This is such a massive topic that I've split it over several posts. Otherwise, there's too much information to try to take in all in one go.
Everything You Need to KNOW
1. Two Different Perspectives
One of my all-time favourite books is “Getting Things Done” by David Allen. I use its principles every day to manage workflow and, well, get things done! Its follow-up, “Making it all Work”, is even better, in my view – it’s life-changing stuff. In “Getting Things Done”, Allen talks about taking different perspectives on your projects and actions, and he uses an aircraft analogy, talking in terms of elevation.
I’m going to borrow that and talk about two different perspectives to your goals and the actions that lead to their fulfilment: 40,000 feet and runway level; in other words, a high-level view and a low-level, more granular view. We're going to look closer at that higher perspective – we’ll call it ‘the 40,000-foot view’.
2. A 40,000-Foot View Means you can Clearly see Further Ahead
As financial planning is such a long-term game for most of us, a 40,000-foot perspective allows us to see clearly the path we need to follow and see further along that path at what is coming. That’s important because while life has a nasty way of chucking in surprises and obstacles that weren’t there the last time we looked, there are some things that we CAN see ahead of time.
This allows us to make some decisions in the here and now that might otherwise be impossible to make if we only had a low-level, short-term view.
Here’s an example: If you take a long term view on things like salary increases and promotion prospects and you can foresee that maybe, down the line you could have a Lifetime Allowance issue in your pension, you can make an informed call as to whether you divert savings into other vehicles now rather than continue to pile money into pensions.
If you only had the runway view of things, you might continue maxing out pension contributions, storing up problems for yourself down the line. I appreciate that this example won’t apply to many readers, but it makes the point – a high-level perspective can be useful for in-the-moment decision-making.
3. A 40,000-Foot View Brings Perspective
That’s not quite the same as the previous point! When there’s a lot of things going on in the outside world, such as when I recorded the podcast episode this chapter is based on, there was a lot of uncertainty in Parliament, and it was a volatile time, politically speaking.
It can be difficult to put things like this in perspective when you’re at the runway level because events like that can easily become ALL YOU CAN THINK ABOUT, because you’re in the thick of them and they’re happening now.
‘What will this mean for my pension?’ ‘What will it mean for house prices?’ ‘Should I stop investing and stockpile cash for a while?’ All these questions become very important in the moment. By contrast, a 40,000 view shows you that even big things like this are temporary. While there are always threats, they do come and go, wax and wane, and yet capitalism prevails.
The declines – the wobbles – are temporary; the advance is permanent.
Some things, such as the events that happened in Autumn 2019, was unprecedented, and the impact it will have in the long term is truly unknown and unknowable. Maybe one day the whole system will go down the swanny and we’ll be back to a peasant-agrarian economy and a feudal system of kings and queens, dukes and barons, but I don’t think so.
It can be easy to obsess about what’s going on around you and how it might affect things right now, but a 40,000-foot view means you can stay the course in light of those events. Think of it another way: If you look at a chart of the FTSE100’s performance over the past year, you’ll see it’s been very up and down and ended up roughly where it was a year ago, give or take.
But look at the performance over 20 years, and the picture is different, even taking account of the financial crisis of 2007 -2009, the FTSE100 has performed very well. Longer timescale, higher perspective leads us to see and understand patterns rather than living in the moment.
So, a 40,000-foot view enables you to see what’s coming further down the line and either see them off or make appropriate decisions in the now. Also remember that ‘now’ is just one point along a lengthy path towards your goals. What does this mean in the here and now? How do we move from goals to actions with a 40,000-foot perspective?