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Ancient Financial Planning Philosophy: Stoic Wisdom on Controlling the Controllables

Ancient Financial Planning Philosophy: Stoic Wisdom on Controlling the Controllables

March 22, 2024

In today’s isolated and anxious landscape, we turn to the ancient Greek philosophy of Stoicism to find a playbook for suffering less internally and attaining some modicum of inner peace. Stoicism focuses on virtue and controlling the controllables as a basis for a fulfilling life, one that has clarity around how nature operates and where our mental energy should not be wasted – which is in what we cannot control.

The core principles of Stoicism fit beautifully into the essence of financial planning and building a successful balance sheet over the long term. Accept what is in our control and what is not, dedicate ourselves to living a virtuous life, practice resiliency, and challenge our own assumptions and temptations repeatedly. By better understanding our own mind and tendencies, we can better equip ourselves to respond rationally to life’s continuous and unexpected events rather than emotionally tear it all down.

Life is not just a speed game, it’s a steady climb.

In 1953, Jaguar won the 24 Hours of Le Mans race using disc brakes when competitors were relying on the previously routine drum brakes. One might wonder how brakes could help a car move faster, but it was the protection and efficiency that enabled better performance. It was the ability for the car to stay on the racetrack that allowed it to continue unhindered. The protection of the brakes gave the car permission to go faster. While most of us are blindly hoping to have enough wealth in the future, we need to slow down to better speed up - an intriguing paradox for sure, but one worth pondering.

In our search for wealth that will make us feel better, safer, more accomplished, respected, we usually end up caught in the hedonic treadmill pattern – this cycle shows us that even when we experience positive (and negative) events and enjoy bursts or drops of dopamine, our baseline level of happiness tends to shift back to where it was previously.

Financial acumen and reported success of the wealthiest humans is seen as some mystical skill, a magical power used to enrich only the few who hit it big as they smile at us all below. Many believe to build wealth you must make perfect decisions, think ahead of the curve, pick the right winners - but nowhere other than in personal finance is mere existence, diversification, patience, and a commitment to the controllable act of saving and building an environment to take advantage of opportunities more relevant to success.

In financial planning, understanding what we can and can’t control is paramount to creating an environment that avoids failure. While many focus solely on Rate of Return and the stock market, Rate of Savings is the foundation of the house that can be missing because it’s not the shiny, buzz-worthy topic many are running to the water cooler to brag about. But it’s this ability to save and the systems we create to become unconscious savers rather than spenders that is the underbelly of actual wealth building – not to be confused with “getting rich quick.” Sustained excellence.

Even when it comes to investments, many focus on what has performed well lately, “beating the market,” and what trendy or flashy stock or asset friends and grandmas are talking about that creates the illusion of missing out.

Recognizing the factors beyond our control and creating environments to satisfy that uncertainty and ensure proper holistic optimization of invested money, savings, taxes, legacy, uncorrelated assets, and arbitrage is key to laying the cement of successful flexibility and true freedom. We want to create an environment that first avoids failure and is resilient enough to handle any shock that’s sure to come. To assume history teaches us the future is to believe we’ve seen it all. As Mark Twain once said, “History never repeats itself, but it does often rhyme.”

In focusing on the Stoic virtues needed for financial planning, we want to zero in on deep thoughtfulness in investment choices (fees, taxes, turnover, and diversification matter) and a clearer understanding of what we’re trying to create, self-control when it comes to spending and investing, being ethical with money, partnerships, and relationships, and a resilience when it comes to market volatility.

When planning for our families and thinking about what’s right for us, we need to set realistic expectations with room for flexibility and opportunity, emphasize long-term security over short-term or immediate gratification, and see failures and setbacks as opportunities while sticking to the plan during bear markets where it feels like our life savings are evaporating in front of us. It’s easy to be committed when everything is smooth, but resiliency and perspective is what cushions us during times of distress no matter how difficult and emotionally draining.

So how do we put these principles into practice?

We build an emergency fund that prepares for the unexpected; we create a budget that aligns with our goals and Stoic ideas of temperance and contentment (to avoid absolute, unfiltered materialism); we diversify investments to avoid concentration and make sure we’re covering the whole world of correlated and uncorrelated asset classes; we self-reflect during hard times and perhaps even let nature take over and avoid staring at our portfolios (we even ramp up our savings and maintain investment consistency during this time); we work with holistic advisors who understand the landscape and can help coach and temper our fears while helping us maintain long-term structure and efficiency. It’s within our grasp to embrace the whole picture, more than we think.