In financial planning, success is usually measured by a primary metric: asset accumulation. Traditional financial advisors emphasize portfolio growth, withdrawal rate and retirement saving, assuming that the more money a person has, the better it would be.
However, this narrow focus can lead to an unexpected result – customers who accumulate money, but fail to get true money.
The contradiction of financial planning is that, while wealth – is defined as high net values - are important for financial security, they do not guarantee a complete life alone. True money is sufficient: enough time, family, love, friendship, hobbies, purpose and financial security to support life.
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True strength and complementary symptoms
This unbalanced approach shows strength and widespread misconception of decision making. Many people believe that their strongest feature is their biggest property. However, as the Harrison reflects the contradiction theory, true strength emerges from balanced the complementary symptoms.
For example, confidence in someone’s opinion is valuable, but without openness and reflection of other approaches, it turns into dogma, leading to poor decisions and damaged relationships.
Similarly, financial planning should balance the drive for money with an understanding of lifestyle, which really needs to form an effective strategy.
This pattern of unbalanced thinking is not unique to financial planning. Many industries accidentally focus on the wrong matrix, leading to sub -degree of results.
A prominent example of Major League baseball is the old approach to the player evaluation, which was replaced by data analytics, as depicted in the 2011 film Moneyball,
The way baseball teams once rely on faulty figures that were not correlated with victory, financial advisors often prefer asset accumulation without considering the real purpose: receiving real money.
Wealth vs. Dhan: Understanding the real goal of retirement
One of the most important misconceptions in financial planning is the belief that being rich and rich is the same. In fact, these concepts are quite different.
Being rich, sufficient amount of money or property – high net value, a large investment portfolio and significant cash reserves. However, a person can have a lot of money and cannot experience money.
Being rich means enough – enough money, but enough time, meaningful relationship, personal fulfillment and freedom to enjoy life. True money is about balance, not more.
The goal of retirement should only accumulate the biggest possible nest eggs, but to create a meaningful and pleasant life. Without this balance, retired people can find themselves financially stable, yet can get emotional and socially spoiled.
Contraindication in financial planning is a singular focus on asset accumulation
For decades, financial advisors have measured success by portfolio size. The industry prioritizes such matrix:
These indicators are important, but they tell only part of the story. If the financial advisors especially focus on these numbers, without considering how customers would use their money to increase their money, they risk their customers failing to serve effectively.
Research has shown that beyond a certain point, low returns have decreased on the satisfaction of life without balanced by plans to become rich in increased rich. This means that the growing assets can result in customers who are financially safe but are individually unaffected without a plan to effectively use them.
In the same way that confidence to create true strength should be balanced with curiosity, the financial plan should balance the asset accumulation with lifestyle fulfillment.
A financial advisor who is confident in his investment strategies, but not receptive to a customer’s personal aspirations, can miss a plan that maximizes the returns, but neglects what really matters to the customer.
A parallel example: Shift in ‘Moneyball’ and Baseball Matrix
As mentioned above, the contradiction in financial planning reflects a similar imbalance in Major League baseball, as shown MoneyballFor decades, baseball scouts and general managers evaluated players based on traditional but flaw matrix, such as:
- Batting average (AVG). While the gold standard for the hits was once considered, it failed to the account to walk.
- (RBI) batted. This is highly dependent on the companions of the statistical team, making it an incredible indicator of personal performance.
- Theft basis (SB). Often used to measure speed, but it fails to pay attention to how often a player is caught stealing, which can cause more damage to the team with the help of successful theft.
These traditional figures were widely accepted despite their flaws. However, Billy Bean, general manager of Oklaland athletics, admitted that he was not necessarily correlated with the winning games.
Shift for advanced analytics
Beane and his team, using the insight of sabermetrics (a data for baseball analysis), preferred more meaningful data, such as:
- On-base percentage (OBP). How many times the remedy reaches a player base, whether by a hit, walk or hit-by-pitch. It proved to be a better prophet of aggressive success than the batting average.
- Slugging percentage (SLG) and on-base plus slugging (OPS). These matrix accounts for the quality of the hit, giving all the hits more weight to additional-base hits instead of treating equally.
- Win over replacement (war). A comprehensive figure that guesses how much a player wins compared to a replacement-tier player.
By focusing on these new matrix, Oklaland A created a competitive team despite being one of the lowest payroll in Major League baseball.
Implementing ‘Moneyball’ thinking for financial planning
The way baseball had to reconsider how players, financial advisors and their customers should reconsider how they measure success. Instead of fully focusing on asset accumulation, both sides should adopt a balanced approach that includes suitable matrix that reflects the overall welfare of a customer, such as:
- Quality of life index. How well the financial plan of a customer supports their desired lifestyle.
- Happiness rate. A balance between savings for the future and enjoying life today.
- Experience-based money use. A metric that tracks whether customers are using their money in such a way that aligns with their values and aspirations.
The contradiction of financial planning lies in a false perception that the money alone leads to happiness. Just as Moneyball This indicates that baseball teams need to reconsider how they evaluate the players, financial advisors should reconsider how they measure success.
To know more, go to my podcast website Hownottoretire.com,
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