Friday, October 07, 2022

“The Perfect is the enemy of the Good.” —Voltaire

Q. When it comes to your finances, should you be willing to settle for anything less than the very best?

A. Maybe. Especially if pursuing the “very best” delays or disrupts steady progress.

The recently released book, On Settling, by social theorist Robert Goodin presents an idea that seems counter-intuitive to contemporary culture: sometimes the best approach to success and fulfillment comes from “settling.” Here’s an explanatory paragraph from the book jacket:

On Settling defends the positive value of settling, explaining why this disdained practice is not only more realistic but more useful than an excessive ideal of striving. In fact, the book makes the case that we’d all be lost without settling—and that even to strive, one must first settle.

Once you read that brief description, it’s easy to think of instances where “excessive” pursuit of the best could be a hindrance to success. It’s the designer who never completes a project because he is constantly re-evaluating the plans. It’s the relative who can’t get along with family members because an issue is “non-negotiable—now and forever!”

Goodin is careful to say that settling does not require compromising core principles or resigning oneself to accepting a bad situation. Instead, he defines settling as a way to achieve “good enough” results. In this format, settling keeps us from needlessly devoting too much time and attention to areas where the difference between “best” and “good enough” may be minimal, and where the extra time and energy required to achieve the best in one area means neglecting other equally important parts of life.

In addition, Goodin asserts that a higher degree of settling in a people’s lives actually makes them better equipped to pursue excellence in areas that matter most. People with settled personal relationships can devote more time and energy to careers. People with both settled careers and personal relationships are free to concentrate their efforts toward achieving long-term financial and lifestyle aspirations.

Goodin defines this good form of settling as one that produces “fixity” in our lives. “People plan their lives on the assumption that the things they take to be settled in their own lives will remain fixed for some suitably protracted period.” Settling issues results in parameters defined, and provides a structure that allows people to plan—and succeed.

The concept of settling has many applications in economic affairs, both large and small, because when things are unsettled, the uncertainty almost always means less-than-optimal choices and results. The current up-in-the-air status of several national economic issues—the solvency of Social Security and Medicare and the resolution of the federal debt—have ripple effects for businesses and consumers. Because these issues aren’t settled, businesses are hesitant to expand and hire. Individuals, unsettled about their employment, are hesitant to spend.

Although the ultimate configuration of each of these external issues will have a great impact on everyone’s financial life, the argument can be made that any resolution will be helpful— regardless of the details—simply because settling the issue will produce enough fixity for individuals and businesses to begin longer-term planning. If taxes are going to be higher, if health insurance is going to be costlier, if Social Security is going to establish a later age for full benefits, at least the certainty of it allows people to arrange their financial affairs accordingly.

Besides the benefits from settling macro-financial issues like the ones mentioned above, there also appears to be a benefit for people who can stay settled in their personal financial actions. Research from Dalbar, a firm that studies individual investor behavior, has produced numerous reports that stock market investors who “chase returns,” constantly re-allocating their portfolios to whatever segment of the market seems to be hot, end up with consistently lower performance. While hindsight might indicate that better results could be obtained from market timing, the reality is a commitment to steady (and perhaps slower) growth usually delivers better results.

Elozor Preil is Managing Director at Wealth Advisory Group and Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS).  He can be reached at epreil_wagroupllc.com. See www.wagroupllc.com/epreil for full disclosures and disclaimers. Guardian, its subsidiaries, agents or employees do not give tax or legal advice.  You should consult your tax or legal advisor regarding your individual situation.

By Elozor M. Preil

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