One of the more vexing problems in financial planning concerns the distinction between effort and results. One does not necessarily lead to the other, at least in the short-run.
You can control your effort and your inputs; you can’t control exactly what happens with that effort. As we often repeat in review meetings, “inputs influence outcomes.” Influence, yes; determine, no.
How Much is Enough?
Perhaps you’ve seen the formula Happiness = Results – Expectations. In my experience, it’s the expectations part that creates a lot of unhappiness. Morgan Housel in his excellent new book The Psychology of Money says “the hardest financial skill is getting the goalpost to stop moving.” There has to be someplace where you can reach “enough.”
One of the reasons I dislike the modifiers “maximize and optimize” is that these words convey the idea that you should always seek “more”, even when you have “enough.”
The whole concept of “enough” is to realize that an unquenchable thirst for more money, more investment returns, more everything…can easily fold over into regret and big mistakes. Every risk isn’t a risk worth taking. Just because your car might be able to go 110 miles per hour doesn’t mean that’s a good idea.
Invest in the Effort
You should avoid directly linking effort with expectations. 20th century philosopher/writer Albert Camus wrote “Invest in the effort, not the result, and you will sleep better.” Since the essence of our financial planning process is to reduce anxiety about money and improve your satisfaction with life, these words by Camus ring true.
The main reason we want to connect effort with a direct outcome is because we want to control the outcome . Think about driving your car on the interstate. You can control your speed and direction but you can’t control how other drivers may impact you. Willingness to set aside the notion of control is an important step in building a successful and sustainable financial life.
Investing starts with the effort of saving and you have certain expectations for this effort. The issue, however, is just like in driving your car, you can only control what you do, not the actions of other investors in the global financial markets.
You might expect a very even and linear result from your effort but the markets are usually lumpy, not smooth. If you adjust your expectations for that reality you likely are reducing your anxiety about money and increasing your happiness.
You can control how you spend your time; who you spend your time with; how you interact with those you care about ; how you save and spend your money; what you eat; and a few other things. Overall, it’s a fairly short list when you consider the lengthy list of things you can’t control.
Can you think of examples in your life where the effort and results were mis-matched? What were the main lessons that you learned? Start there. Ready for a real conversation?