It’s an exciting time, taking our first tentative steps out into the new year. A whole 365 days of newness stretches before us… something I like to think of as the divine unknown. For few things can be more wondrous and enticing than a brand new story just waiting to be told. Where will this year take us, and where will we find ourselves on the other side?
A recent conversation with a client brought up a wonderful analogy for this unique time as we discussed how best to prepare for what is likely to be a financially uncertain 2023: the unknown unknown. ‘Unknown unknowns’ are those unidentified and challenging risks which are hard to manage and even harder to predict; but they have a profound ability to derail carefully made plans.
There will always be things in life that we can’t quite grasp and events that throw us off guard. There is always the possibility that new ‘unknowables’ are just around the corner. Known as the Johari Window, this concept was created by psychologists Joseph Luft and Harrington Ingham in 1955. Designed to help people better understand their relationship with themselves and others, it’s a useful tool for understanding the importance of risk planning in personal finance.
The Financial Known and the Unknown
Life is filled with knowns and unknowns, and starting off a new year in acceptance of this fact means we can approach it with grace, but also – and more importantly – we can prepare for uncertainty and enable ourselves to remain steadfast no matter what the new year brings our way. In no area does this become more important than that of our financial lives.
Right now we are living through a time of ‘unknown unknowns’. On the outer edges of a global pandemic, our economy may be in turmoil, but this doesn’t mean your financial life needs to be. If we are prepared to lay down the right foundations, we can navigate a clear path through this ambiguity and anxiety with careful, mindful and meticulous planning.
Always Plan for the Unknown
‘Unknown knowns’ – like a bank or currency collapse – are rare, although we know in theory that they are possible, which is why strategies like diversification are so important. It is also absolutely possible to mitigate against ‘known unknown’ risks by making provisions for things like sickness, technology disruptions, or market shifts.
And, of course, ‘known knowns’ ask us to pay attention to saving, having insurance and a balanced portfolio. Even those true surprises – the ‘unknown unknowns’ – won’t hit you as hard if you have a plan in place.
During times of uncertainty, a plan is your best friend. It provides peace of mind and the comfort of knowing that you’ve built in some level of protection. With that surety beneath you, you can step out into each new day with the confidence to live life to its fullest, and on your own terms.
Women, Planning and Flexibility
The mistake we as women executives, business owners and professionals can often make, is that we view our financial plans as “an all-or-nothing proposition”. This is a common issue I address in my book, Corner Office Choices.
If we stray from our financial plan, we believe all progress has been wiped out. We treat it like a weight loss program or fitness regime. We’re hard on ourselves and become disillusioned if the clear road ahead starts twisting and turning before our eyes.
This adds huge mental stress at a time when the best advice is to hold true to intentions of the plan, to let the built-in protection mechanisms do their work, and recognize that the path to financial success is long and winding.
Throughout my career I’ve come to appreciate that real wealth comes down to living life on your terms. But it also means being flexible enough to know what you can’t control, such as:
- The Economy: Our economy is riding a tumultuous wave right now. In fact, the entire global economy is weathering a storm of historic magnitude.
Effects of Covid-19: Bloomberg calls the pandemic “a catalyst for lasting economic change” in the US, from remote work to automation and a growing wealth divide. - High Inflation: More rate hikes on the cards by the Federal Reserve.
- Unemployment and Job Losses: Right now, we are working with clients who have lost jobs, who are unemployed and who are deeply concerned about their future and that of their families.
- An Erratic Stock Market: Many of our clients are worried by the erratic performance of the stock market and the impact this is having on passive income.
These are real and understandable concerns, which impact people and livelihoods, but fortunately it is exactly in these conditions where financial planners can make a difference. By providing guidance in uncertain times, and by making sure that all our clients have the protection of a well-crafted plan, we can help you ride out this storm and thrive – even in uncertain times.
Your Best Support Against the Unknown
Our goal at WealthChoice is to help our clients live full lives. We do this by offering a holistic approach to financial, career and personal planning. We understand that the women we work with are fascinating and multifaceted individuals – and that each one is truly unique.
So, we focus on achieving an alignment between professional and personal goals. To do this requires time. Time to talk things through, to explore all the options on the table, to build a relevant financial plan, and design a tailored approach.
If you’ve just lost your job in tech, if your company is downsizing or your business is struggling. If – like so many Americans – you’re worried about your retirement, tax implications, rising debt, the cost of healthcare and college expenses, then help is at hand. We can work with you by putting your existing financial plan on the table, delving into the solutions, and unpacking the steps to get you back on track.
Over the years I’ve seen how women with clear financial plans have better money habits, peace of mind, in-built back-ups and emergency funds than those who don’t. So, I know this approach works.
Working together we can tackle the unknowns of the new year and beyond by putting the right plan in place and helping you make the best financial choices. Start the new year on the right foot, and give us a call today.
