Every financial planner is well versed in preparing financial statements. These reports are an important part of the financial planning process. Preparing financial statements – forecasting financials – is one part of one of the six steps required by all Certified Financial Planners®. We regularly prepare financial statements and forecast the future for our clients. The structure and landscape looking forward allow meaningful conversation and “what ifs” to emerge. The dialogue fosters clarity, connection and purpose-filled action. This experience happens when financial planning is done well.
Financial planning turns sour when forecasting financials is used as a crutch for preparing, anticipating, controlling the future or trying to control … the unknown. Don’t be mistaken, I believe there is great value in creating financial statements. They are needed and essential for meaningful conversation. The problem begins and escalates when the view is static and there is no room for change. Financials are the river we dynamically navigate in our boat of choice. If you believe that the river is unchanging, you will be in for a big surprise when … your canoe tips over, your raft catches a rock, the rapids turn frothy white, your vessel runs aground. Dynamic steering is the capacity to skillfully navigate the waters. Just like any new skill, this capacity requires new muscles. These muscles are not more information about the future; more information will not help you when you are running rapids. The muscles you are called to develop are different and simple: breathing, feeling, allowing, speaking the truth, being with what is, responding with versatility and strength. Using our rafting expedition metaphor, this might look like the following: standing on a raft with bent legs grounded and holding a long paddle, breathing fully, feeling explosive sensations moving through your belly center and torso, palms wet from the water and fear, you say, “I feel scared.” “I want to live and these rapids are bigger than I have ever experienced.” As you face the next bend in the river, your attention is crystal clear, and your fear gives way to confidence. “I can do this. I can navigate these waters.” Your muscles flex, your breath is full and deep. And so it goes. The waters calm down and you pull your raft to the bank of the river.
A couple of years ago many of us were navigating this rough river when the markets collapsed. Financial forecasting did very little, if anything, to support us in the moment-to-moment experiences that felt so dire. Forecasting helps once we are on the bank of the river – we look again at the map and see where we are ,where we want to dynamically navigate. If we ignore the situation right in front of us, and do not integrate the river with our direct rafting experience, we suffer.
We never know what the future holds. Practice navigating in the unknown, and see how much more alive you are in the present. Let financial forecasting be your map, but don’t forget that it will get wet in the rapids.