Bruce Brammall: This one mindset is key to your financial future when life goes off-script

I just spent a night in Borger, Texas, to bed DebtBoy down into college. Borger is not really famous for anything … other than being in the “Texas Panhandle”.

It was not on my bucket list.

And Amarillo, where I am now, is a town most Australians might have only heard of recently, care of Ella Langley’s song Choosin’ Texas.

It’s my third trip to America in nine months. There’ll be another at Christmas.

Five years ago, none of this was in “the plan”. I couldn’t have found Borger on a map (and I suspect most Americans couldn’t either).

My point is that, in my mid-40s, life looked very different when I was imagining what the next decade would bring.

Best-laid plans

Everyone has a rough picture of their future. Not the detail, but the broad shape and direction. Career. Family. Retirement. Kids growing up and moving out.

But for most, life starts colouring outside the lines.

Children choose paths you never expected. Relationships change. Health and careers change. Opportunities appear from nowhere.

And suddenly you’re sitting in a Texas Panhandle hotel room, banging out a column, wondering how this became part of your normal life.

Which got me thinking about financial plans.

Five-year fantasy

For decades, we’ve been encouraged to create five-year plans. But life rarely agrees to co-operate for five years at a time. Think about the past decade.

We had a global pandemic, interest rates jumped from emergency lows to levels many younger borrowers have never experienced.

Inflation returned after being dormant for years. Entire industries changed. Some disappeared. Others emerged from nowhere.

And that’s before we consider personal events that hit much harder on individual finances than share market movements. Divorce, illness, redundancy, inheritance, children moving back home, children moving overseas, parents needing care.

The biggest events in our financial lives are often the ones we never saw coming.

The purpose of a plan

When I was in my early 30s, I had a financial plan that went out in five-year increments till my early 50s. I found it recently and chuckled at how differently life turned out.

If you converted the specific goals in that plan to dollars, I probably actually hit “the target”. But the path didn’t resemble what was written on that sheet.

A good financial plan is one that still works when the future refuses to co-operate.

Too many people build plans based on a series of assumptions going right. Salaries, marriages, businesses, mortgages going in a direction that lead to a retirement date that never changes.

Sometimes that happens. More often than not, it doesn’t.

The people who cope best aren’t necessarily the ones who made the most accurate predictions. They’re the ones who built in flexibility.

Flexibility beats precision

Flexibility sounds like cash reserves, managing debt, having adequate insurance and diversified investments. They create breathing room.

None of those things generate exciting dinner-party conversations. Who brags about having an emergency fund? Yet they’re the difference between a setback becoming a catastrophe or simply an inconvenience.

The person with flexibility can absorb shocks. The person who has everything calibrated to perfection can’t.

That doesn’t mean planning is pointless. Far from it. It means the plan should acknowledge uncertainty rather than pretend it doesn’t exist.

The successful mindset

Looking back over two decades of giving advice, the most successful clients generally weren’t particularly interested in finance at all.

What they tended to have in common was adaptability. When circumstances changed, they sought advice and changed course.

If retirement needed to be changed, they adjusted. If divorce arrived unexpectedly, they adapted. They didn’t view a change of direction as failure. They viewed it as reality. And that mindset is priceless.

No co-operation

The future keeps refusing to follow the script. People are living longer, families are more complex, and careers are less predictable.

Retirement has become more of a transition than an event. More people ease into it through part-time work, consulting, contracting or volunteering.

The destination keeps moving because life keeps changing.

A Texas lesson

Ten years ago, I didn’t have “multiple trips to America each year” on the roadmap.

Plenty of things I once thought were inevitable never happened. And plenty of things I never anticipated became reality.

Not a complaint. Just a reminder that life rarely follows the script. Which is why the best financial plans aren’t the ones that perfectly predict the future.

They’re the ones that still work when the future writes a completely different story.

Now, excuse me while I down tools for some of that famous Texan hospitality.

Bruce Brammall is the author of Mortgages Made Easy and is both a financial adviser and a mortgage broker. bruce@brucebrammallfinancial.com.au