The Second Most Dangerous Word in Financial Planning

The centerpiece of our work each day as financial planners is risk management. Whether it is deciding what accounts a client should open and fund, what insurance coverages a client should purchase, or how a client should manage their various investments, the name of the game is risk management. Our mission as planners is threefold – to assess, to plan, and to execute. When all three phases are functioning well, they inform one another as a continuous analysis framework that should lead toward the best chances of success while addressing potential threats that could compromise that success.

However, there are numerous ways that this framework can be threatened. In my opinion, the first most dangerous word in financial planning is “debt.” Debt, particularly debt in excess of a 10% interest rate, heavily erodes the resources needed for future growth – it acts as both an immediate cost and a drag on future returns. Once debt enters that double-digit threshold, it is now rivaling or exceeding the performance of the S&P 500 (Maverick, 2025), which in my opinion is a daunting uphill battle to combat against a pernicious adversary. We have helped many clients win the fight against debt, but that fight is so nasty and cruel at times, particularly when setbacks in life circumstances occur and debt reaccumulates without further action. For these reasons, debt is in my opinion the most dangerous word in financial planning.

The second most dangerous word shares similar qualities as debt. It too erodes future growth and behaves in a pernicious manner. However, unlike debt the threat this word poses does not bludgeon you over the head like a caveman with a club; rather it lures you into false security, like a siren song that lures its listeners into grave peril. Not only does it not require further action for it to succeed, it is entirely centered around inaction, like sinking into the most comfortable chair and feeling unable and/or unwilling to get oneself out of it.

The second most dangerous word in financial planning is complacency. Complacency takes a number of forms in financial planning. 

1. I have three months’ worth of expenses in emergency savings and if they let me go I’ll get unemployment, so I do not need to save any more money.

Three months’ worth of emergency savings is a solid start, but the median unemployed worker during the financial crisis needed 27.2 weeks to gain employment – three months and unemployment alone likely would not be enough savings. Additionally, if you have kids or an adult dependent such as an elderly parent, you will need even more money to account for their potential sudden and unforeseen expenses. If you run out of money, you may have to make costly and painful decisions such as selling stocks at a market low out of a retirement account, which may have additional tax consequences and penalties. You may be forced to downsize and sell your home, a process that is time-consuming, emotionally painful, and potentially costly in its own right.

2. I love my job and my team, so I don’t want to rock the boat by asking for a raise or looking at other job opportunities.

When you are not given raises that at least keep up with inflation, you are in effect taking a pay cut because your money is losing purchase power. Moreover, increasing how much you earn increases the ability to invest and save, thereby increasing your chances of creating a strong financial position for your future needs and goals. Leveling up your pay isn’t just about earning more now; it is about accelerating wealth growth to defend your future.

3. I am indispensable at my job – they need me and cannot afford to let me go.

Even in a 4% unemployment rate market, 1 out of 25 able-bodied people are out of work. And as we have seen over the past year and a half, unemployment has only stayed steady because as higher wage jobs are being laid off, lower wage and part-time jobs are filling the gap. If the decision as to who to retain and let go is based on financial considerations over job performance, the person firing you is likely an accountant or CFO playing balance sheet overlord, not your boss. 

4. I do not have any noticeable health conditions, so I do not need to assess my health.

Medical care is one of the largest cost centers and causes for bankruptcies. By having regular physicals and screenings, you gain the knowledge of potential early detection and the ability to avoid or manage ailments seen and unseen, reducing the risk of a serious health condition and de-risking that expense threat both short and long-term.

5. I’ll shop for insurance later – it’s not like anything bad is going to happen right this second.

Charlie Munger was famous for saying “All I want to know is where I’m going to die so I don’t go there.” While shopping and buying insurance is rarely a joy for clients, the peace of mind gained by transferring unaffordable risks does offer greater confidence and certainty in day-to-day living.

6. There are some things I want to do, so I just want to take a year to build up my lifestyle before beginning to invest.

If you invest $500 a month in an account for 30 years at a 10% annualized rate of return, you would have built savings of just over $1 million. By starting just one year later, that number drops to $939,000. If you start five years later, that number drops further to approximately $622,000 – one third of the total accumulated lost in one-sixth of the time. The reason for this is that everyone starts at the beginning, so if you start later, you are missing out on years of growth on the back-end of the compounding curve, where most of the compounding growth tends to occur.  

Conclusion

Complacency is dangerous because it generally affects you by starving you of future resources rather than burning you like a hand placed on a hot stove. The main antidote to complacency is to consistently evaluate your current and future financial needs, making deliberate adjustments to maintain asset defence and growth, and to keep working on job and career development to secure your cash flow for future savings. By keeping an active mindset, you will avoid the second most dangerous word in financial planning from silently threatening your tomorrow.

References

Maverick, J. (2025, May 16). S&P 500 Average Returns and Historical Performance. Investopedia. https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp