The Useful Type of Predictions
Over the past four months I’d estimate I’ve heard more financial predictions than I’ve heard in the past four years. I understand the unprecedented nature of what we are currently dealing with makes many people anxious, myself included. It’s natural to want to believe we have some control of the future. However, most predictions I hear are about things 100% out of our control.
I am not going to make a financial plan based on when I think a vaccine will be ready or when all businesses will be fully open or how the stock market is going to react to the latest surge or what additional stimulus packages Congress might approve or who will win the election. It might give a person temporary comfort to pretend we know how things will turn out, but we need to be honest with ourselves and admit that no one can reliably predict things like this that are out of our control. Therefore, we need to make plans that will function well in numerous possible outcomes.
However, that doesn’t mean predictions or thinking about the future is a useless exercise. The more useful types of predictions are the ones you have a significant amount of control over. From a financial planning perspective, here is a list of useful questions where spending time trying to make thoughtful, introspective predictions can be very helpful:
- Where do I ideally want to live? Cost of living is a HUGE financial factor that is underestimated by many.
- Do I want to have kids? If so, how many?
- Do I want to be a homeowner or am I comfortable renting?
- Do I want to work full-time or would I be happier with less money but also less work hours required?
- If I am comfortable with working full-time now, how long do I want to work at the rate I’m currently working?
- If my investments dropped by 40% next year, how would I feel?
- Do I expect my parents to need financial help later in life?
- Are there philanthropic causes that I am passionate about but not currently supporting the way I desire?
This is certainly not an all-inclusive list. It’s a good starting point though. I know it’s hard for many people right now to think beyond the next month (or sometimes even the next day), but if you’re going to spend time and energy thinking about the future, let’s focus on things we have at least some control over.