If I had to summarize my financial planning philosophy in three themes, they would be flexibility, simplicity, and cost-effectiveness. Among these, flexibility is the most crucial. Millennials like me often half-jokingly say we’re tired of constantly living in “unprecedented times,”. Let’s face it, that’s not likely to change anytime soon. Emerging technologies, shifting job markets, and unpredictable global events are all telling us "the only constant is change".
Rather than trying to predict the unpredictable, the key is to prepare for it. By creating a flexible financial plan, you give yourself a cushion to catch the curveballs that life throws at you with grace.
Why Financial Flexibility Matters
Do you remember the future you thought you'd live now from 20 years ago? How about 10 years ago? Do they look anything like your reality now? Humans tend to be overly confident in their ability to predict the future. By acknowledging that we don’t know what lies ahead, we free ourselves from rigid plans that crumble when our lives change. Financial flexibility means seeking a good solution in multiple possible futures, instead of a perfect solution in one future and a terrible one in other futures.
“How Can I Be Wrong?”
In my former manager research analyst days, our group always included a “How Can I Be Wrong?” section at the end of our thesis. I loved this practice because it forced us to pause and acknowledge that our assumptions might fail.
This wasn’t just a box to check; it was a tool to visualize what would happen if things didn’t go as planned. Would our clients suffer dramatically if we were wrong? Were the potential downsides worth the possible upsides? By honestly confronting these questions, I learned to weigh the pros and cons and focus on strategies that offered solid advantages while limiting potential drawbacks. Optimism is a virtue, blind confidence is not.
How to Have a Flexible Financial Plan in Practice
The core elements of a flexible financial plan often come down to three factors:
Diversification:
Don't put all of your eggs in one basket.
Cash Cushion:
An emergency fund or liquidity buffer that buys you time and options.
Protection:
Adequate insurance and safeguards against worst-case scenarios.
Low Fixed Expenses:
Keeping recurring costs manageable ensures you’re not boxed in during tough times.
Here are a few examples to bring these concepts to life.
Diversify Your Investment
Let’s say you believe Nvidia’s stock price will rise indefinitely. But what if it doesn’t? If you structure your entire portfolio on that assumption, you’re vulnerable to the future of one company. Flexibility means diversifying and not betting everything on one big winner.
I can't talk about diversification without talking about Brian Portnoy's "Diversification Means Always Having To Say You're Sorry". No short-term bragging rights. Brian said: "If every piece of your portfolio is working really well, it means one of two things: you’re incredibly lucky or you are not actually diversified. I would assume the latter." As a fellow former manager research analyst. SAME.
Adopting a slow-and-steady approach that avoids chasing every hot trend can mean missing out on short-term bragging rights. You won’t have wild stories of making a killing by pouring all your money into the hottest cryptocurrency or leveraging debt to buy the next rocket-ship stock. But guess what—you also won’t be up all night panicking when the crypto market crashes or that “can’t-miss” stock nosedive.
Emergency Funds and Safety Nets
Unfortunately, I do have clients that were laid off this year. The corporate layoffs come like a tornado - it seems to start out of nowhere and it's over before you know it. People who are affected don't normally have a long time to prepare for it.
Maintaining an emergency fund—enough cash to cover at least three to six months of living expenses—provides a safety net when unexpected job losses or medical emergencies occur. The cash cushion not only keeps you afloat when your income dips, it gives you permission to only take on new roles that you deserve.
Insurance and Protection Against Uncertainty
Will you remain healthy and able to work until your planned retirement age? While we hope for the best, accidents or illnesses happen. By estimate, 25% of 20-year-olds become disabled before they reach retirement age. Adequate insurance coverage, including disability insurance, helps to make sure that losing a breadwinner’s income doesn’t destroy the life you have built.
15-year Mortgage or 30-yea Mortgage?
A 15-year mortgage might sound great now, but what if your household income changes suddenly? With a 30-year mortgage, you can still choose to pay it off early when times are good, but if you need more breathing room down the line, that lower required payment can protect you from financial stress. Keeping low fixed expenses gives you the ability to pivot without panic.
Parting words
In the end, creating a flexible financial plan is about acknowledging uncertainty and building a framework that can withstand the unexpected. By putting flexibility on top of your mind, you trade short-term spectacle for long-term stability. You build a financial roadmap not on wishful thinking, but with acknowledgment that we don't what we don't know and we can't predict the future. And because you’re prepared for that change, you’ll be ready—no matter what the future brings.