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Bad Assumptions

Have you ever noticed how small mistakes tend to get worse over time?  Cracks tend to spread, gaps often widen.  I recently built a brick paver pathway around the side of my house.  It was an extension of a pathway the previous homeowners installed, and it’s lined by wood beams on either side.  I measured the pavers in the pathway which were 8″ x 4″, making for some decently easy math.  I excavated, laid down a base of gravel, compacted the base, and installed my wood beams with rebar which would allow for 5 bricks laid length-wise (40″ pathway).

I then ordered some brick pavers from the nice folks at Carolina Brick & Materials so I could install the pathway. I was so excited to lay the pathway after spending so much time working on the foundation.  Sadly, the “modern” 8×4 pavers that manufacturers produce are in reality 7.75″ x 3.88″ (unlike the originals), so when I laid out my first row it meant that I needed an extra sliver of a brick on each and every row in order to fill in the gap.  This not only meant several hours of cutting on the wet saw, but now I didn’t have enough pavers and had to order more!

Obviously in hindsight, I had just totally assumed that the new pavers would be the same size as the old.  I wasn’t off by much (0.25″), but that little bit on each paver compounded and caused a lot of headache, time, and extra money.

Assumptions and Financial Planning

Financial planning is a lot of the same.  The output is only as good as the variables we enter.  If our assumptions are wrong, then it makes the entire financial plan not worth the paper it gets printed on!

This is quite a challenge, because you can’t just measure all of your financial inputs like a simple rectangular brick.  For starters, we don’t know what will happen tomorrow let alone 20 years down the road.  The stock market is semi-knowable the further down the road we get, but our lives are just the opposite.  We don’t know what will happen to our income streams, expenses, inflation, taxes, homes, healthcare, children, parents, country, etc.  We make assumptions and best guesses, knowing that our best laid plans are written in pencil with God holding the eraser and permanent marker.

Not only that, but being just slightly off has huge effects over a long period of time.  If we assume that stocks earn 8% annually, $100,000 will grow to $1,006,266 over 30 years.  However just 0.5% more annual growth will grow to $1,155,825 over that same time period.  Even little differences have a compounding effect!

The Illusion of Control

The real kicker of it all is that there are very few parts of our lives and finances that we can actually control.  Most of the things in the list above that we can’t know are also things that are completely out of our control.  That fact alone can have the power to either completely wreck us or increase our faith in a Sovereign God.  If you tend to be a control freak like me, it can be a battle not to let it be the former.  I like to plan things out on spreadsheets; I like right answers.

Unfortunately, right answers can be pretty hard to come by much of the time.  Life can’t be lived on a spreadsheet.  When I try to, others around me suffer and so do I.  The tighter I try to hold on to things, the more frustrated I get when I find things slipping through my grasp.

Good News

There’s a couple of pieces of good news I have for us today.  One is that not everything is beyond our control.  We can control whether we buy the fancy coffee or the new power tool or how much we tip the waiter.  Sometimes the pipes in our old home burst and we have to spend way more than we want on something we can’t even see!  But a lot of our expenses are choices, and as Ron Blue used to say, “every spending decision is a spiritual decision” because it all belongs to God.

We can also control how we handle this uncertain world.  We can decide our attitudes, reactions and outlooks, our work ethic and when we choose to retire.  As out of control as this world seems, we are totally in control of our inner worlds.  And the choices we’re making today will bear fruit later in life.

“Old age is the harvest of all the years that have gone before…We are each, in our earlier years, building the house in which we shall have to live when we grow old.  And we may make it a prison or a palace.”1  To me, how we react to the uncertainties that surround us is much more important than the uncertainties themselves.

Faithful Stewardship

So what do we do with this dichotomy?  What does faithful stewardship and well thought out financial planning look like?

To me, the best course of action is to 1) not focus too much on the wrong things (the uncontrollable), and 2) to not make assumptions that are presuming upon the future.  Will everything need to work out just right for your nest egg to last beyond your life expectancy?  Are we counting on bonus income in order to pay for our expenses?  Will we need multiple incomes to afford the mortgage payment?

Focus on the controllables (you!), and leave yourself margin.  That doesn’t mean that you tear down your barns to build bigger ones, planning God out of the picture.  But it does mean that you leave room for God to change your best laid plans.

1 from Living Life Backward, David Gibson, 2017