The Fight Against Financial Entropy

This blog is courtesy of Russ Thornton of Wealthcare for Women.



I was reading this article from James Clear about “why life always seems to get more complicated.”

Not sure about you, but I’ve certainly felt this before in my life (sometimes more than others).

Clear goes on in his article to explain this observation with the word “entropy.”

One definition of “entropy” that works for both the James Clear article and what I want to share with you today is, “gradual decline into disorder.”

More specifically, I’d like to talk about “financial entropy.”

One of the many benefits that my clients have gotten out of working with me on their financial planning is that their plan brings a sense of order and purpose to their money matters.

It helps to simplify things.

And as I’ve written before, I believe there are many advantages to keeping your finances (and everything else in your life) as simple as possible.

But here’s the thing . . . this isn’t a one-time fix.

You can’t “set it and forget it.”

As the article states about entropy, “it always increases over time.”

In other words, virtually everything becomes more disordered as time passes.

This is such a fundamental principle, in fact, that it’s also the 2nd law of thermodynamics (also knows as the law of increased entropy).

And I believe the same holds true with the idea of financial entropy. It always increases over time.

And as a result, your relationship with money will perpetually become less structured over time.

Examples include:

  • You change jobs and now you have a 401k with your prior employer
  • You get married and have to figure out how to manage money with your spouse
  • You get divorced and have to learn how to manage money on your own again
  • You have children which introduce new challenges and decisions into your money matters
  • Your turn 65 and have to figure out Medicare
  • Your parents are aging and you might need to help care for them – physically and/or financially
  • Tax laws changes
  • Investment markets change
  • You’ll experience personal and professional change in your life
  • And the list goes on . . .

All of these can introduce an element of disorder into your financial life.

If you review the list above, you might notice that while these examples serve to explain the idea of financial entropy in your life, they’re also great examples of why you want to regularly review and update your financial plan.

Not just to keep things in order and fight against financial entropy, but also to make sure your plan reflects your current reality as your money comes into contact with your life.


Not only does the ongoing process of financial planning help keep your plan as current and relevant to your life as possible, but it also provides a process through which you can keep your financial life in order and fight the inevitable creep of financial entropy and a decline into disorder.

Without effort, life tends to lose order. This is another important lesson from the James Clear article. And the same is true of your financial planning.

A financial plan is a product. Or, if you look at how most advisors use financial planning, it’s a proposal or sales tool.

However, financial planning, done the right way, is an ongoing process. It takes some effort and patience and discipline.



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