January, it’s probably for two main reasons:

1) Most of us have expended more than 100% of our limited energy before even addressing the issue of personal finances. We have nothing more in store to give on this important subject. Most of us spend more time and energy planning this week’s meals or next summer’s vacation than planning our retirement – ​​throughout our lives – and that’s not because that we are idiots. It’s because we’re hardwired to overvalue our present and near future and undervalue what’s further down the road. By the way, that wiring isn’t faulty either, because we all have a greater likelihood of having dinner this Friday or enjoying a vacation next July than parking a golf cart after 18 holes in 30, 20, or even 10 years.

2) When we approach financial planning, we expect too much of ourselves. Even, if not especially, those of us who are Certified Financial Planner™ practitioners have often learned how to make comprehensive financial plans, that is, plans that take into account all aspects of a company’s financial life. a person and provide an exhaustive list of recommendations which, if we are honest, would only be feasible if someone made this effort in their full-time job for several weeks. As well-intentioned as they were, these plans broke every behavioral financial rule in the book; the most important is the one that says if you give people too many tasks, none of them will become tasks to be done. (And indeed, studies suggest that up to 80% of financial planning recommendations are – wait for it –never implemented!) I’m a big proponent of comprehensive (modular) financial planning – we need to be aware of the whole in order to address the parts – but I think comprehensive financial plans are little more than an expensive paperweight . Made of paper.

So what can we do about it? Well, let’s divide the “we” into two groups: financial advisors and everyone else. We’ll start with my recommendations for financial advisors, because I believe it’s incumbent upon us, as credentialed professionals, to give often overlooked advice, to do a better job of giving it.


Most of us have learned to shun emotions as demonic and worship delayed gratification as divine. It’s too bad because most of the decisions people make about money—bad and good – are driven by emotion, not logic. And besides, you can’t eat delayed gratification. So what do we do?

As for emotion, instead of ignoring it (at best) and demonizing it (at worst), we can learn both to explore this and harness it. And while it works for a few, especially those who build a media empire around a “You’re stupid” schtick, preaching forever from the pulpit of delayed gratification has failed for most, especially due to the fight against hyperbolic discounting biology (referenced above). But Hal Hershfield’s research suggests that we can heighten our interest in funding the future by using our imaginations to animate it. I invite you to imagine how you could incorporate this into your planning.

And how can we help people do more? By asking them less. It’s so simple. In my work, I never give a client more than three recommendations at a time or over a time horizon of more than a year – and I always find a way to tap into their emotion – their “why” – connecting each goal financial to a life purpose.

All the others :

Well, for starters, read my suggestions for advisors and work with someone who understands. The economist who coined the term “behavioral economics” (and won a small Nobel Prize), Richard Thaler, said, “If the main thing a financial advisor is doing in a session with a client is looking at spreadsheets, then they’re not doing their job.” Wow, strong words. He concludes: “It’s as much psychology as finance. “As much” sounds like a lot, right?

Just for fun, take Thaler’s advice and ask your financial advisor if they know the difference between System 1 and System 2, and how they’ve used those results in their client experience.

But even if you’re a do-it-yourselfer, start by adopting the suggestion I gave to advisors: accomplish more by demanding less of yourself. Don’t try to reallocate your portfolio, increase the liability limits of your car coverage, search for cash value accumulated in your life insurance policy, explore the impact of alternative minimum tax and qualifying charitable distributions on your 1040, update your beneficiary designations, overhaul your cash management system, redo your estate planning documents, and open three 529 plans for your children at the same time. Choose no more than three at a time, only work on one at a time, and let the success you have in ticking those boxes fuel your motivation to tackle the next one on the list.

Next, consider applying more and better energy and attention to your financial planning by setting aside quality time to review it, not what’s left after you’ve spent it.

Personally, I review my budget and cash flow every Saturday morning, or at least about 46 Saturdays every year. Those 30-60 minutes at the start of my day are motivated by a very strong cup of coffee, a stronger album that will help me through the budgeting process (I use YNAB—You need a budget—and have had it for many years now) and brings about the predictable catharsis that comes with knowing exactly where I stand financially.

Finally, remember Doris Lessing’s warning to use our energies well, “instead of squandering them.” Yes, much of what saps our energy is worth it – our meals this week and our next vacation, to name a few. But most of us also expend a decent amount of energy to another episode of Ozark (as exciting as it is) or another counting the number of likes received on our last message.

We are, whether we like it or not, the CFOs of our respective personal estates, so stepping down is really not an option, and the only one who pays for our failures is us and those we love.


About Author

Comments are closed.