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Charles Dickens brought us Ebenezer Scrooge. A man haunted by ghosts as they reviewed his life. We believe Ebenezer would have been better served looking forward (from a young age) rather than looking back. His story is like so many who choose to focus on emotions rather than numbers (and opportunity).

Like so many, his actions were based on the two strongest emotions…fear and greed. Imagine if he would have completed a financial plan with Disciplined Money. He would have understood where he was (at each stage) and where he wanted to be at each stage in the future. But, if that happened, we may have lost terms like Scrooge and bah humbug (not sure if that is his) and one of the classic Christmas stories. But I can’t help but wonder what would have happened to Ebenezer if he had reviewed his plan.

Fear is a strong motivator

When it comes to money (and life) decisions fear is often the primary motivator. We shouldn’t knock fear. It helps us avoid questionable scenarios and when it comes to money decisions, fear guides us toward saving and away from the strong desire of instant gratification. The fear of not having enough in the future forces investors to save. The trip to Christmas Past reveals a younger Ebenezer looking forward to a happy future. It reminds me of the young couples of today. Although they struggle with current needs like funding student loans and buying the first house, they review their plan because they understand the best way to prepare for the future is to envision it (and put it in writing).

The vision of the desired future provides the roadmap. As we look back on Scrooge’s journey, he lost his focus. If only he would have put it in writing and reviewed it every so often… Instead, without clear goals, he shifted his focus to greed.

Greed is not good

Shifting characters for a minute. In the movie Wall Street, we were told greed is good. What is the goal of greed? If the answer is more, the obvious follow-up question is how much is enough? In other words, when do we shift from fear of not having enough to being greedy?

Without a plan, it often becomes difficult to measure how much is enough. One of the greatest benefits of a financial plan is the ability to see the numbers of your plan. If only Ebenezer would have seen “his numbers”, perhaps he would have enjoyed his life just a little more. We know he ultimately realizes (and achieves) his goals with a little guidance from Christmas Future but it was a painful path.

The best goals are forward-looking and objective rather than reflective and based on guilt. If Ebenezer would have reviewed his plan with us, we would have spent time discussing his goals, values, and vision. Perhaps, the spirits did our job.

We don’t receive a visit from various spirits (well most of us don’t). As mentioned above, looking backward with guilt is likely not a productive exercise. Looking back with an objective to learn from mistakes is a different story. By the way, if you receive a visit from Christmas future, please ask what the market will do…it would make planning a lot simpler.

The most interesting part of a plan creation is the discussion surrounding goals. Mr. Scrooge may have been surprised by the amount of time spent on goals. The reason we spend so much time with goals is that no one I’ve ever written a plan for simply said…I want more money. Money is a tool that provides the ability to accomplish goals rather than become the goal itself. Again, if Mr. Scrooge would have simply given us a call…

Breaking down goals

When considering goals, we separate them into needs, wants and wishes. A younger Scrooge may have focused more on Needs. As his plan progressed, he would shift towards saving for Wants. Ultimately, with a high likelihood of success, he may have shifted to Wishes (without the dreaded nightmare).  Few would blame Scrooge for focusing on himself first if his Needs were not taken care of. During this phase, we would have reminded Ebenezer that financial planning is a process, not an event.

Start with Christmas Past

As I consider the story, I can’t help but consider how Scrooge’s path follows a normal plan. In the beginning, most couples are scraping by. Young couples (or those starting over) balance the desire to build for tomorrow while managing today’s needs. They have student debt payments, they desire upward mobility in their career, potentially start a family, and maybe buy their first house. When considering this phase in the process, sometimes taking care of Needs is the only viable option. Interestingly, Ebenezer seemed most content in this phase. Life was a lot simpler then.  

Moving into Christmas Present

At this point, the couple of Christmas Past often becomes the family of Christmas Present. Opportunities for income typically increase as due responsibilities. It is interesting to consider how similar a story is written in 1843 compares with the struggles/opportunities of today. The plan shifts from solely focused on needs to consideration of wants and wishes.

As we look in on the Cratchit family, we discover a family who struggles with how to pay for health care. They work hard to build their vision of the future. At the same time, the employer balances the need to serve himself (or shareholders) with the desire to help employees. Today’s situation may be more difficult today or easier…depending on who you ask.

