investing advice

When We Overcrunch the Numbers
graphic shows a photo of a calculator, graph paper, and glasses, all pixelated

I was recently amused by an online debate among some financial planners. One planner was wondering how to “deal” with a client who wanted to pay off their mortgage early, given that they could invest their extra money instead.

My amusement came from observing those who believed their calculators or spreadsheets could provide a definitive answer to the question. Was it better to make larger mortgage payments or to invest more?

They seemed to confuse their analytical tools with an ability to know the future.

Most argued that the “correct” answer was to invest more rather than pay down the debt, because their tools showed greater ending wealth by doing so. To them, the spreadsheet was the truth. (Usually, they did did at least concede that an emotional insistence to pay off the mortgage might offer the benefit of greater peace of mind.)

None, however, acknowledged that we cannot know the future. Hence there is always uncertainty about the “best” course financially. It is possible that the path to greatest future wealth is via debt reduction, rather than investing more. No one has been to the future and back; there are no guarantees about it either way.

We do know these things: if the future is like the past, chances are one might end with more wealth by investing. And one might reduce uncertainty and increase financial security by paying the mortgage. But we don’t know if the future will be like the past.

The spreadsheet is not the future.

I wonder if there are more interesting questions worth debating… If you have what you need, what is the point of pursuing more? How do you value the feeling of owning a paid-off home? No spreadsheet—and no planner—can answer these questions for you.

Clients, when you’d like to explore the interesting questions, please email us or call. We’ll talk about it.

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Play the audio version of this post below:

When We Overcrunch the Numbers – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

For You and With You

pic for For You and With You

“People rarely need to hear our conclusion,” writes Adam Grant about advice-giving in the Smarter Living newsletter. “They benefit from hearing our thought process and our perspective.”

Grant is an organizational psychologist, but even without working at his level of research, we have felt the truth of these findings. You’ll notice that our posts don’t typically promise “the right answer” or “the most perfect approach.” And it’s not because we’re the most humble organization in the world, either.

But imagine if an advisor made all the calls for you or claimed they had discovered a one-size-fits-all solution. Sound convenient? Probably would be—for them.

We could insert a cliché at this point about how it’s about the journey and not the destination, but maybe it’s more mundane than that. It’s more like math class: if you don’t show your work, it’s hard for others to have confidence in how you got there, and nobody involved learns or gets as much perspective.

Giving “good advice,” for us, is a process that we and you must navigate together. What are the goals? That’s all you. What are the possible ways to get there? Together, we can lay out some options. How do we proceed? Well… we’ll need to figure that out.

Grant says, “The most useful advice doesn’t specify what to do.” It helps folks “clarify their priorities.”

We do this work for you—clients, you’re the heart of it!—but we actually need your help to do it with you.

If you’d like to talk more about this or anything, call or write.

What To Hold For Your End Of The World Portfolio

Man worried about 2012 doomsday prophecy - Stock photoOur entire investment philosophy is underwritten by a simple fundamental belief: tomorrow will be better than today. We can’t know that this will be true of every single tomorrow, but we’re pretty sure of what the long term trend will be.

Though they say that “past performance does not guarantee future results”, human civilization has a track record thousands of years long of managing to always do bigger and better things. We expect that things will continue to get bigger and better as time goes on. Without this belief the idea of investing in the future is meaningless.

We know that there are troubles in the world, as the news frequently reminds us. Clients sometimes come to us fearing that the latest bad news signals imminent total catastrophe. This isn’t anything new–people have been predicting the end of civilization for the entire span of human history. Yet somehow we’ve always gone on to bigger and better things all the same.

If such things ever do come to pass, it isn’t going to matter what investments you own. Your meanest neighbor will be trying to steal your canned goods. So the ideal portfolio for the end of the world is the one that will serve you best in the event that the end of the world fails to show up on schedule—again.