Albert Einstein once said “If you can’t explain something simply, you don’t understand it well enough.” From time to time people will compliment me on my column. My favorite thing to hear is that I have broken down a complicated subject to something even they could understand. Perhaps it is my background in education, but when I write an article, my goal is to make others smarter, not to show how smart I am.
I am a strong believer in the KISS principle (Keep it simple, stupid) particularly when it comes to financial planning. Too often people overthink their overall financial strategy and make the process so complex that ultimately they take no action at all. In her book “Execution is the Strategy,” Laura Stack argues that complexity is the enemy of execution. Therefore when developing a plan, you should always choose the simplest one that still accomplishes the goal.
I am part of a personal finance support group led by Dave Ramsey. Within this group I regularly counsel people on improving their financial wellness. Probably the biggest bit of advice I give is to stop trying to think of everything and do something.
A prime example of this occurred recently when I spoke with a person who was trying very hard to get their budget in order so they could pay off debt. This person had literally set up a different checking account for each item in their budget. He described it as a “virtual envelope system.” When I asked him how much time it took to keep track of all these different accounts, making sure they all stayed liquid, he simply replied “too much.”
I suggested to him that while it’s a good idea to make sure he’s allocating every dollar of his paycheck to a specific line item within his budget, the way he was going about it was far too complex and therefore keeping him from reaching his actual goal of not over spending.
For many, it can be the same way with investing for retirement. With an almost limitless number of investment options, and an infinite amount of information at our fingertips, many of us allow analysis paralysis to take hold and in the end do nothing.
My message this week is appropriately simple. Don’t let perfection become the enemy of good. If there is an area in your life you want to improve upon, pick three simple things you can do and actually do them. That alone might not get you to the finish line, but you’ll be closer than you were. If your goals are financial in nature, and don’t even know where to start, reach out to us. We’re here to help.