Embracing the “Good Enough” Approach to Financial Planning
As a self-proclaimed “satisficer,” I’ve always been drawn to making quick decisions and relying on tried-and-true methods. Unlike “optimizers” who meticulously analyze every choice, I prioritize simplicity and efficiency in my financial planning. If you’re like me, you’ll want to focus on making decent, “good enough” choices that allow you to move on to other things. So, what strategies should you employ, and what can you stop doing?
Streamlining Your Financial Approach
To start, it’s essential to eliminate unnecessary complexity. This means stepping away from individual stocks, I bonds, and laddered portfolios of individual Treasury Inflation-Protected Securities. Instead, opt for a simpler approach with fewer moving parts. A portfolio with fewer accounts and holdings is not only easier to oversee but also simpler to document, making it more accessible to loved ones or a financial advisor if needed.
Morningstar research suggests that investors tend to perform better with broadly diversified investments, such as total-market index funds, which require minimal oversight. These funds have been highly competitive with actively managed funds in the long term, making them an excellent choice for satisficers. Additionally, all-in-one investments like target-date funds can provide a hassle-free solution.
Simplifying Financial Relationships
While some individuals enjoy maximizing their gains from credit cards and hotel loyalty programs, managing multiple financial relationships can be time-consuming and require significant discipline. For most households, especially those with a satisficing approach, it’s better to take a minimalist approach to credit cards and other financial relationships. A single, well-chosen credit card or two can be plenty, eliminating the need for constant monitoring and optimization.
Automation: The Key to Effortless Investing
Automating investments can address several financial pain points at once. By setting up automatic investments, you eliminate the need to decide when and how much to invest, making it easier to stick to your plan. Additionally, increasing the target investment amounts as you receive pay increases and bonuses can obviate the need for traditional budgeting and expense tracking.
Seeking Professional Help When Needed
While paying for financial planning guidance may seem counterintuitive, it can be a worthwhile investment for satisficers. A professional planner can provide peace of mind, help identify blind spots, and offer valuable guidance on complex financial decisions. With their expertise and high-powered software, planners can help you make informed decisions and ensure your financial plan is on track.
By embracing these strategies, you can create a “good enough” financial plan that allows you to focus on other aspects of your life. Remember, it’s not about achieving perfection but about finding a balance that works for you. For more information on creating a satisfying financial plan, visit Here
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