“It’s irresponsible to use math alone to build a financial plan,” says the Certified Financial Planner with a bachelor’s degree in finance and accounting from the number-one entrepreneurship college in the country.
It might sound a bit odd coming from the finance pros, but it’s true. Eric did say using math alone is an irresponsible way to build a financial plan in this episode. And we’ve seen what happens when people run wild with a spreadsheet that says their plan “works,” without considering the real-life context those numbers have to work within.
That’s because money isn’t a math problem.
Too often we think we can just plug numbers into a formula and rely on the answer that it generates, but that leaves out a lot of variables that often matter more than the baseline numbers.
So what do we look at instead? Join us for this conversation where we’re talking about what’s way more important than math — namely:
- Understanding your financial reality and respecting what the numbers say about today. The numbers aren’ everything… but they don’t lie, either. We have to get grounded in the certainty that right now offers us before we can move forward.
- Adding color and context that reflects the fact that your financial decisions are made with the long-term in mind… but that you actually have to live your life in the day-to-day moments. That’s what makes financial planning a massive challenge: present-day You has to act in the best interest of yourself as well as someone you don’t know at all and doesn’t exist yet… future You!
- Managing the emotional challenges that come with trying to align your money, your time, and your energy in a way that allows you to get more of what you want. Most steps to financial success take not just weeks or months but years, and being able to stick with the same action over and over again is (a) hard, (b) boring, and (c) not always realistic. This is a big reason why our plans come with buffer room and why we work so hard to foolproof the advice we’re giving. It’s also why we work to narrow down the starting point of a million choices to 2 or 3 realistic, doable, sustainable potential options for moving forward.
We’ll cover the 3-step framework we use with financial planning clients every single day to navigate the complex thought process that’s required when making money decisions that actually work in real life… and along the way, we’ll explain why spreadsheets and calculations only play a supportive role rather than a starring one.
Jump into the episode here:
Further Reading & Links from This Episode on How Using “Only Numbers” Leads to Irresponsible Planning
- Our recent podcast on building a foolproof financial plan is relevant for this convo, too. If you prefer to read, this post on creating a bulletproof balance sheet is a nice compliment.
- Read the Psychology of Money by Morgan Housel if you haven’t already.
- You can learn more about Carl Richards and his work here (highly recommend his book, The Behavior Gap, as well).
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