The only constant variable that you can truly rely on is change. Your circumstances will change. Your finances will change. YOU will change. How can you build a financial plan that withstands so much variability and uncertainty?

This is what makes financial planning so hard.  An actual plan that you put down on paper is outdated before the ink is even dry, because every single piece of new information will throw your charts and your projections and your linear action steps out of whack. 

Plus, there’s no one variable that you can plug in to account for “change.” You cannot pin it down or make it more concrete. It’s inherently unknowable, usually unpredictable, and rarely attributable to any one thing.

And yet you have to deal with it anyway.

In this episode, we discuss a few strategies for working with change (rather than having it work against your plans), including:

• The biggest factor that people don’t want to account for in their finances – but that is critical to consider
• The importance of giving yourself permission to change (and the costs of failing to do so)
• Ways to accept change and how to prepare for the unpredictable
• Why you must stay open, flexible, and, most importantly, connected with other people
• How to use your money to create a positive feedback loop that teaches you about yourself and your values
• The dangers of ignoring the reality of “the only constant”

Before we can plan for change, or deal with it, or set up our personal finances to flex with shifts (both predictible and unexpected) in life, we have to first give ourselves permission to change.

It’s okay to change your mind or to realize, Wait. This path that I’m on isn’t the right one for me. Or, I want to pursue something else.

You don’t even have to know WHY you feel that way (and forcing a reason can be counterproductive… sometimes, the reason is simply “because I want to,” and that’s valid).

Eric shares a bit of how his career trajectory evolved over the 20 years since he left college.

Although he went to Babson College, consistently recognized as a top entrepreneurial school, he told himself he never wanted to run a business. He wanted to work within a large corporation, climb the ladder, and come out on top in the C-suite.

A few years on that path, however, had him doing a 180. Now, as a business owner with a firm that is 9 years old, he can’t imagine it any other way.

But he wouldn’t have reached this point without allowing himself to dramatically change his vision of success, his specific goals, and the track he initially pursued.

Giving yourself permission means you’re adaptable and flexibile, rather than rigid and set.

When you hesitate to allow yourself to change your mind, you can compound mistakes due to the time you lose in resisting the change. You become more suseptible to the sunk cost fallacy, and can be slow to adjus even when you know it’s the right thing to do.

In terms of specific advice for dealing with the reality that the only constant in life (and even in yourself!) is change, we talk about the importance of:

• Giving yourself permission
• Knowing that change is inevitable… and when it shows up, take it on (don’t avoid or ignore it)
• Building relationships with other people to help you understand different ways of being and perspectives about the world
• Being open-minded: to new people, experiences, situations, information
• Understanding that, sometimes, you just have to rack up the life experience to know what’s right for you. There’s no other way than simply being around for long enough to understand what works for you and what doesn’t

To that last point: it’s something that most people don’t want to hear and most people also avoid saying out loud.

It’s important to acknowledge, though: sometimes, you just do not know who you are going to become in the future and what that person wants.

Rather than resist that (and you resist it by underestimating how different Future-You inevitably is from Present-Day-You) it’s helpful to embrace it.

A potential mantra: I know I will change in the future. I may not know how, when, or why, but I can be certain that the person I am right now will be unique from the person I will be in 5, 10, or 20 years.

In terms of how this applies to your financial planning – it all comes back to buffer room! (Yes, we’re talking about building buffer room into your financial plan again. Sorry not sorry.)

One major way you can deal with the one constant in your life being the fact that life changes is to treat financial planning as an ongoing, continual process rather than a one-time event.

An actual plan that you put down on paper is outdated before the ink is even dry, because every single piece of new information will throw your charts and your projections and your linear action steps out of whack.

The other important strategy is to seek a balance between using your money today and saving responsibly for tomorrow.

This is extremely hard to do, but good financial planning can at least get you in the ballpark of “middle ground” between enjoying your money right now and having enough to also enjoy it in the future.

Most people fall on one end of the spectrum or the other; they either tend to spend too much now and save too little, leaving their future uncertain and unstable.

Or, they tend to save too much. It happens when you save more than what you actually need and you’re sacrificing things you value or important experiences in the present because you’re so focused on building wealth for the future.

Not to mention, not using your money can mean missing out on experiences that would inform you about your values and priorities.

Using money creates a feedback loop: it helps you understand what a good use of your money is, and isn’t.

Without that experience, you don’t create the loop, and you miss out on valuable information about yourself and what you might want for (and from) your life.

And what if you feel like you don’t have the money to use right now? It’s time to consider earning more, or spending less.

You have many levers that you can pull, and what works for one person might not work for you. But you do have options, so explore those.

Free up cash flow by reducing expenses, even temporarily – and using that freed-up money to do something new, different, out-of-the-usual routine. That can give you the opportunity to rethink what you thought was entrenched or view your normal life from a new angle.

The fact that we must account for change is also an argument against massive fixed expenses in your personal finances.

This is a big reason we harp on housing so much, and push to keep those costs in check. It’s probably one of the biggest line items in everyone’s budget, and when you max that out, you take dollars away from every other need or want that could crop up now or in the future.

Yes, you can offload these fixed expenses… but it’s like trying to get a cruise ship to do a 180 in 30 seconds. It takes time to make major changes like sell a home and find a new living situation (and those are changes you might not want to make – and you don’t want to be forced to make).

What failing to account for change can look like in a financial plan is locking in decisions that you don’t have a choice but to stick with for a very, very long time. It’s great if works now. But if you’re making financial choices that are forcing you to keep things status quo forever, that’s not a sustainable plan.

Ready to tune in? Jump into the episode here:

Further Reading & Links from This Episode on Change as the Only Constant

• Dan Gilbert’s TED Talk on the end of history illusion and the reality of how we change
• Here’s the This American Life episode that features Jeopardy! winner Ryan Long

Want More from the Podcast — and Your Hosts? Here’s How to Connect

We’d love to connect with you and continue the conversation! You can follow us @BeyondFinances on Twitter | Instagram | TikTok

If you have questions or comments, send us an email at team@beyondyourhammock.com.

You can even chat with Eric about becoming a financial planning client at BYH by clicking here.

And of course, we’d love to hear what you think. Share your feedback by leaving your review on Apple Podcasts. It means a lot.