Possibilities vs. Probabilities for your Financial Future - J.E. Wilson Advisors

Possibilities vs. Probabilities for your Financial Future

Estimated Reading Time: 4 minutes

Possibilities gives you a sense of delight about the future, while probabilities sounds more like duties, responsibilities, and situations to mitigate.

If you had a choice between planning with possibilities or planning for probabilities, what would you choose? You’d pick possibilities — everyone would.

Focusing on possibilities doesn’t mean having a Pollyanna worldview that’s detached from real life. In fact, it can be quite the opposite.

Planning for your financial future while creating possibilities requires you to take a clear-eyed look at your future. You’ll have to fully comprehend the reality of your financial situation to move forward with achieving your life and wealth goals.

Working with a fee-only Certified Financial Planner™ can help you build the foundation necessary to plan with possibilities at the forefront. We’ve put together four reasons planning for possibilities makes sense for your financial future and four ways waiting for probabilities can negatively impact your financial plans for the future.

1. Simple Math Says Starting Early is Better

If you start saving at a younger age, it’s just pure, simple arithmetic that you’ll be able to save more overall.

  • Possibilities: It’s truly never too early to start planning for your future possibilities. In fact, the earlier you start, the more possibilities and opportunities you may have available to plan for. Warren Buffett famously said, “investing is forgoing consumption now in order to have the ability to consume more at a later date.” By building a plan now and making adjustments as needed, you’re likely to end up in a better position than if you wait to save until later in life.
  • Probabilities: If you wait to start saving and planning, your pool of possibilities will shrink. Whether you’ve put off planning for your financial future out of optimism or avoidance, in the long run, you’ll find yourself spending more time and money preparing for contingencies and dealing with inconveniences.

2. Having Time to Get your Family On Board Creates Synergy

If you’ve ever watched “The Newlywed Game,” you’ve seen that you can think you know a person well, only to find out they have thoughts and opinions far different from what you anticipated.

The same goes for your finances. If you aren’t on board with your spouse and pulling together toward the same goals early on, you may find it harder to steer past problems in the future.

  • Possibilities: When you start planning your finances early, you have more time and more opportunity to get your family members on board. You have a greater likelihood of success if you’re working together as a team and are on the same page about your goals for what your golden years should look like.
  • Probabilities: If you wait to make financial plans, you may find that life makes them for you. Wouldn’t it be nicer to have a say in your plans than to wake up at 65 and realize you’re nowhere near retirement, or you’re never going to be able to sustain your lifestyle after retirement?

3. The Flexibility Created by Saving Always Beats the Alternative

It may seem like planning and saving early on limits your flexibility and traps you into a process of squirreling away funds instead of being able to enjoy life. However, the reverse can actually be true.

  • Possibilities: When you start early and set goals with your financial planner, you’re giving yourself some room, a margin of error for your finances. You can choose, along with your advisor, reasonable investment policy to meet your goals. You can take time to analyze investment options and determine whether they’re compatible with your values..

Probabilities: If you decide to ignore your money management options until later in life, your freedom of flexibility can be rapidly drained away. Instead of being able to go where you want and do what you want, you may instead find yourself working longer into your golden years. Instead of setting up legacies for your children and grandchildren, you may need to put a larger chunk of your savings toward retirement living expenses. And, you may find yourself chasing higher returns whether or not they fit into your overall financial plans, just because you’re concerned about whether you can afford to bankroll your retirement.

4. The Longer You Invest, the More You Can Avoid Excessive Risk

Planning for possibilities isn’t about seeking the highest return, instead, it’s about working with a fee-only CFP® and using that expert’s dispassionate discipline to find the solutions that fit your needs and financial situation.

  • Possibilities: When you plan for possibilities, you have the opportunity to sit down with a Certified Financial Planner™ and determine what your long term purpose for investing . Instead of letting your emotions guide you, planning provides guidance. Working from a planning perspective boosts your ability to rationally judge your financial options before making decisions that could affect you long term.
  • Probabilities: Waiting until later to start planning can put you into an emotionally charged situation. Instead of feeling prepared, you may feel you need a miracle, or a lucky tip on the next big thing, to be able to catch up your financial efforts and meet your future needs. That’s a dangerous way of thinking, because it may make you inclined to take additional risks.

Setting your financial goals early doesn’t make it a sure thing that you’ll be able to achieve everything you want in retirement. There will still be tradeoffs to negotiate, and you’ll want to prioritize your goals so can you achieve what’s most important.

However, taking time early to think about and plan for “what can be” is one of the best ways to ensure you’re not forced to deal with “what will be.”

OUr experience tells us that the planning process helps investors become better equipped to make smart decisions about their future. Still have questions? we’re here to talk.

Speak Your Mind

*