In financial planning, there’s a fallacy of earned success and deserved failure. Those who are well educated and work hard will be rewarded with success, while the lazy and unambitious will fail. It disregards the role of luck and risk in finances. By critically approaching ideas of success and failure, you can proactively decide what it means to build long-term wealth in your life. A holistic approach will ensure a secure future for you and your loved ones, both in retirement and after you’re gone. Working with California financial planning services can give you the insight you need to separate risk from luck.
When I work with a new client, I’ll sometimes ask, “What would you like to know about investing that we can’t know?”
It’s not a question about goals, finances, or risk tolerance, but it gets to the heart of someone’s relationship with their wealth. Their answer reveals their attitudes towards financial planning, how they see their future––and their ability to dictate their future.
I asked the economist Richard Shiller this question, and his response has stuck with me for years, “The exact role of luck in successful outcomes.” It’s true that when someone makes a series of successful outcomes, we never say, well, they were lucky.
But when people fail, we also never say they didn’t work hard enough, or they took too many risks.
We blame luck for our failures and credit moderate risk for our successes. But both viewpoints are saying the same things––we aren’t in 100% control with financial planning. There is always something about investing that we cannot know.
None of us get to dictate how our lives will go at the outset. Luck—and risk—play a large part in the experiences we have and opportunities we encounter along the way. However, our lives aren’t pure uncontrolled chaos either–we all do things to align our experiences with our goals. You select where to go to college, do your post-grad, or work to influence your experiences and connections. Networking events, clubs, and groups you join also help you align your relationships and experiences with your goals.
You can put great effort into influencing your life, but there will still be conditions outside your control. It’s not your fault for not meeting the right people or getting the perfect opportunities to achieve your ambitions.
Many people struggle with financial planning because they make decisions based on their ideal life without accounting for the risk, luck, and unpredictability of experience. Successful financial planning comes from understanding the things you cannot control and optimizing strategies for your behavior and lifestyle–the life you’re actually living, not an idealized version.
There’s power in acknowledging the things you cannot control in life and financial planning. Don’t assume you’ll be the person to do everything 100% correct, avoid risk and bad luck in equal measures, and earn your success with tireless effort. Instead, you can develop a strategy for your future well-being that considers chance and luck are two sides of the same unavoidable coin.
Transformational Finances works with clients to identify their goals, lifestyle, and behavior across various financial planning services: protection, investment, retirement, tax, and estate.
By acknowledging the role of luck, risk, and chance in life and investing, we’re able to help our clients plan for the future they want based on their life and behavior in the present. We take a holistic approach to our services, based on a philosophy of financial behavior that accounts for all our clients’ unique, individual needs.
Schedule a financial planning appointment with Transformational Finances and experience the care, attention, and dedication we provide to every client from the very first meeting.
