On December 31, 1759, Arthur Guinness signed a lease to take over an old brewery building in Dublin. What was unusual was the lease’s term: 9,000 years.

It didn’t take long before Guinness and his landlord both realized they’d made a mistake and agreed to end the lease. Guinness needed more space, and the landlord realized he’d neglected to account for inflation. The rent was fixed at £45 annually for the entire 9,000 years.

The Guinness case is notable because it’s so extreme, but it illustrates an important point: In making financial decisions, we should always look for ways to maintain flexibility.

What does this mean in practice?

When it comes to your portfolio, I’d start by asking two questions: Are you diversified between asset classes, and are you diversified within asset classes? There are other considerations, but these two decisions—according to the data—generally have the most impact on both risk and return.

In choosing among asset classes, what’s most important is to look for investments that, ideally, would not all decline together during a downturn. That’s why the two asset classes I recommend are stocks and bonds, because they often move in opposite directions. But those aren’t the only options. Real estate, for example, could be very helpful.

The decisions within each asset class are less important but nonetheless deserve attention and can make a portfolio more flexible. On the stock side, I almost always recommend index funds, but you might also consider an allocation to one of the newer, lower-cost direct indexing services. These aren’t appropriate for everyone, but they can deliver added flexibility from a tax perspective.

On the bond side, I’d avoid total-market funds. While they are diversified, their duration exposes them to risk. In 2022, funds like this lost 13%. That’s why I’d opt for a broader mix of funds. Most importantly, I’d include one or more short-term funds in the mix. By way of comparison, in 2022, most short-term funds lost less than 5%. For further flexibility, you might also add some individual bonds. This can help insulate the value of your bond holdings whether rates are rising or falling.

Looking beyond your portfolio, how else can you add flexibility to your finances?

Tracking spending is no one’s favorite activity, and the process of categorizing transactions can be tedious. Recognizing this reality, one approach is to categorize spending into just a handful of major categories. This should make the process much easier. The most important thing, in my view, is to see how your spending breaks down between fixed costs and those that are discretionary. This exercise will tell you how much flexibility you would have to reduce spending, if need be, in future years and could provide valuable peace of mind.

How might you achieve financial flexibility when buying a home? Suppose you have the ability to make a down payment that’s larger than the required minimum. If you make a larger down payment, then you’ll be left with less in the bank but smaller monthly payments. On the other hand, if you make a smaller down payment, then you’ll be left with more in the bank but have larger ongoing payments. Each option, in other words, provides a form of flexibility. Which is better? In my view, a larger down payment is the better bet, because lower payments could provide welcome flexibility should things ever get tight down the road.

You can incorporate flexibility into your charitable plans. If you employ a donor-advised fund (DAF), you can front-load multiple years of contributions during years when your tax rate is high. You could then use the DAF as a charitable piggybank from which to make contributions over any number of subsequent years.

What about insurance? If you have children and are looking to buy life insurance, don’t feel that you need to choose just one policy. Recognizing that your need for insurance will likely decline over time—as your savings grow, your children finish school and your mortgage balance shrinks—you might set up a ladder of sorts, with more coverage during your early-career years. Or look for a policy that allows you to reduce the coverage level over time.

Buying a new car? When you do the math, leasing generally isn’t the best option. But that doesn’t take into account the non-quantitative aspects of the decision. Those who prefer leasing cars cite a number of benefits. It means you always end up driving a new car with the latest safety features. New cars are also more reliable and require less time in the shop. Leasing can also make sense if you’re considering an electric car, where the technology—and thus the resale value—can change quickly. With leasing, this risk becomes a non-issue. In short, leasing might not be the “right” answer according to the calculator, but it may provide the most flexibility.

Maintaining flexibility can be valuable even when it doesn’t seem necessary. Consider the universities that have faced funding pressure from the federal government this year. Some of them have been forced to conduct fire sales of their illiquid private equity holdings. There’s no way these universities could have predicted the bind that they’re in. But in structuring their portfolios, if they’d allocated more to standard, publicly-traded investments, that would’ve provided more of a buffer against any potential unknowns.

In making financial decisions, it’s natural to want to feel we’re being logical. But especially because the future is so full of unknowns, it’s important to avoid being too strictly wedded to the math. As I see it, there are two answers to every financial question: what the numbers say and how you feel about it. Both deserve equal votes in any decision, and you shouldn’t worry if you end up prioritizing flexibility over what is strictly “optimal.”

In my town, the big political debate these days is whether to allow overnight parking. Things are pretty tame, in other words. Nonetheless if you were to visit the mayor’s office, you’d find that behind her desk is a door leading to a narrow staircase. It’s essentially an escape hatch, allowing the mayor to exit directly from her second-floor office to an out-of-the-way door at the back of the building. I’m not sure that any mayor has ever had to use this exit, but I would imagine that there are times when they’ve been grateful to know it was there.

The bottom line: Finding ways to maintain flexibility, even when the risks don’t seem high, can pay dividends in more ways than one.​