Stop Using the C-Word!
Stop using the C-Word! You know what I’m talking about. People throw around the C-Word as if they can guarantee it. But they can’t. No one can. You know what word I’m talking about.
Certainty.
People love to use this word, this concept, in their marketing. Those in politics and finance love it best. Vote for this candidate, and you can have certainty about the future. Buy this financial product, and feel your uncertainty vanish. Buy into this marketing message and you too can have certainty. But here is the problem:
Certainty is easy to sell and impossible to deliver.
We are going to examine three elements of the C-Word today.
- Why you should stop using the C-Word.
- When you can use the C-Word.
- Which is the better C-Word.
Why You Should Stop Using the C-Word
As humans, we crave certainty. We want to know what is happening and what will happen.
But in finance, especially in financial planning and investing, we are looking toward the future. And the future is uncertain. If we need certainty about an uncertain future, those who profit from selling “certainty” will prey upon us. This is where insurance products got out beyond their expertise.
Life Insurance
Insurance is meant for high-impact low-probability events. What are the chances I crash my car into someone today. Not high. What’s the impact? Hundreds of thousands in damages. I should have auto insurance for that. What are the chances that I die this year? Not high. What is the financial impact? My wife and two daughters are without an income the economic support and become a burden on others. I better have life insurance.
But eventually, some of that goes away. Properly planned, you don’t need life insurance for your whole life. A financial situation may look better after one person passes (not that we want them to, for obvious reasons). But insurance salespeople will stir up uncertainty around your death after your term insurance expires. What happens if you die at 65? What will happen to your wife? How are you going to pay for the funeral? You need permanent life insurance! (Ka-ching! That the sound of the sales rep cashing their commission check.)
What are the chances you die eventually. 100%. So you know that if these policies must pay out, they also must price them in such a way that makes them a bad investment so that they can cover commissions, administration, and company profits. All to give you a sense of certainty around something you weren’t uncertain about before you met with them.
Annuities
A more common uncertainty surrounds investing and “the stock market.” What will happen? Will your retirement income outlast your expenses? You could lose all your money in the risky stock market! Let’s sell you some certainty with an annuity. We can guarantee you a retirement income you can’t outlive.
Then people, desperate for certainty, will place large portions of their life saving into a product that will lock them into a flat income amid two to three decades of rising costs. In exchange for a fat commission check, the financial representative will be happy to sell you certainty in one area while completely ignoring all the uncertainty in others (namely inflation and changes in income needs). You pay a high price for this “certainty.”
As Carl Richards says, “Certainty is easy to sell but impossible to deliver.”
Stop It
We need to stop using that word. You cannot be certain about the future. Any attempts to be certain about it will cost you thousands, if not tens of thousands of dollars each year.
You’ll probably notice I don’t call on the insurance industry to stop selling certainty. I don’t rail against them to knock it off. As long as there is a demand for certainty, someone will always be there to try and sell it.
My goal is always to educate and inspire people on mindsets to have, strategies to adopt, and products to avoid. If we can teach you to be okay with uncertainty and reinforce that belief with other elements we will discuss shortly, you won’t need to buy poor products.
But we must be okay with uncertainty. We don’t know what will happen in the future. No one does. And that’s okay. We’ll create and follow the best plan we can for what we do know and what may happen. Which leads us to our second point.
When You Can Use the C-Word
We talk a lot about “belief” in this podcast, especially when discussing positive outcomes on the other side of uncertainty. We don’t know when it will turn out alright. But we believe that it will turn out alright.
A wise author wrote these words in an immortal book two thousand years ago: “Faith (belief) is being sure of what we hope for and certain of what we do not see.”
They weren’t talking about financial planning and investing in the best businesses in the world, but it still applies.
We don’t know what will happen in the future. But we hope it will be better than in the past, as it has always been. Therefore we are sure things will be better, even if we don’t know when. We cannot see the future, but we can be certain that things will work out.
We are not certain that the market will recover next month. We are not certain that we will live to exactly ninety years old and pass away peacefully in our sleep. We are not certain that nothing bad will happen to us. We are certain that when bad things happen, this too shall pass. We are certain that we can keep working the plan.
The Only Way
How can it be any other way? Why would you invest or stay invested in the best businesses in the world when their values are falling if you didn’t believe it would work out? How could you see the value of your nest egg drop by 20, 30, or 40% and not panic if you were not certain things would work out? You couldn’t. We must be sure of what we hope for and certain of what we do not see. It is the only way to invest successfully, and thus the only way to retire successfully and stay successfully retired.
But perhaps there is a better C-Word we could use.
Which is the Better C-Word
Because we live in an uncertain world with an uncertain future, perhaps “certain” is not the best C-Word. Let’s pick another.
Confidence.
You may not feel certain about the positive outcome, but you can still be confident. You can be confident in your financial plan. You can be confident in long-term trends. You can be confident in your planner.
Now, certainly (pun intended), it helps if you have a plan. If your plan is to wing it and wander into the future with no roadmap and guide, you should feel uncertain. But if you are doing everything you can to encourage, if not ensure, a positive outcome, you can have confidence that it will work.
Some people’s uncertainty comes simply from not knowing and not understanding. A Nobel laureate once said, “Nothing on earth is to be feared, only to be understood.” People don’t understand the equity markets. They don’t understand taxes and insurance. They don’t understand how to retire. Here’s a better C-Word for you:
Clarity.
You may need to get a plan. You may need to read a book, take a class, or work with an educational financial planner to help you understand your finances. The financial world is a lot less scary when you understand it. And you don’t need a master’s in finance. You simply need to know how and what affects you.
How is it that some people have confidence in their financial life, and others in the same situation do not? Consider my classic example couples: Chuck & Diane and Bob & Sue. They are both in their early sixties and both have the same health and the same level of income and assets. Chuck & Diane are confident in their retirement, Bob & Sue are not. Why?
Bob & Sue bought some financial products that they hope will help, but they have some lingering doubts. Chuck & Diane were educated through their finances and have embarked and a financial strategy they believe in. They have clarity around their finances and confidence in their future. Why?
Here is the last C-Word for the day:
Choice.
Chuck & Diane made a choice. They chose to be educated. They chose to invest the time and energy into working with a planner to figure it out. And they choose (present, ongoing) to reinforce their beliefs with positive messages and facts, instead of listening to the constant drivel of the financial pornography network. They made choices and continue to make choices that give them confidence and, dear I say, certainty around their financial outcomes.
You, too, can choose.
You already are. If you are scared of the uncertainty in the world and afraid of investing or of what may happen to you, it is likely because of the poor choices you are making in terms of what media you are consuming. You are choosing to procrastinate on getting a plan. You are choosing to let life happen to you instead of happening to life.
But you can make a different choice.
Make a better choice.
Choose, now, to get clarity around your finances. Choose, now, to throw off everything that hinders your belief in long-term success. Choose confidence, and reinforce that confidence.
And if you ever need a shot of confidence, a boost of vitamin C against all the sickness of fear and uncertainty that plagues our world, come back here. It’s what we do.
This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are the opinions of the people expressing them. Any performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be directly invested in.
