There’s beauty in simplicity
Chris Broome – Chartered Financial Planner
As we grow up and experience more of the world we learn that a topic typically gets more complicated as we dive deeper into it.
For example, supply and demand is a concept most of us can grasp quickly, but having a deep understanding of how these variables are affected by changes in interest rates, inflation and trade relations requires further study.
We also find that for those who push past a certain point in any discipline things seem to simplify again. The detail fades away, you unlearn some of the complexities that don’t seem to matter, and you’re able to distil the subject into the few key points that really matter.
True simplicity comes from a deep understanding and appreciation for the subject matter. When shared, this simplicity allows the rest of us to make sense of the world without becoming an expert in every field.
Every great teacher or writer has this quality. Richard Feynman’s writing can make anyone appreciate the key lessons in physics, and he’ll make you laugh. Who would have thought physics could be humorous?
Complexity for its own sake
Unfortunately, we too often encounter complexity where simplicity is what we really need. In many cases it’s used as a way to confuse, leaving the recipient with little understanding and keeping them reliant on the expert.
The financial industry is no different. Experts highlight the dismal level of financial literacy and argue for financial education to be part of the school curriculum, but very few contribute to the changes we need.
Most industry players are complicit by using complexity to spread fear and a reliance on an industry which is happy to sell a product without having the buyer understand what they are getting themselves into.
The media creates the crisis of the day (or fans the flames) while the financial machine stands ready with the solution which would have solved the previous crisis but little chance of being suitable for the current challenge.
If there’s anything we’ve learnt from the history of the financial markets it’s that there are a few key learnings which will always apply. Once you approach every new crisis with this knowledge, the world becomes much simpler.
Simple Is Better
Money, too, can be simple if you want it to be.
If it’s complexity you want, then financial product providers will give it to you. There’s a product for every financial fear you might have. But starting here is likely to lead you astray. You’ll need to work out what these mean for you and the lifestyle you want to have. A new crisis might make you second-guess your tactic, taking you back to square one.
A true understanding of money allows you to build on your understanding of your own situation and the life you want to live.
A strategy can then be built on a simple understanding of the concepts of spending less than you earn, investing for your unknown future, providing for short term expenses, compound interest, and historical market returns combined with old-fashioned discipline and patience.
We have found that people find the above process easier when it’s facilitated by a caring financial adviser who can educate, encourage, and hold them accountable.
Products may be required, but they’ll be put in their rightful place.
The Choice Is Yours
We have a choice between simple and complex in many areas of life. Sadly, complexity is often perceived as clever and sophisticated. It’s easy to look down on a simple strategy when a complex one will make you look smart. With financial matters, nothing could be further from the truth.
The real tragedy is that many don’t know that simplicity with money is an option. They accept the complicity sold to them with the result often being overwhelm and a lack of understanding. In many cases this leads to disengagement, which itself compounds into long term consequences.
Our experience is that simple and done is almost better than complex and perfect. Clients taking action and engaging in their own financial affairs leads to a proper understanding of how their decisions will impact their long term future
How can your plan be simplified to remove the unnecessary?
Next steps
If you have any questions about any of the above, or wish to discuss your long-term financial plans with us, please get in touch. Contact us
