When was the last time something made you look at life through a different lens?
I thought this was a great read by Morgan Housel, renowned personal finance author, by this same logic. Housel recounts how, over the years, few distinctive ideas seem to actually stick and yet have the power to transform how you think in a big way.
It’s taken enough situations to know that, at my core, I prefer to be quiet and observant at first—especially in new places. But I’ve always had an eye for identifying problems. Even if I was too shy to speak on them. This finally paid off when I had a project in college to survey the entire Bowling Green campus.
The first half of this 20-something-student class covered the theory of risk management in today’s environment. Now it was time for the application. Our instructions were to search as many areas as possible to spot potential hazards or an accident waiting to happen.
This forced me to truly observe and second-guess nearly everything around me, from staircase guardrails to bathroom floors to the distance of the student parking lot to the rest of campus. I guess they didn’t want a bunch of babyfaced adults with newfound freedom having too easy of access to their cars, or pedestrians for that matter.
As I attempt to divert your attention from recessions and inflation talk, ask yourself what risks in your life are staring you in the face and which ones you are OK with.
A lot has changed since then. But still, It made me realize how there are tons of risks and isolated situations that we run into every day, and we may not even know it’s happening.
Little did I know that project would still come in handy years later. So much of my time is spent helping people psychoanalyze what happens if and spot what potential hazards lay ahead.
What happens if I don’t have enough insurance on my home, or my life, for that matter? What happens if I don’t go to my friend’s one-year-old’s birthday party? What if I don’t go and see grandma or grandpa this Christmas? What if I miss a few contributions to my 401(k) to help pay for Christmas gifts this year?
Some questions are small and require only a dose of logic. Others are simply a matter of having been through it before. But some questions are real with real big consequences. Asking these questions is a good start. Yet there’s a difference between asking, knowing this is just normal paranoia, and actually taking the steps to protect yourself. Doing the latter takes much more energy and effort up front.
I would start by reducing the mental strain on small decisions.
I stole this from a page in Jessica Hagy’s book, How To Be Interesting. Although she was talking about rolling the dice, letting fate or chance be the decision maker in a qualm, the idea behind this image is that as options and uncertainty increase, you’re more likely to be stuck in limbo when it comes to making decisions. So, don’t sweat the small stuff.
It’s no wonder budgeting and dieting have so many similarities—they’re extremely difficult to stick with over the long haul. Yet the number one commonality between both is to master saying “no.” So, sometimes it’s ok to buy yourself that vanilla latte. That pint of Ben and Jerry’s—it’s not going to make or break your budget. But dining out one too many times a month, too many weekend trips to the bar, and DoorDashing does have a compounding effect that may not be for the better.
Focus on getting the big decisions right.
Could you hold off on the new house for now? “With mortgage interest rates around 6 percent, American homebuyers have 24 percent less spending power than they did a year ago,” claims Allyson Waddell of RealtyHop.
Really, a 6.5% mortgage rate means the grocery budget is much tighter. Until you have the chance to refinance, this means less room for contributing to retirement. And despite a lower asking price, it means a higher chance of getting rejected for the mortgage loan. The same could be said for negotiating with your kids where they attend college. As Remit Sethi, author and personal finance guru would say, focus on $30,000 problems, not $3 problems.
Another way to keep anxieties down is to start the year by planning.
If you plan on maxing out the retirement accounts, automatically set your contribution rates on your IRA, 401k, or even HSA, to the percentage of maxing it out. Knowing it’s been taken care of is the easiest way to take the stress away. And to follow that, make sure you have a secure place for keeping important financial and estate documents handy. Save the person who needs to find these documents a lot of time and effort.
Look at what’s changing. Are you expecting a raise at work? Otherwise, job seekers could still be in the clear for a Roth conversion. And new members of the family mean insurance considerations should be on the to-do list.
For business owners, it’s time to both reflect on the year in the rearview and strategize for the new year. Recollect on past expenses to chip away at that tax bill. Despite inflation seemingly cooling down, you may still need to prepare for higher costs and consider the elevated cost of borrowing.
It took me long after that school project to realize that the real risks are the silent, mundane tasks of everyday life. Our diets, posture, and even our sleep balance. What that project really taught me was that you need to get to the problem before the problem finds you.
The same principle applies to your mental health. Nod if your mind is already on your next trip, as mine is. Find when you can (or what month you like the least) and plan that vacation. And if you’re still like me, you may need to replenish the savings coming out of this particular holiday season. So get a jump on the short-term savings now for what’s on the horizon.
If you want to make this year a little bit easier on yourself, remember, don’t sweat the small stuff. Instead, focus on the big picture.
Are my contributions on track for the retirement that I want? Is my diet conducive to the lifestyle I want then, too?
There are risks we know we don’t know, and then there are risks we don’t know we don’t know. So remember to leave room for life’s curveballs.
Plan this year for success and let everything fall into its place. It doesn’t matter if the market goes up, down, or does a loopty-loop next year. Knowing today is taken care of is satisfying enough.
If you find yourself asking what happens if and need help spotting an accident waiting to happen, reach out to us to help plan the year off to a good start.