What is the most important part of every plan? Planning on your plan or going according to plan?
Planning on your plan is what to note as the most important part of every plan.

Some of our unlikely places hold the best examples of smart financial behaviour. Take, for example, the casinos.

A tiny group of blackjack players in the area who practice card counting can teach ordinary people something extraordinarily important about money management.

With their fundamentals of card counting you can learn a lot about money. Let’s enumerate three simple fundamentals of card counting before moving ahead:

1). No one will ever know exactly with certainty what card the dealer will draw next.

2). You can easily calculate what cards remain in the deck by tracking what cards have already been dealt with.

3). By doing so, you can easily ascertain the odds of a particular card being drawn by the dealer.

As a player, you are expected to bet more when the odds of getting a card you want are in your favour and less when they are against you.

The process of doing this does not matter in this circumstance now. The matter lies on the blackjack card counter who knows they are playing a game of odds, not certainties.

Desperately, they think they have a good chance of being right, but at the back of their mind, they know there’s a decent chance of being wrong.

Given their profession, this sounds strange but their strategy relies entirely on humility.

Yes! The humility that they don’t know it all, and cannot know exactly what’s going to happen next, so they resort to playing their hands accordingly.

You have to remember that the reason why the card system works is because it tilts the odds ever so slightly from the house to the player.

But you have to remember not to bet too heavily even when the odds seem in your favour because if you are wrong, you might lose so much that you don’t have enough money to keep playing.

With this scenario, you have to know that there is never a moment when you are so right that you can bet on every chip in front of you.

For your information, the world isn’t that kind to anyone, not consistently as many of us could think.

The ultimate thing to do is to give yourself room for error.
Simply put, you have to plan on your plan not going according to plan.

How can we navigate a world governed by odds, not certainties?

To do this, you have to make use of what I call “Margin of safety” which you can equally call room for error or redundancy.

This is the only effective way to safely navigate a world that is governed by odds, not certainties.
And the funny thing is that almost everything related to money exists in this kind of world.

Unfortunately, people always underestimate the actual need for room for error in almost everything they do including money.

My odd times had taught me heavy lessons about creating room for errors. But do I ever hack to this solution?

I only remember I was supposed to have room for errors when I’m in lack of the resources to solve that particular problem.

But as soon as I regain a few resources back, the world becomes a bed of roses again.

And two major things cause us to avoid room for error. They are:

a). The Idea of Knowing What The Future Holds:-
We always believe that somebody must know what the future holds. With this, we always are driven by the uncomfortable feeling that comes from admitting the opposite ( which is having room for error.)

b). Room For Error Is Underappreciated And Misunderstood:-
Many people view it as a conservative hedge, mostly used by individuals who are afraid to take risks.

It’s assumed that individuals making use of it are doing themselves harm by not taking actions that would lead to that future coming through as viewed.

I disagree totally with this because, when used appropriately it becomes the opposite.
Then let’s consider some advantages of room for error.

ADVANTAGES OF ROOM FOR ERRORS
i). With room for error you will endure a range of potential outcomes. This endurance will help you stick around for long enough, and this will allow you to benefit from low-probability outcomes as the odds fall in your favour.

ii). The second advantage is the biggest gain which occurs infrequently.
This could be based on the fact that they don’t happen often or because they take time to compound.

Let’s use this statement below as a case study:

Imagine a person with enough room for error in part of their strategy say (cash) which would let them endure hardship in another strategy say (stocks).

Does he/she not have an edge over someone who gets wiped out, game over, with an insertion of more tokens when they’re wrong?

A typical example of proper room for error is Bill Gates. Let’s examine his statement — when Microsoft was a young company he said and I quote:

“I came up with this incredibly conservative approach that I need to have enough money in the bank to pay a year’s worth of payroll even if we didn’t get any payment coming in.”

I think that what Bill Gates is trying to let us know here is that room for error is supposed to be applicable when estimating your future returns.
Probably, this should be seen as more art than science.

iii). Unquestionably, room for error does more than just widen the target around what you think might happen. It goes ahead to help you by protecting you from things you’d never imagined.

And these unimaginable things could be the most troublesome events we are likely to face.

Let’s use the case of the German Tank Unit during the battle of Stalingrad World War 11 which was the largest battle in history.

In late 1942, the German Tank Unit sat in reserve on grassland out of the city.
And such a time came when tanks were desperately needed on the frontlines, and to their greatest dismay, something happened that surprised everyone.

Almost none of the Tanks worked when needed. Fewer than 20 Tanks were operable out of 104 Tanks in that unit. God was so kind that their engineers later found the issue.

“It was discovered that during the weeks of inactivities behind the frontlines, field mice had nested inside the vehicles and eaten away insulation covering the electrical systems.”

Let us not forget that Germans had the most sophisticated equipment in the world then. Yet they were defeated by the little mice.

They were thrown off-balance in disbelief because this never crossed their minds.

You see! you can plan for every risk except the things that are too crazy to cross your mind. And the funny thing is that those crazy tiny things stand to do the most harm.

This is based on the fact that they happen more often than you think and definitely you will have no plan for how to deal with them.
And we all know that avoiding these kinds of unknowns is almost impossible.

This is based on the fact that you can’t prepare for what you can’t envision.

So, the biggest single point of failure with money comes from the total reliance on a paycheck to fund short-term spending needs, with no savings to create a gap between what you think your expenses are and what likely they might be in the future.

We all are involved including the wealthiest in this idea that it is time to save for a car, or a home, or for retirement.
But I have to let you know that it’s more important to save for things you can’t possibly predict or even comprehend — which is the financial equivalent of field mice in the case of the German Units above.

By not saving for unforeseen events, you assume you live in a world where you know exactly what your future expenses will be, which I know no one does.

So, you have to know that financial plans that equally prepare for unknown risks have enough potential to survive in the real world.

With all of these said you have to remember that the most important part of every plan is planning on your plan not going according to plan.

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