Holistic Financial Wellness Principles: Intro and Principle #1
Introduction to Essay Series
In Money Mountaineering I describe 6 Foundational Principles that I believe everyone should keep in mind as we all strive for financial well-being. This essay is the first of a series that explores each of these principles in greater depth.
Some of these principles may seem counterintuitive, and I hope that by reading my book you will become convinced that they are both sound and can be helpful. The first of these principles does run counter to conventional financial planning wisdom which is full of general rules and recommendations for what you should do with your money. I believe this is wrong, and that, to paraphrase the words of my good friend and brilliant actuary Charlie Commander –“if you have seen one financial plan, you have seen one financial plan” .
In this first essay, we talk not just about how individualized our circumstances and goals and plans should be but how important it is to stay aware of how all the factors that are relevant to your plan can change — either because you change or the world around you does.
Holistic Financial Wellness Principle#1 — Adapting to Change
“Everything changes a little as it should. Good ain’t forever, and bad ain’t for good” — Roger Miller from “Lou’s got the Flu”
I learned a lot from my mathematician father and as many lectures as he gave me growing up, there was almost always music playing in our house. Roger Miller’s songs formed the soundtrack to many of my childhood Sunday afternoons.
I always listened to the words of the songs and from the men and women who sang them I learned even more. As rigid and clear as my father’s views and teachings usually were, he was always open and curious about the world around us and how it can change — in unpredictable ways that can render one’s normal survival strategies a recipe for suffering.
As a precocious child in the 1930s and 1940s, my dad watched as the world run by the grown-ups got turned inside out and upside down for reasons that people still argue over. Geography must have been a particular challenge for his elementary school teachers. World maps, only recently revised to reflect the geopolitical shifts caused by World War I, became a moving target. Whole fields of study had to be modified on the fly to keep up with events, while only the oldest and most solid of academic subjects remained the same. And this not even considering the socio economic and geopolitical changes that were occurring in real time disrupting normal life outside of school.
The list of academic subjects unaffected by World War II was relatively short. Astronomy and science where new discoveries come more slowly could be considered one. Ancient history and Classic literature were perhaps two others with the long lead time between the writing and the recognition of a work’s value, but the most unchanging of all fields was and always has been mathematics. That is a very good thing since it is through mathematics and mathematical thinking that we can understand the changes themselves.
We are not in a time of war, but whatever changes this country is going through now, they seem as dramatic to me as any I have seen in my 64 years on earth, and I feel grateful to my father for having passed on to me the wherewithal to use a mathematical lens to consider what is happening around us.
I am an actuary and not a mathematician and so, haven’t used the gifts he gave me in the same way as he did. Rather than attempt to climb the highest peaks of mathematical abstraction as he and his colleagues have, I chose to concern myself with the more mundane world of Money. It is an area where I can use the skills he taught me to separate the signal from the noise, and it is an area where I think some of my insights can help others.
In Money Mountaineering I lay out 6 Foundational Principles of Holistic Financial Wellness. The first is:
HFW Principle #1: Every person’s values, objectives, and financial situation are unique and multi-dimensional. Therefore, make every financial decision consistent with who you are, considering the totality of your own specific financial picture.
Putting aside whether “who you are” is changing as the world changes around you, to apply this principle effectively, it is critical to understand and be clear on your “values, objectives and financial situation”. Reading Money Mountaineering won’t help you determine whether and how your values have changed — but the tools I provide might help you better understand how your financial situation and its relationship to the financial world in general has changed, and by understanding that, you can, if warranted, take a fresh look at your objectives — where you want to hike, climb or camp in the financial wilderness.
In Money Mountaineering I described in some detail my own financial situation and the complicated set of investments and income generating ventures I was involved with, but things change — and sometimes, as Roger Miller says, “everything changes”. In my case it was almost everything and the changes were far from “little”.
For me, losing my home and everything in it in a wildfire that raced through my part of the world 9 months ago was just the beginning. Now, instead of living on 8.5 acres in the relative solitude of backcountry Sonoma County, I live near downtown Santa Rosa in a rented house that I have filled with a mix of new rental furniture (provided by my insurance company) and well made, used furniture that I purchased from local merchants or received as gifts from friends and neighbors. I have also begun to replace all the books and technology (phones, appliances, etc.) in my life so I can be more engaged with the larger world around me.
That process has been both transformative and educational as I have developed connections with dozens of local merchants and neighbors who are now an essential part of my new situation. I am the same person I was before the fire, but my network of friends is different as well as the community that I am a part of. And those changes have had a large impact on not just my financial objectives but what my hopes, dreams and fears are about the future.
On top of that, I see the economic and the financial markets undergoing dramatic change as well. These kinds of changes are much more familiar to me as I have been watching markets evolve and change continuously for over 40 years. Not that the environment is exactly like anything I have seen before, but the forces at work are, at least to my eyes, the same as they’ve been for decades.
So what does that mean for the financial steps I plan to take in the near future? Well, the first thing I am doing is placing a higher value on real assets than I have in the past. Much of the furniture I purchased (or was given to me) is old and not only useful, but in many cases is better made and more durable than what I can get new. Not only that, but with inflation apparently increasing (perhaps as a result of the Fed’s heroic efforts to avert a financial collapse by flooding the economy with trillions of dollars) I believe that my new acquisitions are likely to increase in value rather than depreciate as most new things often do. In terms of my invested assets, I am therefore shifting some financial assets into collectibles that I like having around like comic books, coins and old books.
More generally, I am now recognizing that the relationships I have with my community in Santa Rosa are among the most precious components of my life that exist. I am learning how to nurture and grow those relationships and one of the best ways I have discovered for doing that is through giving and receiving gifts. In Chapter 15 of my book I make a case for the “gift economy” and now for the first time in my life I am getting an opportunity to participate in one that is growing here in my new neighborhood in a way that may bear some surface similarities to the parking lot of a Grateful Dead concert (the gift economy I am most familiar with) but is on a larger scale and potentially more sustainable and permanent than a caravan of buses following a band from town to town. Whether a gift economy can take root and grow in something as large as a city or a county is a question that I don’t know the answer to, but right now I am simply adjusting my financial plan to the realities in my environment and the new financial situation I find myself in.
I hope this essay will give my readers a fuller understanding of HFW Principle #1. In particular, it is important to know that using this principle is not a “set it and forget about it” proposition, but rather a step that once undertaken must be reviewed periodically as you and the world around you change. In future essays we will take a deeper look at the other 5 principles, but consider this as me sharing my first step back towards holistic financial wellness. I am glad to have you along for the journey.
