Planning outlives the plan

On 14 November 1957, President Dwight D. Eisenhower addressed the National Defense Executive Reserve Conference in Washington, a gathering of civilians preparing to help run government in a national emergency. He told them about the maps once used at the Army staff college at Leavenworth. Before the United States entered the First World War, reformers swapped the maps of Alsace-Lorraine and Champagne for maps of Leavenworth and Gettysburg, and about two years later American troops were fighting in Alsace-Lorraine and Champagne. Then he repeated something he had “heard long ago in the Army”: “Plans are worthless, but planning is everything.”

Eisenhower was talking about emergencies, not money, and he was passing on an Army saying rather than claiming it as his own. His reasoning was simple. An emergency is by definition unexpected, so it never unfolds the way the plan assumed. Those who have been planning, however, understand the problem well enough to start again, and to do so intelligently.

Applied to personal finances the line overstates the case, because a retirement plan is not worthless. But every plan is a snapshot of the life it was written for: the income, the household, the home and the goals at that moment. Life moves on, while the policy usually stays exactly as it was signed. That is why the CapitalPath approach (see “My approach”) doesn’t stop at Build. After Understand, Protect and Build comes Review, because life changes and a fresh look from time to time pays off. Reviewing is not the same as switching. Often it simply means checking whether what fitted then still fits now.

Every autumn the same envelope arrives: the annual statement for the private pension policy Henrik took out at 41, paying €70 a month (an illustration, not a calculation for you). At the time he was renting a flat on his own, and he named his sister as beneficiary for the death benefit. It made sense for the life he had then.

Henrik is 52 now. He is married, the family owns a flat with a mortgage still running, and he earns a good deal more than he did eleven years ago. The statements went into a folder, mostly unopened; the policy was running, after all. Only when his wife, sorting paperwork one weekend, asks who is actually named on it does he realise he has no idea.

He doesn’t cancel anything, and he doesn’t take out anything new. Instead Henrik puts this year’s statement next to the original application and splits a sheet of paper into two columns, then and now. Home, family, income, debt: almost every line has moved. He puts one fixed date a year in his calendar, with a note that a wedding, a child or a new job is also a reason to look. The policy has stood still for eleven years. Henrik hasn’t.