31 May 2019 Lifestyle Leverage
How often do you ask yourself, ‘why didn’t I do this sooner?’ We love to drive when our car is clean. Work seems more enjoyable when our work space is neat and orderly. Our homes were never so delightful to live in until putting them on the market for sale.
If we fail to do the things that offer immediate reward to our lifestyles, then it’s no wonder why we resist investing our time in payoffs that are far down the road. We are procrastinators by nature, but the cost to our lifestyles is real and measurable. Charles Kettering reminds us, “the future is where we will have to spend the rest of our lives,” and making a better future is easier with the leverage of time.
Archimedes said, “give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” While he was referring to mass, the same principle can be applied to lifestyle leverage.
In the figure below, note there are two levers representing the timing of decision and actions. The top has a fulcrum to the left, representing early actions. Notice that a small movement of the lever now, suggesting modest investment or sacrifice of lifestyle, generates huge lifestyle benefits later. Notice too that the gain is almost unlimited as sacrifice (left side) approaches the floor (of what’s possible with your budget).
As the fulcrum moves further to the right, or into the future, the future lifestyle benefits shrink relative to growing amounts of sacrifice required today. And the left side of the lever fulcrum hits the floor far sooner, implying only so much improvement can be made as in the later stages of life.
Good financial planning results in consistently making good decisions, sooner rather than later, to maximize the leverage of time and compounding. The lever demonstrates that significant improvements in lifestyle can be made with modest sacrifices in today’s lifestyle given the exponential power of compounding, if we act sooner than later.
Figure 2 demonstrates that a good decision made now will compound over time to impact our future, positively in an ever-expanding way. Of course the reverse can happen as well, which is why it is important to regularly review the results of decisions made, making adjustments as required.
Each time we meet with clients, we analyze where they are relative to their lifestyle goals, evaluate their what-if’s, their options, and decisions. These happen in their ‘now,’ but looking toward a more confident future. We can analyze the impact of various options, pulling all the levers available to objectively choose the best combination that maximizes lifestyle, both now and into the future. The process is fun and compelling, helping our clients avoid procrastination. If your lifestyle could use a lift, give us a call.