No Plan Survives Contact With The Ground

No plan survives contact with the ground

I sometimes hear Financial Planners and Advisers condemn the use of cash flow modelling. They question what purpose it serves – after all, life never turns out the way you think it will. But I think they are missing the point. Let me explain.

Cash flow modelling isn’t about creating a fixed vision

Of course we don’t know exactly how our lives will turn out. In fact, the one thing we do know is that life is almost certainly going to turn out differently to the way we expect. But that’s not necessarily a bad thing.

Cash flow modelling isn’t about creating a crystalised vision of your life. It’s not a golden plan that has to be held aloft and mustn’t ever change. And it’s certainly not something that absolutely has to be implemented – no matter what happens. That’s just not what cash flow modelling is about.

So what is cash flow modelling about?

Cash flow modelling is about giving you an idea of what things might look like, under a range of different circumstances.

What’s the benefit of that?

  • It helps you to see potential issues.
  • It enables you to start thinking about how you might deal with them.

The SAS often say, “no plan survives contact with the ground.” If we accept that from the outset, it all starts to make a bit more sense. When you’re building a structure (in the world of engineering), and the design is done, a set of working plans are produced. And they are just that – working plans. It’s about saying, “assuming everything goes well, this is how we’ll build it.”

But you know from the outset that things are going to change. The minute you put a bucket in the ground, you discover things that you didn’t know were there. So the plan is adjusted – it’s adapted. And that’s fine. A new working plan is then issued to everyone on the job and they crack on.

Cash flow models are designed to adapt and change

Just like the working plan on a building site, cash flow models are designed to change and adapt with our lives – and everything that life throws at us. Does that stop us from doing anything? No!

Imagine you want to buy a sports car, but you’re aware it’s going to be unsuitable for you in 5 years time. Does that stop you buying the car? No! You buy the sports car because you are young, free and single! Then after 5 years, when you have kids running around, you might trade it in for an estate car. You just adapt and change. But it doesn’t stop you buying the sports car.

Cash flow models are supposed to adapt and change to what life throws at us – that is the whole point.

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