Why The Glass Must Be Half Empty In Financial Planning

A few days ago I was visiting with some clients whose financial situation has evolved a little (normal stuff, nothing bad) and part of their equation is selling their home in a specific range of time down the road a little bit.

As part of the discussion I asked what they expect to sell the home for and they responded with a dollar figure that I’ll refer to as $X. Ok, I said but what happens if your best offer turns out to be 75% of $X? I warned them ahead of time I was going to ask a blunt and tough question.

That is very much a glass half empty question but I was clear in my reason for asking; glass half full or $X is a great outcome that allows them to do this, that and other and so is no threat to any aspect of how they view their life evolving. The threat comes from only getting 75% of $X and trying to understand what impact, if any, the reduced sales proceeds would mean.

In this case the difference doesn’t mean financial plan failure versus financial plan success but to put a framework to it that is easy for everyone to relate to; maybe taking a big trip every three or four years versus every year or driving a not so expensive car for ten years versus a sort of expensive car for five years.

Clearly not a ruinous situation but at the margin we have things that if we had to cut back on we could but would be frustrated to do so. If travel or cars and we could expand to include a lot of golf or season tickets to a major league baseball team are your thing and you have to give that thing up then it would be life altering in a manner of speaking and probably the types of things that you are saving for and planning on doing.

In the last few market updates we’ve given some attention to some of the threats to the current bull market in equities. The reason to do this is not in pursuit of some sort of perma-bear agenda like selling books about the coming alien invasion but because bull markets pose no threat to investors or advisors trying to help their clients.