Business Insight Zone

The dreaded “extras”

Talk to someone who doesn’t know how to budget, and you won’t have to wait long before you hear about “extra” expenses cropping up.

I’ve been there, in my younger days. You find yourself blindsided by the “unforeseeable” need to do $1,000 in repairs on your 10-year-old car. As though older cars never break down, or need replacement parts. A new timing belt? Who could have seen that coming?!

Lack of foresight in business

It’s the same with weak management. Who could possibly have foreseen that housing prices might come off of historic highs? Well, lots of savvy investors did — but lots of un-savvy ones were left holding the bag.

Jamie Dimon may or may not have foreseen the collapse of the subprime housing market, but in any event he prudently steered JPMorgan Chase away from those risks. Warren Buffett doesn’t need to foresee the collapse of bubbles, because he makes a habit of investing in bubble-resistant ways.

Some may say, “Well, sure, but those are two of the best CEOs in the world.” I say, “How do you think they GOT to be the best in the world?” Prudence.

Specifics and trends

Just because you can’t foresee the specific source of a one-off expense, or a bubble’s meltdown, doesn’t mean that you can’t prepare for the likelihood of some expense or disaster. Countless buildings in Japan and California are built to withstand huge earthquakes that may come tomorrow . . . or in 500 years.

The best performers — in business, in personal finance, in the arts, in anything — take prudent risks, risks they can live with. And they don’t act surprised when foreseeable “accidents” happen, because they’ve been preparing all along to deal with them. They’re ready to forge ahead regardless.

Look around you.

In your life, in your career planning, in your department at work . . . are you responding prudently to foreseeable risks? Or pinning your hopes on a rosy future in which nothing “unforeseeable” ever crops up?

Hard as it is to come to grips with painful reality, it’s a lot better than the alternative.

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(Photo by houseoftext, used under a CC Share Alike license.)