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Guesswork & Rule of Thumb: A Wolf Dressed Up In Sheep’s Clothing?

Updated: Apr 23

When it comes to making big life decisions everyone has stress, everybody procrastinates. Few will admit it. Often, we wrap ourselves in a cloak of research and rules of thumb. Why? Because these ideas have a thread of truth. We get caught wishing for easy answers to life's complex and important decisions.

How many times have we heard "Information is power!" We have been taught when in doubt, get information. Sometimes the information we gather is incomplete and confusing. It might make for interesting reading, but it can also lead to false assumptions.

“Rule of thumb" was originally a tool for measuring. Of course, the critic in me immediately asks "Whose thumb?" Your thumb is likely a very different size than mine. Trusting a rule of thumb might be dangerous. They all use broad assumptions, generalities or based on one person’s experience.

The trap in applying a "rule of thumb" is the broad nature of the assumptions. What works for one person may not work for you. You cannot assume that applying any rule of thumb will produce a reliable answer, for you.

Trusting Your Retirement with Generalities?

Making a decision to figure out whether you can "afford" to retire and when is a scary proposition. It is a bigger decision than buying a home. It is a decision that will affect you the rest of your life. Figuring out how to replace your paycheck is a complicated and intimidating project.

Applying simple mathematics and rule of thumb to retirement planning is dangerous. It's like using a screwdriver instead of a circuit breaker in your electrical panel. It might work for a while until it doesn't, and by then it is too late. You forget the screwdriver is still jammed in. By the time you realize it won't work, it is too late. The screwdriver short circuits. Your electrical panel blows up or worse the resulting fire burns your home to the ground. The damage is done. The same thing can happen in retirement relying on generalities and rules of thumb.

It is not as simple as applying an arbitrary mathematical formula. If it were that simple, there would be no need for third party financial plans and investment advice. There would be no need for government regulations of the financial industry. Nor the need for stringent compliance for investment advisory firms.

Figuring out when and how much you need to retire is a complex issue. Yes, you need to know how to replace your paycheck and so much more.

It is a structured process that provides you an opportunity to revisit what is most important to you. A time to reflect and explore what might be possible. Provides you the time to reflect and think about your future. Give yourself the gift of exploring what might be possible for you. To look beyond the easy answers.

Beyond The Easy Answers

Seeking the easy answers is procrastination dressed up as research. It is tempting to chase the "information is power" urban myth. Rules of thumb are appealing because it makes you feel smart. Plus it feels good to be doing something to resolve your retirement puzzle. Which is why we get hooked on doing research and seeking the "right" information.

I have to be careful that I don't get caught in the "Do I have the 'right' information?" Because I am seeking the perfect answer. Yet, I don't want to make a decision but feel pressure to make a decision. At least doing research, reading and talking to friends massages my anxiety somewhat. When I procrastinate, it is because I do not want to make a decision. I am afraid of making the wrong decision.

Beware Catch 22

Fear of making a mistake is what drives me to gorge myself on research, information and analysis. Often I end up in analysis paralysis. Stuck in the deep freeze of dread, confusion and fear. This is a classic Catch 22 scenario. Trapped in a dilemma of confusion from which there seems to be no escape.

Why? Because I have painted myself into a corner with information. Conflicting opinions and contradictions. It is easy to end up caught between mutual conflicting and dependent conditions.

If you are feeling caught in a retirement decision conundrum...

It might be time to change your approach to making a decision.

Abandon rules of thumb and one size fits all solutions. Stop buying "off the rack" and invest in a custom, made-to-measure financial plan.

Instead, go "all in" developing a customized plan designed to fit you and your life. Invest the time and energy into thinking through your unique situation and needs.

Spend time with a qualified, certified financial planning and investment advisors . They will walk you through a structured process. The good ones will ask many questions to help you explore and connect with what's most important to you. They will give you time to get comfortable with your financial plan.

Yes, you can retire with confidence.

If you have questions or comments about this article, please call us at 1-317-875-0202 or message us with our contact us form.

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