How to Destroy Your Financial Plan Part 2: The Explosion

Trying to Save a Few Bucks Can Cost You Everything

Have you ever tried to carry all your grocery bags in one trip to save the extra time and effort it would take to make two trips? Inevitably, a bag rips, eggs shatter, and milk spills everywhere. You were trying to save just a bit of effort, but you ended up creating a mess that takes twice as much time and energy to clean up.

I see people often handle their financial plans the same way. In an attempt to save a few dollars or avoid some perceived hassle, they risk dropping their entire financial future.

Except instead of eggs and milk, they drop their entire financial future for what was an avoidable error.

You can't put Humpy Dumpy together again whether it's a dozen eggs or the insurance you didn't have but really needed.

Here's some examples to illustrate what I mean...

Example 1: Not Enough Insurance Coverage

Insurance—life, disability, long-term care—is often misunderstood and frequently overlooked. I often see mid-career professionals rely solely on the free life insurance that's part of their employee benefits. This is usually 2–4 times their salary. But realistically, you likely need coverage equal to 20–25 times your annual living expenses, which for most people is a lot more than what their employer provides. Sure, you might never need it, but failing to prepare means risking leaving your spouse or family destitute.

If you're comfortable risking your spouse being destitute if something happens to you, you might need more than financial advice, you might need a therapist.

Example 2: Playing Stock Picker

I've recently met several people who started picking individual stocks and initially did well, outperforming major indices. But what happens when one of those stocks implodes? If 25% of your retirement nest egg disappears overnight, the consequences are catastrophic.

Remember Enron, Theranos, and FTX? These seemed like sure bets. They were unstoppable until they weren't. Proper diversification isn't just smart, it's necessary.

It's true that some people do earn above average returns in the stock market. At least for a period of time. But that's what makes playing stock picker so pernicious: above average returns are nearly always the result of luck but get attributed to skill. By crediting their skill, not luck, these people have created a financial powder keg ready to explode then decided to use it for a dinner table. When their luck runs out, they aren't the only ones who will get hurt.

Example 3: Assuming More Money Fixes Everything

Another less obvious but equally dangerous pitfall is assuming more money is the solution to your financial problems. Everything in your financial plan would be fixed if you just somehow got more money into the plan. However, cramming more money into your plan as the solution for whatever was broken is like throwing gasoline on a fire. It amplifies the existing problems, leading to even worse outcomes. If every decision you make is primarily driven by the question, "Which option makes me the most money?" you risk damaging relationships, mental health, and even your marriage.

For instance, as a rule of thumb divorce halves your net worth. So, if you have a net worth of $3 million, divide it by two if you get divorced (this is the easiest future value of money calculation to run, unfortunately). How many years did it take to build from $1.5 million to $3 million? Imagine having to do it again. That's the real cost of making decisions based solely on financial gain.

How Do You Avoid the Explosion?

So, we can see there are plenty of ways to blow up your financial future. The question is, how do you guard against these and other pitfalls?

As a financial advisor, part of me wants to tell you to just find a good advisor and do what they say. Yes, that could be part of the solution. An advisor should be able to help you have the right amount of the right insurance in place, properly diversify your portfolio, and watch out for changes in tax laws. These are all important.

But I don't believe even the best advisor can’t protect you from making catastrophic decisions if you're not clear on what you value most.

Imagine you are out on the farm. If you want to plow a straight line, you don’t look right in front of the tractor; you look at the far end of the field. You look at where you are going.

Likewise, in financial planning, if your eyes are fixed on short-term goals or immediate concerns, you'll drift off course. Real financial planning has to start with knowing where you want to go by understanding your values and priorities.

A financial plan built on shaky foundation such as blind luck, short-term thinking, or simply trying to save a buck—is going to collapse. Probably in spectacular fashion. But a financial plan anchored in your core values and long-term vision is robust and resilient.

Next Steps

Your financial future deserves careful, thoughtful planning. Don't rely on shortcuts or luck—build your plan on solid ground. Take the first step today by clarifying your values and aligning your financial decisions accordingly. That’s how you prevent the blow up.

If you're not sure where to start or want to ensure your financial future is secure, reach out today. It’s not just about having a map—it's about having a trusted guide to help you navigate life's unpredictable financial terrain.

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