“Not everything that can be counted counts, and not everything that counts cannot be counted.” Albert Einstein
Indeed, this is not the only quote from Einstein that relates to personal finance, and certainly not the most famous. That price probably goes to: “Compound interest is the eighth wonder of the world. Whoever understands it, wins it… whoever does not understand it… pays it.
While market-savvy readers may artfully argue that in the realm of capital markets and wealth creation, gains and losses are not technically a “zero-sum game,” which among us would support the power of compound interest?
But back to the math, let’s start by looking at the first half of Einstein’s spiritual wisdom:
“Not everything that can be counted matters” is such a powerful consideration in financial planning, because for too long – and still too long – financial planning has been limited to scheduling what can be counted. Assets, liabilities, dollars and cents.
But what is missing in this deliberate order of enumeration is goal, himself. That’s why every big financial the plan has life planning at its center. Planning for life is not as pretentious or intimidating as it sounds; it’s just about discerning and articulating what is most important to you in life so that your count management is grounded in what really matters.
(While this should be a natural conversation for clients, it’s important to note that only a relative small number of financial advisors have actually been trained in life planning or coaching. Although some revolve around this of We are innately trained more to teach and recommend as counselors than to actively listen, nudge effectively, and help inspire our clients.)
So what can be counted only counts when imbued with a goal, but do we also have to put the second half of Einstein’s quote to the test? I think if we read this statement over and over, that “not everything that matters can be counted”, its truth begins to become evident.
Let’s think about it in the context of some common examples in financial planning:
· Educational planning – Courses, credits, assignments, degrees, education savings 529 balances, and certainly tuition and fees, can all be counted, right? But what about the confidence or sense of self-sufficiency instilled in a new graduate? The ability to think critically and solve problems? The depth of relationships that often last a lifetime? While these are some of the most valuable parts of a college education, they cannot be counted.
· Risk management – Premiums and claims? Countable. The sense of peace that comes from knowing that in the midst of some of life’s most unwelcome events, financial hardship will not add up? Uncountable.
· Estate planning – The definition of a “domain”, what someone leaves behind after their departure, is eminently countable. But “the legacy”? That’s all the rest, the most important “stuff” that remains after we leave.
· Debt management – Balances, interest rates and amortization schedules are as accounting as they come, but the feeling you get when that debt is paid off? It’s very real, I’ve seen it on the faces of many. But as invaluable as it is, it does not appear on the balance sheet.
To be fair, there are some things in life that can be counted that matter too. The family business, the generational lake house, certain books or furniture or musical instruments that carry more than their intrinsic value, even the share of stock that underlies a technology that changes the world and the aggregate representation of the effort collective of its workforce.
I don’t think it’s Einstein’s intention to suggest that the ability to be counted and to count are mutually exclusive, but in my two decades of working at the intersection of life and money, I think there is a lot of value in struggling with that puns and figuring out how the dichotomy can or should play out in your financial planning.
Let’s start by recognizing that what is tangible, material, and accountable is arguably overvalued – yes, because we can see it and / or touch it, and also because we tend to derive much of the joy from any purchase ( or experience) through his anticipation. , but also literally when you consider the impacts of depreciation and inflation.
Then consider the incredible value of what we cannot count: purpose, potential, security, holiness, trust, solace, curiosity, and more.
Finally, let’s recognize that what matters, whether material or not, must be the inspiration and fuel of our financial plans. To be clear, this shouldn’t be the icing on the cake. This shouldn’t be something we strive for once our planning has been deemed “successful”. This should be the center, starting point, and compass that we refer to and return to throughout the planning process to make sure we count what really matters.