Why a good financial plan doesn’t have to be complicated

As we grow up and experience more of the world, we learn that a topic typically becomes more complicated as we dive deeper into it. For example, supply and demand is a concept most of us can grasp quickly, but gaining a deep understanding of how these variables are affected by changes in interest rates, inflation and trade relations requires further study. We also find that for those who delve deeper into any discipline, things eventually seem to simplify again . The details fade away, and you unlearn some complexities that don't seem important, allowing you to distil the subject into a few key points that really matter. True simplicity comes from a deep understanding and appreciation of the subject matter. When shared, this simplicity enables the rest of us to make sense of the world without becoming an expert in every field. Every great teacher or writer has this quality. Richard Feynman’s writing can make anyone appreciate the key lessons in physics, and even make you laugh. Who would have thought physics could be funny? Unfortunately, too often we encounter complexity where simplicity is what we really need. In many cases, complexity is used to confuse, leaving the recipient with little understanding and keeping them reliant on the expert. The financial industry is no different. Experts highlight the dismal level of financial literacy and advocate for financial education to be part of the school curriculum, but very few contribute to the necessary changes. Most financial players are complicit in using complexity to spread fear and to maintain reliance on an industry that is content to sell products without ensuring buyers understand what they are getting into. The media creates the crisis of the day (or fans the flames), while the financial machine stands ready with solutions that may have addressed previous crises but are unlikely to be suitable for the current challenge. From the history of financial markets, we have learnt a few key lessons that will always apply. Once you approach every new crisis with this knowledge, the world becomes much simpler. Money, too, can be simple if you want it to be. If complexity is what you seek, then financial product providers will gladly give it to you. There's a product for every financial fear you may have. However, starting here is likely to lead you astray. You must determine what these products mean for you and the lifestyle you wish to lead. A true understanding of money allows you to build on your understanding of your own situation and the life you want to live. A strategy can then be developed based on a simple comprehension of the concepts, such as spending less than you earn, investing for your unknown future, providing for short-term expenses, compound interest, historical market returns, and combining these with old-fashioned discipline and patience. People often find this process easier when it is facilitated by a caring life financial planner who can educate, encourage and hold them accountable. While products may be necessary, they should be placed in their proper context. We have a choice between simplicity and complexity in many aspects of life. Unfortunately, complexity is often perceived as clever and sophisticated. It is easy to dismiss a simple strategy when a complex one can make you appear smart. However, with financial matters, nothing could be further from the truth. The real tragedy is that many individuals are unaware that simplicity with money is an option. They accept the complexity sold to them, leading to feelings of being overwhelmed and a lack of understanding. This often results in disengagement, which can have long-term consequences. Our experience shows that simple and “done” is often better than complex and perfect. Clients who act and engage in their financial affairs gain a proper understanding of how their decisions will impact their long-term future. Simplifying your plan to eliminate the unnecessary can be a beneficial approach. Sam Instone is co-chief executive of wealth management company AES