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I don’t have the right stuff to be an engineer, as the math involved boggles my mind. But that didn’t stop my infatuation with spreadsheets in the nascent days of computer ownership. That was around 1990, roughly the same time-frame as the implementation of my employer’s 401k.
Oh boy, enabled by my new love of Excel, my life was planned out via extrapolations of future earnings, savings rates, and stock market performance. My plan had me comfortably retired at age 55. Yeaaaa!
But as Mike Tyson quipped after being asked if he was worried about Evander Holyfield’s fight plan; “everyone has a plan until they get punched in the mouth”. My punch in the mouth came via divorce, arthritis, plantar fasciitis, and a change in occupations.
There was no more gazing into the Excel crystal ball for me after that. Maxing out the IRA, SEP, and HSA accounts, and then living on what was left became my way for the remainder of my working life. Of course my ace in the hole was meeting Chris; we have achieved more together than either of us would have on our own.
Things still have worked out swimmingly, it just took an extra 15 years to cross the finish line.
What are you going to do if you get punched in the mouth?
Dan, thanks for yet another thoughtful piece.
First thought….
With regards Tyson’s quote “everyone has a plan until they get punched in the mouth”, it is pretty funny, but I think some use it to justify having no plan (not you Dan, other people!)
When some disaster strikes, I would much rather have some plan in place, even if it has to be adapted or reworked significantly. To my mind, that is still better than no plan.
Second thought…..
To build a plan, we need to make sort of guess about what the future might look like. For instance, a financial plan might assume a 40% drawdown on the market, or a lost decade, or some other nasty event. Or our plan might assume average 7% returns (after inflation) over a long period, whilst still acknowledging that there will; be ups and downs.
It seems to me that the least helpful plans will be those that make the most extreme guesses about the future. A wildly pessimistic guess about the future is likely to lead to such a conservative plan that in all likelihood it will leave us far worse off than we might have otherwise been. A magically optimistic guess is also likely a poor one, as it will fall over at the first hurdle.
Greg, I think this highlights one of the value propositions provided by a financial advisor: the ability to robustly stress-test a plan to see how it holds up under multiple extreme scenarios, consequently giving you more faith and peace of mind before retirement.
*Deleted*
I agree with Mike Tyson. I really won’t know until it happens, but I do have a plan.
I’m a big believer in diversification. Not only in investment sectors and countries but also in income. We currently have five income
streams. If anything happens to any of them we’ll still be ok.
Admittedly long term care could become a financial issue but with our income streams being permanent we should be all right
Cry quietly in the corner? Joking aside, I wonder if any plan is ever truly safe from getting blindsided. Poor health, yours or someone you love, a multi-year market crash, your house burning down, a lawsuit that drains your savings…the threats are real and unpredictable.
The best we can do is build in resilience. Good insurance coverage, staying healthy through diet and exercise, keeping our investment risk at a comfortable level, maximizing whatever fixed income we can get, and keeping spending reasonable. Beyond that, we’re at the mercy of chance.
Proper insurance is a key defense against a punch in the kisser. Lawsuits were a tiny hazard for my tax business, still, I owned a business policy in case a client tripped on a chair, cyber insurance in case of a data breach, and errors and omissions insurance in case I made a huge mistake on a tax return. A young family needs term life as well as disability insurance.
I know we’d rather spend our money on fun stuff, but insurance is the cost of doing life.
Never live based on assumptions, especially numbers on a spreadsheet🙏🏻
I am a bit obsessed with having a backup, to backups. As I have written about, the what if’s of life which we are experiencing now.
Some of my views on income and spending and multiple linked designated bank accounts which have been maligned on HD are all part of that plan.
When I was starting my business, I went cap in hand to the banks for financing. They required a business plan, and the assumptions must have looked reasonable—they lent me plenty of money. According to those spreadsheets, I should’ve been a multi-millionaire several times over by 40.
Reality and the spreadsheets had a disagreement. Reality won.