Let’s put it out there, making assumptions is making an ass out of u and me. Mostly though, making an ass of out myself. On my way to wealth, I’ve made a few of them. Today in the series on Screw-ups on My Way to a Million: Making Assumptions. As you can guess, most of them wrong.
Is making assumptions bad?
That is a tough question. I’ve made several wrong ones but at the same time my entire path to wealth and my continued growth/stability of my wealth is premised on the biggest assumption of them all: The stock market will go up in the long run. Without that assumption I may as well start applying for work today and give up retirement.
Maybe that assumption is safer to make because of the players involved. I’m fully aware the system might be rigged. To what extend I don’t know. What I do know is that those that may have rigged the system mostly have one goal in mind: Get wealthy, wealthier and wealthiest. That global desire, I believe will make the market go up in the long run. Sure there will be bumps on the way like 2008, but let’s be honest, those that caused that, actually came out having more than ever.
So some assumptions, I’ll keep alive and fortunately have not yet, made an ass of me.
I’ve gone wrong on assumptions that have mostly been on a micro level. Assumptions about the things and people around me. Assumptions made about work, income, children and health.
Don’t make assumption about your income
Look at people in bankruptcy and there is a good chance it was caused by one of two things, loss of Income and/or Health (one may very well lead to the other). More on health later but let’s look at income first. Unfortunately for most of us in America (and in growing number others in other Nations as well) life is about accumulating more and more. So in many cases, whenever raises are handed out, the extra money will go to more: a bigger car, a bigger house and of course that boat that adorns your garage (99.9% of the year). Why do we do it? No matter how insecure the job market is, we always assume there will be another raise somewhere down the line.
Instead of assuming there will always be raises and always work, which will lead to disappointment, how about we change it, into “One day that raise, or that job won’t be there”. Proven wrong on the latter can only bring gratification, but in the meantime you can prepare for it.
Don’t assume the people around you will live according to your plan
In the early days of my plan I assumed that I would retire early and that Mrs. MI10 would continue to bring in a modest amount of income. Oh, and having children? I assumed I would hold off on that as well for a while. I know, some of you are now thinking, what a schmuck, especially on that last one. My wife thought differently and made a real ass of me on that one. We ended up having children at the age of 38 which is late in life and the basis of a movie called Idiocracy (watch it, I can’t help but draw parallels to what is happening these days).
I had no right to make assumptions about my wife’s reproductive system, and I was also proven wrong on that continued income. Btw, we came out of it okay. An additional chunk added to our net worth made up for the lost income and my children are the best thing that ever happened in my life (that and having met my wife of course).
Don’t get me wrong, even though only one might be planning, it takes two in a relationship to make it happen. That means you can’t make assumptions about each other’s lives that are crucial to the plan. Make sure you and your partner are on the same page when it comes to life choices. Also realize life doesn’t always go according to plan. Whenever you plan for the long term make sure you incorporate some flexibility.
Money doesn’t make happy
By now we should know, right? We’ve been told a million times. So many of us still assume being rich comes with a dose of happiness. It doesn’t. Read my book for the gory details but suffice it to say: You make your own happiness, money doesn’t. What money can do for you is open doors to discovering happiness but it still lies with you, not with what’s in your wallet. Money can buy you things, but things don’t make happy. It is up to you to find happiness with the things you have. As you may discover, the fewer things, the more happiness they bring.
Health is a fickle thing
It is safe to assume that bad health will probably lead to high expenses. You don’t have to assume since it is a fact: no matter how well you think you are insured, not everything is covered. It is not safe to assume that living healthy guarantees good health. There are accidents and there is genetics. We don’t live ultra-healthy but I exercise every day, Mrs. MI10 is vegetarian and we try to serve our children healthy food. We’ve recently learned that no matter what we would have done different, nothing would have prevented our son to get Type 1 Diabetes. Type 1 happens to be just one of the diseases no one sees coming. Of course there are all the different kinds of cancer and mental health ailments nothing can be done against. Hope it never comes and plan for the worst. Make sure you get yourself an emergency fund of some sort.
Wait? So should I or should I not?
I hate to admit, but I think in order to plan for the future you have to make some assumptions. “Stock market needs to go up for this to work”, “I assume my pension will be there to augment, my social security”, “There will be social security”. Maybe we should always assume then some assumption will be wrong and will make an Ass of U and Me.
I’d love to hear of some of the assumptions you rely on, or those that made a huge…
Good luck reaching your financial goals.
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