Wonder, Blunder, Thunder and Plunder

I recently heard a legendary consultant deliver a great talk about managing closely-held businesses. He identified what he termed, “the four stages of entrepreneurial endeavors: Wonder, Blunder, Thunder and Plunder!” I could not help but translate this to your financial life, but in order to do so, I need to review each step and then apply it to what I will call the four stages of personal financial management.

“Wonder” begins with nothing—you have no business, no clients, no money, but you are filled with optimism. Most folks in this stage run the business—and that is a loose term, considering that it is just a dream at this point—by the seat of the pants. In personal financial management, this is where we all begin, unless we are lucky enough to be born into a family with lots of money. You remember when you got that first job and started to figure out that the government takes an awfully large portion of your check (“Dad-I think there’s a mistake with my pay stub!”) and you could barely pay your rent, but it was all new and exciting.

“Blunder” is when things start moving at warp speed. The business finally has profits, but no cash. In other words, the little idea has become a business, but there is tremendous stress and the owner clings to a crisis mode of management. In your real life, this is the period where you can’t believe that you made so much money and have nothing to show for it at the end of the year. Sure, you pay your bills and even have a house, but it feels like you are living paycheck to paycheck and there is no plan in place to help you get to the next place.

“Thunder” is a more mature phase of the business. The boss has become loud, opinionated, obnoxious and over-confident. He has formalized the management structure, but mostly so he can lecture the staff about his numerous ideas. This is often met with nods of agreement to his face and extreme eye-rolling behind his back. But nobody wants to rock the boat-the company is finally profitable and everyone is glad to be making money. In personal finance, this is usually when people accumulate real money for the first time in their lives, often through their retirement accounts. They usually do not have a plan, but “the numbers speak for themselves.” As a result, the Thunder-guy/gal believes that he/she knows better and does not need anything more. I always hope to meet people during the Thunder phase—it is when wealth management can have the most significant impact on the client’s life and can actually create opportunities for those who get on board with the process before the next stage robs them of possibilities.

The final stage, “Plunder,” is the fork in the road: it can either be a period of renewal or decline. It is a time when change smacks the entrepreneur in the face, as all of the “wisdom” that he has relied upon is now obsolete. If the business is fortunate, this is the moment when the boss recognizes that he must make changes or the business will slowly drift away.

In personal finance, Plunder usually occurs when the stock market swoons or during life-changing times like job-loss, disability or even death. It can be the moment when a couple faces up to the fact that the non-strategy that has been at play can not possibly see them through retirement and in fact, may be the reason that dreams must be put on hold. While I can also help those who are in the early part of Plunder, when they wait too long, I find that most suggestions are met with “yeah, but…” and they are simply going to plunder opportunity due to stubbornness.