Episode 6 Transcript: How to Make Financial Decisions When the World Feels Unstable

I’d like to talk to you today about making financial decisions when the world feels particularly unstable. And if there was ever a moment for that, this certainly feels like one.

Every time there’s a major global event, people say something similar. They say they’ve never felt like the world is so uncertain or so troubling.  Right now it’s the war in the Middle East. A few years ago it was the pandemic. Before that it was the financial crisis. It’s inflation, artificial intelligence, political division. There’s always something.

And when these things happen, uncertainty stops feeling like something abstract and starts to feel more personal.  We start wondering how it will affect us, our jobs, our families, our security. But here’s the uncomfortable truth that I’ve learned from doing this work. The world is always uncertain. What changes is simply how aware we are of that uncertainty.

There are stretches of time when life feels calm and predictable. Our jobs feel secure. Things seem steady. Then something happens and we’re reminded of how little control we really had to begin with.

So I’m always interested in how we learn to coexist with uncertainty without letting it become overwhelming or spiral.

Let me give you a few real life examples from my work. I think they might help illustrate how we can cope a little bit better.

I’ve had a lot of conversations lately about artificial intelligence. For one, I don’t know how my business will look different in five years. It’s not a question I can answer right now.

I’ve had some parents asking me, what if artificial intelligence takes away the future stability of our kids?  Others have said they feel uneasy that their job might not exist because of big changes in artificial intelligence.  I don’t have the answer to these questions and neither do you. What we can do is make these uncertainties a little more concrete.

For the family that was concerned about their kids’ future, that meant continuing to fund education savings. While that doesn’t guarantee anything, it increases the kids’ options.  In the future, hopefully they have a little more available for education, a little more opportunity, and that might mean they have more flexibility, whatever the environment looks like then.  It also meant making sure the parents were saving enough for themselves so their kids never felt financially responsible for them later.  That’s a version of control for someone worried about what might come.

For someone worried about their job becoming obsolete in the next three, five, or ten years because of artificial intelligence, we can play that out.  Let’s imagine that does happen.  What would you want to make sure is taken care of before that happens?  We can start answering questions like:

How much would I need to save over the next three, five, or ten years so that if I couldn’t save again later because my earnings were lower, my future self is still relatively secure?

How much do I actually need to earn each year? How much do I spend? How much do I really need to spend? How flexible am I with that? Could I change things about my life to adapt to a new circumstance?  That’s another way we can deal with it.

We move from abstract uncertainty about what artificial intelligence might mean for our jobs and our future security to concrete thinking about how we can prepare.

We move from uncertainty to actual numbers and plans.

Another example has nothing to do with artificial intelligence.

A client recently was worried their job might be eliminated in the next few months. We weren’t sure, but there were enough signs that it made sense to think about it and plan for it.

So we looked at what a period of unemployment might mean.

How much money would they need in savings to cover their expenses in a worst case scenario where they were laid off and unemployed for a period of time?

We discovered that their monthly expenses were about $5,000.  If we wanted to make sure they had six months of protection, that meant about $30,000 in savings.  For this person, they already had that savings.  So we made a few small adjustments to help them feel even more comfortable in the short term. For example, saving a little extra money over the next couple of months in case it actually happens, so there is a bit more cushion.

As you can tell from these examples, we don’t have answers to the uncertainties.  But when we build flexibility into our finances, we can handle whatever may come.

So if you’re feeling unsettled right now, there are a few questions you can ask yourself.  Do I actually know what I spend each month? If I lost my job, how would I cover expenses until I found a new one?  When I think about my future self, how much have I saved and invested so far? And if I couldn’t save again, would I still be okay?If I did lose my job and needed to lower my expenses, what options would exist? Having awareness and clarity gives you more of a plan in a world that always feels a little unpredictable.

You don’t need the world to feel stable to make good financial decisions and move forward with your life. We can build flexibility and resilience.  And I think that’s where the real comfort and confidence in our financial lives come from.

Thanks for joining me, and I’ll see you next time.

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