We’re going to title today’s dispatch “The Curse of Misplaced Optimism.”
This curse is more commonly known as Plan A—the path through life most people take on the assumption that everything will be fine.
Plan A is easy. It requires very little difficult thinking. No “what ifs” to ponder. No contingencies to contemplate. Just set it and forget it… and hope for the best.
Hope is a powerful drug. We’re all abusers of it to some degree. It allows the mind to believe all will be OK in the end.
Maybe.
Then again, maybe not.
Plan A Is Never Enough: Everyone Needs a Plan B
I highlighted this idea frequently when I was at The Wall Street Journal and writing my weekly, first-person personal finance column called Love & Money. Families are a Petri dish of Plan A thinking, which roots and grows wild like a fungus within family finance. Believing in Plan A is good enough because Plan B is too much to contemplate when you have bills to pay and kids to finance and on and on and on.
Which is why I call it “misplaced optimism.” You’re just hoping positive thoughts manifest positive outcomes.
Plan A: I have a great job I love and that pays me well, and my boss loves me. I don’t need to think about “what if.”
Plan B: I have a great job I love and that pays me well, and my boss loves me. But what happens if my boss leaves or is fired, and I clash with their replacement?
Plan B is way harder to think about because it requires you to work through practical concerns you don’t want to consider.
Thing is, I faced that exact Plan A/Plan B scenario.
For seven years, I had a great job. A great boss. A big income.
And then that boss moved on to greener pastures.
Things changed.
And I lost my job at 51.
I didn’t have a Plan B.
I only had a Plan A.
And hope failed me… with no Plan B in sight. I hadn’t taken my own advice from those WSJ columns.
Long-Shots Always Come In. Are You Prepared?
I ultimately got my life back on track and landed an even better job. But my point is that a Plan B would have made the death of Plan A so much easier to deal with when it happened.
And that’s really our point today: Putting in place a Plan B to fall back on if and when Plan A goes tits up.
How do you pay for your life if you lose your source of income? You purposefully build into your budget an emergency savings account that keeps you afloat while you assess your situation and look for the best path forward.
How do you prepare for the possibility that the dollar loses value—or even reserve currency status—and your cost of living hyperinflates? You build into your portfolio non-dollar assets like gold, silver, bitcoin, Swiss francs, foreign blue-chip stocks, and foreign real estate.
How do you plan for the possibility that the United States starts to break down politically, or even cleaves itself apart? You think about where you want to live abroad, and work on obtaining either a second passport or a residence visa. Or you know the best countries to head to in an emergency, where you can quickly obtain residence (Uruguay sits atop that list).
Truth is, these possibilities might never happen.
They’re long-shots.
But long-shots routinely come in. And those who bet on the long-shot make a killing, while everyone around them wants to know how they picked the rabbit from the hat.
What Putting A Plan B in Place Looks Like
The truth is, none of us picks a rabbit from a hat. We just prudently prepare for the possibility that long-shots might just impact our personal and financial lives.
These days, I can say that I’ve learned my lesson. And I’ve put a Plan B in place.
My wife Yulia and I are actively building an online business to generate passive income we can fall back on… just in case.
I’ve been buying gold in various forms since 2010. And I’ve been holding metals in a vault overseas since the mid-2010s on the off chance the U.S. government ever decides to again confiscate gold or even take control of bank accounts amid a monetary crisis. (Do not roll your eyes and rule that out.)
I’m also working on obtaining a European Union passport, just in case American social life degrades to such a degree that Red and Blue start dividing the country, just like Blue and Grey did, based on wildly differing ideological beliefs.
And I’m working on owning a piece of real estate somewhere outside the U.S. for the same reason. Not sure where that will be—Portugal, Uruguay, Mexico’s Riviera Maya… Montenegro? Thailand, near a beach?
Whatever the case, I know the value of having a Plan B.
I’ve lived the results of not having one.
I’m not willing to do so again.
No more misplaced optimism for me.