Have you ever been to a football game where your team barely lost and you blamed it on a missed 50-yard Hail Mary in the fourth quarter? I’ve certainly been guilty of that. Now, ask yourself, suppose instead of focusing on that split second, your team had simply converted one or two more third downs, or stopped the opposing side from doing so? Yep, that may have changed the game as well. What if they’d progressed a half yard further on every play? Also effective. We know when our team comes up short there are any number of things the team actually could have done better all along that would’ve led to a better outcome. It’s the easy way out to place more importance on a dramatic few seconds. Our financial lives are no different.
When it comes to building wealth, the tried and true way is to keep advancing down the field. How do we advance? By making more money than we spend and putting that money to work through saving and investing. Building wealth is rarely based on calling the next market crash or finding the next high flying stock. Yet, that’s what so many novice and “pro” investors alike focus on.
What should we focus on to build wealth and financial security?
Consistent Advances
(starting in the first quarter!)
We’ve all seen (and ignored) the examples. Who ends up with more money, a 30 year old who invests a modest amount each month or a 50 year old who invests substantially more to catch up? That’s right. The 30 year old. The beginning, as Plato said, is the most important part of the work. If you haven’t yet begun to save and invest in order to build your wealth then the time to do that is today. It’s not tomorrow. It’s not when you have time or when you make more or after you achieve x. It’s today. Waiting until the fourth quarter to turn on your offense usually just doesn’t pan out. You don’t have to start big, but you should start.
Defense
The best offense is a good defense, right? In our financial lives, defense is about being smart. It’s about avoiding unnecessary debt, particularly interest-only debt like home equity lines and credit card balances. These products, by design, don’t help us get where we need to be. They’re the financial equivalent of 20 yard lateral run. A lot of effort and nothing to show for it. Another defensive money move is having adequate emergency cash. When life comes at us hard, this gives us the ability to withstand it. Put another way, we’ve taken the liberty of banking a few field goals to build up a healthy cushion against the occasional interception.
Watching the Clock
Time. It’s the one thing we know we can’t have more of. For that reason, it’s important to realize that we have to plan for the time we’re likely to have. Living like there’s no tomorrow can quickly leave our finances in ruin when there’s still three quarters of life left. Likewise, not preparing for the important time markers in life, like childbirth, education, retirement and even death can make it seem like their respective play clocks simply ran out before we’d put together a game-plan. Being aware of the clock and putting the time we have to good use helps a good plan turn into a win.
Are you focused on the fundamentals or on the Hail Marys?