Like most of our commentaries, this one is born from an analogy to real life. While exercising on the elliptical machine, I usually strive to get a certain number of steps completed within a certain amount of time. During a recent workout, and approaching my time limit, it appeared that I wasn’t going to make the number of steps to reach my goal without increasing my effort and working really hard. As I completed the workout, tired and out of breath, I realized that it was a lot like investing for retirement.
What would have happened if I had worked a little harder in the beginning and accumulated more steps in the first quarter of my allotted time? In investing, time is critically important as the longer you have to let your investments grow, the larger and stronger your portfolio will be in the end.
As you begin your career, it is easy to find ways to spend rather than save, right? Having your own money and freedom is new and exciting but it is important to take steps early to make sure you that you don’t have to work so hard at the end to catch up. For younger individuals, retirement is decades away and not something necessarily focused on but a little discipline up front can make the later years easier.
Discipline is required throughout your life as there are plenty of distractions tempting you to deviate from your savings plan. Like someone stopping by to talk while you are on the elliptical, life itself creates many opportunities to sidetrack your plan. The purchase of a home, having children and even vacations are all life events that make it easy take a break from saving, believing that you can always make it up later. The issue is that like not getting enough steps in early or starting slowly in a workout, it becomes more difficult to catch up and make sure you have enough steps or in this case, savings at the end.
If you find yourself nearing the last quarter (of your workout or life for that matter) and short of steps (savings), what do you do? In both instances, it requires sacrifice and hard work. In the case of savings, carefully review your expenditures and determine where you can save money even if it means sacrificing and some pain. By no means give up and throw in the towel. Ignoring the issue won’t make it go away, it only makes it more difficult in the end.
When you’ve reached your steps or financial goals, you don’t just stop at that point, you just don’t have to work as hard to finish out to your time. Remember at the end of exercising, there is a cool down period so you are still moving forward just not with the same speed or intensity. The same is true with saving; the ‘cool down’ here correlates to the distribution phase of retirement planning. While saving for retirement is the accumulation phase, moving into retirement constitutes the distribution phase. Just like the cooldown, you don’t stop moving and your savings shouldn’t stop growing. And that’s another subject for another time.
So, to complete the cardio workout and savings/retirement time frame analogy, set your pace early and keep it up. In the end, and with every breath you take, you’ll end up with a better chance of reaching your goal in an easier and much more satisfying way.
For specifics on reaching financial goals and the strategies utilized along the way, please contact us directly at (704) 482-2001.