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Flawcasting: a demonstration

5 June 2020

Below is a video that illustrates the “flawcasting” exercise I often go through with clients.

(It's best viewed on a big screen.)

I don’t always use this tool. And of course, the variables I use can differ markedly from client to client.

The purpose of the video is to give a rough understanding of how the exercise operates. If you’re an Excel whizz, you might be able to create your own “flawcast” (I’d love to see any bells and whistles you add! Plus feedback from Excel gurus is always welcome). Even if you don’t, the video might give you some insight into how thinking about the long-term financial ramifications of certain decisions can help inform those decisions.

As I stress in the video, I use the term “flawcasting” deliberately, because the only guarantee I can give is that these flawcasts will be wrong.

There are so many variables that can influence our long-term trajectory and quality of life! Many of these are difficult to fit into a model like this. For example:

  • How long will you live?
  • What will happen to your health?
  • What twists and turns in your career will you experience?

And on top of this: what will the world look like in several decades???

Despite this, flawcasting can be an excellent tool to get a sense of your current trajectory. It can help inform some of the decisions that you might choose to make, since it can quite clearly show you the trade-offs associated with these decisions.

I’m also well aware that this exercise is relatively simplistic. There are many variables that aren’t included in this spreadsheet. The assumption that these variables will stay constant over the long-run is also a major assumption. This goes back to the fact that I can only guarantee that it will be wrong: even if I wrote a sophisticated model with hundreds of variables, the outcomes still wouldn’t be guaranteed. As it stands, I try to balance simplicity/ease of understanding with insight.

The video is long (nearing 40 minutes), and you’ll be spending most of that time looking at a spreadsheet. I make no apologies for that. It’s also not super polished, and I kind of want to apologise for that – but at the same time, I think it’s better to share this video as it is rather than wait until it’s perfect (in which case it might never come available!).

If the video is too slow for you, you can change the playback speed in Youtube. I also recommend installing an extension for your browser like Video Speed Controller which allows you to change the playback speed of Youtube (and other) videos in 0.1 iterations.

I hope it’s valuable!


Tags

financial trajectory, flawcast, flawcasting, insight, trade-offs


About the author 

Sonnie Bailey

In his spare time, Sonnie likes telling people that he’s a former Olympic power walker, a lion tamer, or that he is an orthodontist. He is none of those things. In reality, Sonnie is a financial planner based in Christchurch. Through his business, Fairhaven Wealth (www.fairhavenwealth.co.nz), he provides independent, advice-only, fixed-fee financial planning services. Sonnie is a “recovering lawyer”: he has specialised in trusts and personal client work. He has also worked as a financial services lawyer for many years.

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