Financial Planning Is Less Math and More Like A Rorschach Test

Benjamin Haas |

Are you familiar with the psychological testing using inkblots called the Rorschach Test? I thought about this test this week as a favorite economic commentator of mine referenced it in his weekly post. It spoke to me as more and more people have been asking me “what I think about markets” and how things will go in the next couple months with trade discussion, political elections, potential recessions, etc.

I’m no expert in psychology, but in layman’s terms, the idea is that someone can look at a picture of spilled ink and what they see will give insight into their subconscious thoughts and/or feelings. It’s purely personal interpretation and there’s no right or wrong answer; that’s the point. It’s what you interpret in the inkblot that is important.

There are many economists out there who are looking at data and using it to support their argument. Which is fine. But then it makes headlines. And, it turns out, that same data can be used to support a completely different argument. So, what does that tell us? Data is data, like looking at inkblots, some people just see what they want to see.

Sometimes in financial planning and investment management, we look at numbers and think that every plan, allocation, and piece of advice should be black and white, easily calculated and the path forward should be clear as day (there are robo-advisor platforms built to serve people with this belief). But we believe your financial plan and your investment plan are more nuanced than that. It’s an inkblot, unique to you with plenty of room for interpretation.

As we continue to prepare for the certainty of uncertainty with our investments, the economy, an election and geopolitical events around the world, remember this:

  • If you’re trying to use data as a singular resource for decision-making, you’re missing the boat. Personal finances encompass many different variables influenced by many different things. Nothing happens in a vacuum. So, filter out the news. Your financial plan does not revolve around the Fed Funds rate, who is President, or what China says, nor should it.
  • There is no one way to do things and sometimes success is simply knowing what NOT to do. For example: bailing on a well-diversified portfolio out of fear of some future recession, which may be predicted based on singular data points or inkblot interpretation of those data points, is ill-advised.
  • There are no guarantees in life and the sooner we accept that within our financial plan, the better off we will be in preparing for the future. Plan ahead while looking at many variables and take the approach that “if this won’t work” there’s probably an alternative path that might. You just have to be open to exploring that path.
  • We can look to the past for information and guidance. But we live in a different world today than we did 10 years ago. Data, policy and consumers have changed. Each new decade comes with its own challenges. So, take a pause before adjusting plans on “gut feelings” or bold predictions.

I’m a numbers guy. But let’s review your financial plan through the lens that really matters; not the economists or political pundits, but your lens. What’s important to you? How do you feel about money? Where are you today? And how can we help guide you there?


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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