Three steps to…nowhere in particular
If most things in life could be completed in 3 easy steps, we would all be PhD candidates, world class surfers, expert plastic surgeons, college graduates in less than four years, multi-millionaires, and successfully run with the bulls in Pamplona. Unfortunately, life is not quite that tidy and efficient. It is messy, circuitous, confusing, surprising, glorious, frustrating and downright beautiful. Any of the previous adjectives can apply to personal finances. I see the value in simplifying complicated concepts into bite sized understandable pieces. The tradeoff of simplicity is the loss of exercising critical thinking. What happens when I get to step 3 and I haven’t accomplished the goal or changed in any way?
I am 5’2” on a good day, if I stand up straight. Anyplace I could arrive at in 3 steps would be a truly appreciated gift. I can’t even make it from my bathroom to the kitchen in less than fifteen. If I just had 2 more inches, I could probably shave off 300 - 400 steps to reach a mile. Believe me, three steps is preferrable, but it won’t take me very far or anywhere in particular. What will help me is thought, consideration, meaningful planning, and applying wisdom.
While me and my pocket-sized legs were walking one day, it occurred to me that trying anything new or unfamiliar requires acknowledging the uncomfortable, starting out small, and doing a basic common-sense task. From that walk, the 50/70/100 principle was born. I see your devastating side eye and hear your skeptical commentary, “Katrena, that looks suspiciously like a 3-step process.” On the contrary, the 50/70/100 principle stands for 50% uncomfortable, 70% incremental, and 100% vital.
Remember when I said the trade off to seeking the simple is losing the critical thinking? Critical thinking incoming. First, I promise that I realize 50%+70%+100% doesn’t equal 100. My math isn’t that terrible. Each percentage represents a concept and thought process. For example, when we are discussing estate planning in one of the upcoming Your Money Mix series, and the topic of life insurance comes up, what do you do? Quit listening, get overwhelmed, or shiver because who wants to talk about them dying? Most of those responses are understandable, but none will allow you to shore up that part of your financial picture. This is how 50/70/100 could apply.
You purchased a $250,000 insurance policy back in 2002, because that’s what you were supposed to do and the cost was easy on the budget. At the time you were single with no kids. Fast forward 22 years, you are a husband with 3 kids (two under 18), and frankly forgot about the policy until one of your fishing buddies unexpectedly passed leaving his family in a tight financial spot. What now? The 50% uncomfortable is fairly easy – acknowledge that adequate coverage for your family is important and a discussion needs to happen. The 70% incremental is determining what needs to be accounted for to ensure your wife and family are covered for a respectable time period and doing the math to figure out what that amount should be. In addition, consider how the assumed increase in cost for the larger policy will impact your monthly and yearly budget. The 100% vital is pulling out and reviewing the dusty document – without that basic action, none of the other matters.
Now, I could have said: Step 1: review current life insurance policy, Step 2: discuss the need for appropriate coverage with wife/significant other, and Step 3: calculate amount for adequate coverage. The challenge to that approach is that it discounts the involvement of people. Money is strangely personal and emotional. Failing to acknowledge that some parts of our financial life are difficult doesn’t encourage a person to engage in the hard stuff. But if I call it for what it is, ‘uncomfortable,’ I am more likely to offer it a gentlewoman’s nod and take on the challenge. This is my gentle way of bringing the difficult from the shadows to the light.
The 50/70/100 principle will be a staple in all things StudioM Financial. Hope it proves as helpful to you as it is becoming for me. I want us to arrive at an intended and determined destination no matter how many steps are required. Until we meet…keep working on the change.