Control the Input

Control the Input

Here is a simple, but often difficult concept to understand when it comes to financial planning (and truthfully, also life).  The concept is about controlling the input and letting the output take care of itself. 

What We Can Control

You see, all too often, I work with clients who spend too much of their time thinking, watching, and worrying about the output.  As a matter of fact, I think most people spend more time focusing on the output than the input, and this is a grave mistake.  Why?  Because only one of these two things you can actually control. 

Neither you nor I has any impact on what the markets will do, for instance, today or even this year.  We have no control over tariffs or geopolitical happenings.  Heck, we don’t even have control over interest rates, and the list goes on.

However, what do we control?  For starters, controlling our emotions or outlook on things.  We can control how we act or react to what is happening globally.  More importantly, I think, is that we can also control the inputs at the end of the day.  When we do modeling, it is ALL about the inputs.  How much do you save, when will you retire, how much do you spend annually, what kind of lifestyle do you want to live, and will there be other incomes post-retirement, etc.

These inputs are so much more important than the outputs.  Why?  Simply put, because you can control them directly.  I like to focus on the long term and the averages.  For instance, we know the “stock market” averages around 10% a year, and we also know that it never does 10% in a given year.  Thus, we can worry about the fact that markets are erratic, or we can keep focusing on the big picture and the things we can directly influence.

Maybe there is some element of blind faith here.  That said, isn’t that the better approach to believe what has happened over decades and centuries will continually hold true, then whatever issue we face next is the end of something like capital markets as we know it?

Assumptions

When I build and review plans, including my own, I like to make conservative assumptions.  From there, I don’t let current market conditions thwart my outlook, rather, I keep focusing on the things I can control, THE INPUTS.  I know if I keep saving XYZ dollars each month, and paying down my debts and maxing out my 401(k)/HSA, that the current trajectory of INPUTS will have me sitting pretty in 20 years from now.

Now I think if I viewed this with an output-only lens, as all too many of us do.  I’d say, all these efforts, and I’ve still lost money this year.  Or I’m going to stop contributing (the worst offense by the way) because every time I do, the markets go down, so I am simply wasting money.  FALSE FALSE FALSE!  This type of thinking is not only detrimental to your finances but also does more irreparable damage than almost any single output can do.  

Averages

Finance is a world of averages at the end of the day.  We have a choice about what we want to believe and what we want to focus on.  Only you can decide where to put your efforts.  However, I can tell you that after decades of working intimately with individuals and families working to optimize their outputs, the best way I see this realized is by being highly attuned to the inputs you can control.

Remember to control the inputs, and the outputs will take care of themselves, plus you’ll live a more stress-free life!

As always, stay wealthy, healthy, and happy.