Building wealth for the Unknowns

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Building Wealth for the Unknowns

In our work with clients, we have built hundreds of financial plans for real families. These plans include all the knowns and some “known unknowns.” This includes provision for essential and non-essential items, an allocation for possible medical expenses, and aspirational bucket-list expenses. However, as we know, “Man plans, and God laughs.”

One thing missing from these plans is the “unknown unknowns.” By their very nature, these cannot be planned for—or can they?

Having seen people’s lives unfold and personally witnessed their investment journeys, we’ve concluded that curtailing people’s investment returns because they are projected to get over the financial finish line is short-sighted.

Wealth For Its Own Sake

Knowing that unknown financial shocks hit people out of the blue, creating additional wealth can only give you more freedom and opportunity. We don’t know what financial shocks people (and their families or friends) may face in the future.

One of the biggest ‘unknowns’ we’ve seen is parents supporting adult children in divorce; this ‘trend’ is not going anywhere. Another example is unexpected health issues that require more money than the plan predicted.

While traditional financial plans aim to meet specific goals, it’s crucial to save and invest beyond our immediate and expected needs. This extra wealth can serve as a safety net when unforeseen circumstances arise, providing security and confidence in the face of the unknown. If this extra wealth is not needed during your lifetime, more wealth will be available to benefit your family or worthy causes.

The “stock market”, being human ingenuity captured, is the perfect vehicle for insuring against life’s “unknown unknowns”. As a reminder, the “stock market” is the mechanism for owning shares in the Great Companies of the World. Their ability to increase profits and dividends is the driving force of wealth creation. It’s a powerful and lucrative force that can protect you financially from life’s “unknowns”.

Guessing at the Unknowns

As investors, we must consider the potential challenges we may face down the road. Life rarely unfolds as we envision, and building a margin of safety into our financial planning is one way of countering the fragility of our plans.

As experienced advisers, we can assist you in this process by discussing scenarios that we’ve seen other clients encounter, helping you develop a more realistic understanding of your financial future. We’ve seen how this awareness can motivate clients to prioritise wealth creation and make proactive choices to prepare in advance, knowing that they have a trusted guide to navigate these challenges with them.

Our mandate extends beyond mere wealth accumulation; it encompasses cultivating financial preparedness for the unknown, ensuring you are equipped to weather life’s unpredictable storms. An essential element is admitting our inability to predict what is to come.

The “unknown unknowns” may never be fully accounted for. Still, by taking a proactive and adaptable approach, you can be empowered to face whatever challenges come your way, instilling a sense of control and empowerment in your financial journey.

As financial author Morgan Housel bluntly states, “Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.”

This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

The value of investments may go down as well as up and you may get back less than you invest.