I remember my father quoting the law of physics regarding things in motion staying in motion and things at rest staying at rest. Still today, my eyes involuntarily roll at the memory. These reminders of Newton’s law usually came when I was ignoring my list of chores in favor of leisurely pursuits. In other words, I was goofing off.
Being proactive about your personal finances.
Applying Newton’s law to our financial lives is not a wide leap, nor a departure from what we know about financial success. It’s about movement, action, and momentum. Financial success depends on a mindset of success paired with appropriate action.
Consider the components of achieving your financial success:
- Your Values
- Your most important goals (your “musts”)
- Your current financial situation
- Your ability to navigate successfully from now through the attainment of your goals
- Your ability to successfully handle transitions and unexpected distresses and problems
- Your willingness to make changes where appropriate and necessary
Living your life with your values and goals in place is an active endeavor—a path in motion. There is nothing autopilot or “sitting back with your feet up” about it. It requires vigilance, desire, and involvement to ensure you don’t wind up in a financial ditch. No goofing off here.
I am not referring to day trading stocks or attempting to time the market. Those activities are both generally a waste of time and destructive to your goals. I am referring to aligning your financial needs with appropriate actions.
Here are some actions you should be taking:
- Make sure you are saving actively for your goals. Think 401(k), automatic monthly investment plans.
- Have your insurance policies reviewed annually for sufficiency. In other words, is your coverage appropriate for your needs?
- Meet with your CPA before the end of the tax year to incorporate tax law changesor complete any appropriate tax strategies.
- Have your estate planning documents reviewed periodically to ensure they are accurate, reflect current law, your wishes, and needs.
- Review your cash flow at least annually to make sure your spending is within an expected and appropriate range.
- Have your financial plan updated annually or every 2 years to make sure you are on target with your goals.
- Talk with all stakeholders to see if their goals and objectives have shiftedthereby requiring a change in plans and actions.
- Review your portfolio allocation in respect to your time horizon. As you get closer to your goal, taking risk off the table might be appropriate.
- Review the amount of debt you carry and prudently work towards appropriate retirement.
- Explore options for big ticket items such as, providing college cost or long-term care expenses.
Imagine ignoring these items and leaving them to fate—it’s likely you will not meet your goals or live according to your highest values. Think of a vegetable garden that you plant in the spring and ignore until autumn; there’s a better than even chance that weeds, pests or lack of water or fertilizer will leave your crop less than your expectations. In other words, appropriate action is required and prudent.
Isaac Newton’s Laws are ever present in our lives, whether or not we actively think about it. Our intention, matched with appropriate action puts us in a position to improve our live satisfaction and build a path towards financial success.
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