One-Way Doors

After last Sunday’s Chiefs-Patriots game, NFL referees took some heat for a call they made (what else is new). Officials incorrectly called N’Keal Harry out of bounds before he dove for the pylon on what would have been a crucial touchdown.

I assure you that I have not lost any sleep over this call, as the Patriots are constant tormentors of my beloved NY Jets. However, many fans are upset because when a scoring play is considered “too close to call”, it’s widely accepted that the ref’s default should be to declare it a touchdown. The theory goes that every scoring play is automatically reviewed, so if there was a mistake it can be overturned – the opposite is not true.

In other words, NFL refs should do everything they can to, “avoid walking through one-way doors”. This is a guiding principle used by Amazon Web Services when deploying new software. Whenever possible, AWS avoids making choices that are difficult or impossible to reverse.

I’ve also found identifying “one-way doors” to be a useful decision-making tool when helping clients through the financial planning process at our firm.

The most integral question to consider when creating a financial plan is: what if we’re wrong?

Financial planning involves assumptions. And, spoiler alert: an assumption is a guess. Hopefully these are thoughtful guesses, but it’s important to recognize them for what they are. Since we are making decisions today guided by educated guesses about tomorrow, it is worthwhile to consider how permanent we want our choices to be. What if things change? How can we modify our trajectory? What would potential repercussions of a course-correction be?

This is where things can get confusing because sometimes the best choice on paper isn’t the best choice in the real world. In the real world, flexibility is a valuable commodity often worth paying up for. Flexibility might mean holding more cash than most. Flexibility might mean saving after-tax instead of pre-tax. Flexibility might mean building some “fluff” into your projected monthly expenses.

Having the humility to desire flexibility is nothing to be ashamed of. The important thing is coming up with a plan that is flexible enough to not self-destruct when we’re wrong. Because we will be wrong.