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Jun 17, 2021

As we head into this Father’s Day weekend, we wanted to first stop and appreciate all of the dads out there. It takes a lot of work to play that important role in a child’s life and Nancy has a story she’ll share about her wonderful dad.

Now, let’s talk about financial planning. This conversation takes on an important question that we all have to evaluate in different aspects of life: Is the risk worth the reward?

We have to go back about 400 years to what might be the first instance of someone truly analyzing outcomes. That man was Pascal, a brilliant seventeenth-century philosopher that developed the idea that belief in God would provide an infinite upside but if you don’t believe it would only provide a finite upside. Although the term hadn’t been created yet, Pascal had complete a cost-benefit analysis to determine that there’s much to gain by believing than not.

This became known as Pascal’s wager over time and created the framework that’s used in all facets of life as we weigh potential outcomes from our decisions.

So how does this tie into planning? Well assume that you’ve accumulated enough wealth after several decades of savings and investing. Should keep trying to grow the nest egg with risk or shift to safer investments to protect your capital. Using the Pascal’s wager, we’ll run through potential scenarios that could play out with each option on the table.

We’ll also use a couple famous quotes from notable financial professionals tie into this idea of Pascal’s wager.

Check out the full episode or use the timestamps below to hear a specific segment.

1:56 – Pascal’s wager

4:27 – Applying this to retirement planning

7:53 – If you can dream it…

8:55 – Warren Buffet famous quote

10:29 – Risk

12:12 – Summarizing the discussion


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