Slow, slow, slow, fast.
I wrote a while back that things typically muddle along in life for a while, then bang, tragedy happens, you inherit money, or perhaps you finally start that business you’ve been dreaming of.
Slow, slow, slow, fast.
This sequence is essential for investors to understand.
We should never be surprised when tragedy hits or when good things happen.
It’s just the way it is.
Just look at the recent deal with Credit Suisse, the famed Swiss Bank that not that long ago was worth more than Microsoft, and its forced merger with UBS for a mere $3B.
It was a slow grind lower for many years. Attempts to recapitalize and cut underperforming business lines only prolonged the long decline.
Then, just last weekend, it suddenly was over for the Swiss bank.
The moral of the story for us who strive to build better balance sheets is threefold.
Build while we can
Bad things and good things will happen to our money, many of which are out of our control. It is up to us to build in the good times, knowing that, at some point, this will get worse. For example, you get a bonus every year at work. Invest 80% of it and spend 20%, the opposite of what everyone else does.
Where are we weak
We must know our financial weaknesses and seek to mitigate them. Let’s say you make $200,000, struggle with saving, and plan on retiring in 10 years. What’s your weak point? You spend too much. If that’s been a consistent theme in your life, build new systems to help avoid overspending. Know where you are good and where you are not.
What’s the plan, anyway
We need to know what we are working to accomplish. What does this mean? Unlike companies that have to grow in perpetuity, our financial lives typically have a peak and an endpoint—expenses peak in our 40s, earnings peak in our 50s, and assets peak in our 60s/70s. Ideally, we could replace the income we hit in our 50s with our assets in our 60s. This is what will happen and also what you ideally want to accomplish.
It’s just math and a lot of life in between.
The status quo is until it’s not.
Slow, slow, slow, fast.
This is how the world works and how your money works as well.
Take advantage of the good times, understand tragedy will strike, and know the game you are playing.
