27 Oct 2017 A Lever to Move Your World
A relatively small adjustment today can have a huge impact on our future goals and lifestyle. How often do we lament, ‘if I had only done this sooner’? What a pleasure it was to live in our beautifully renovated home, just before we sold it. Clean cars drive better than dirty ones, work is easier and faster when we are are organized, and there’s one less thing to worry about once we renew the car’s registration. When our lives can be improved so quickly and with relatively small investments of time, energy, and money, why do we wonder so often – why did it take us so long?
If we procrastinate or fail to act in order to receive almost instant rewards, how much more will we put off or forget to do the things today that might have huge impact on our lifestyles over the longer term? We simply don’t spend much time thinking about the future, but we should, it’s where we’re going to live from now on. And more to the point, there are two powerful forces available to us right now that diminish the longer we wait to use them.
One is called leverage. Archimedes said, “give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” But rather than moving mass, we will use use the lever to demonstrate the power of leveraging time along with another powerful force known as compounding to bring about significant improvements in your lifestyle.
In the figure below, note two levers. The top one with the fulcrum to the left, representing an early decision, demonstrates the benefit of making a small sacrifice in today’s lifestyle, maybe even an inconsequential one, to bring about significant changes in future lifestyle down the road.
As the fulcrum moves further to the right, into the future, the benefits of the action shrink relative to the amount of sacrifice it required now. Notice also that the lever on the ‘Late’ fulcrum hits the floor at now far sooner (relative to its future benefit), implying that only so much improvement can be made as we get into the later stages of life.
The next diagram demonstrates that better decisions made and acted upon sooner rather than later, compound well into the future, improving lifestyle beyond that which would occur if no actions, or detrimental actions, were taken. Notice too the sense of connectedness the line illustrates. Good decisions and actions connect our now to our end, just as bad ones do. But notice also the origin of “Now,” implies that we can change the trajectory of our lives any time of our choosing.
A key benefit to good financial life planning is that we can objectively analyze the merits of decisions and actions in every “Now” that we meet with our clients to discover the best paths forward over and over, effectively compounding good decisions on top of previous good decisions. It truly can be the lever that ‘moves your world.’