Christmas Present is where many spend the most time in the planning process. This is arguably where Scrooge failed. He didn’t find the balance between today and tomorrow. Like many, the fear of an unknown future limited his ability to clearly see his potential. If Ebenezer would have sat down with us during this phase, we would have shared the “numbers viewpoint.” Numbers don’t lie. Without seeing numbers, most rely on emotions and hopefully not regret.

Reaching Christmas Future

Christmas Future is not based on age. It is based on the status of the financial plan. When you reach Christmas Future, you have a high probability of reaching (most often 100% when considering Average Return and Bad Timing) your needs and wants. At this point, we add additional wants and wishes. Again, if Ebenezer would have sat with us, we would have shared this fact.

Christmas Future typically means you have the necessities taken care of. Now, you begin to consider sharing. The first phase is often directed towards the family. The ability to help with college or other payments (children and grandchildren) is often the first step. After that, the options are dependent on the desire of the plan. Some choose to travel more or increase their travel options (stay in nicer hotels, eat at nicer places or move from the inside cabin to the cabin with a view). Others gift to others. This may be the final struggle with financial fear.

Even when a plan projects a high probability of success, it can be challenging (fearful) to share money with others today. It is easier to give at “the end” because there is no longer a need. The fear of running out has passed. At the end of A Christmas Carol, Ebenezer reaches this stage.

Charitable intent versus tax saving

Once Ebenezer reached this phase, we might have helped him give more “efficiently.” Of course, the tax code and rules were different in 1843.

We would focus on charitable intent first. Having a clear intent relieves some of the fear associated with giving. Unfortunately, we hear stories of misuse of funds by charities. This makes giving more challenging. Discussing intent and discussing possibilities create a positive outcome for both recipient and donor.

Specific Giving

A couple years back a new client expressed a desire to provide a set amount to a charitable organization that provided health care for the low-income population. Ultimately, she visited a few places. One place (I believe it was dental related) shared their need for a certain piece of equipment. The cost? Right at her desired amount. She bought the machine.

Longtime readers know I lost my father last year around this time. He was active in the Hospice community before he fell ill. Around that time, I spoke with a client who was also active in the Hospice community. We (or at least I) tend to think of Hospice as being an older person problem. In this case, it wasn’t. A child (less than a year old) was in Hospice and needed constant holding. His mother had other children to care for, so a group of volunteers took shifts. I couldn’t imagine and likely couldn’t do what they did. When the child passed, the mother lacked resources to bury her child. Sadly, this is a bigger problem than we might think (and yet it is not necessarily a reason to buy life insurance on a child…that is the topic for another post).

This person wanted to help future families in this position. Ironically, the offer to help was initially dismissed. That surprised me, but we let it go. About a month ago, the local Hospice community circled back. A fund was created within the Hospice community with the initial donation made by…you guessed it!

We all have “Scrooge moments”

Today, the success of A Christmas Carol would have begged for A Christmas Carol Part 2 (or maybe not). In the sequel, we might get to see if Ebenezer stuck to his new vision. Maybe…after the fear of the visit from spirits passed, he returned to his old ways. Maybe…he needed an annual visit to remind him and review his scenario.

We might have seen a healthy Tiny Tim in the future…maybe working with Mr. Scrooge. Maybe, we would have had multiple sequels…A Christmas Carol Part 5 where a broke fighter helps the son of a former friend…oops…wrong story.

Perhaps, the most important aspect of this classic story is that we all transition through various phases in our lives. Understanding how each phase impacts the next allows us to avoid negative emotional decisions.

No phase is better or worse than the previous or next. Each phase has its set of opportunities and challenges. If Ebenezer had reviewed his plan with us, we would have recommended focusing on what is in front of him today. Then, consider what excites him about the future. Finally, let’s see if we can match today’s reality with tomorrow’s vision. And if so…let’s get started making that dream a reality.

I took today to write a fun spin on a financial planning topic. Unfortunately, the reality of market conditions requires a less playful spin going forward. More to follow shortly. Bottom line…we expected a pullback in markets. Now, we begin executing the plan to adjust based on numbers rather than emotions.

Thank you for reading. We hope you have a wonderful holiday season and sorry if I ruined A Christmas Carol for you. Hopefully, you can watch it without thinking about your financial plan. I can’t.