March 6, 2018

Financial Stability is Like Bouncing on a Trampoline


Financial Stability is like bouncing on a trampoline - that doesn't sound very encouraging, does it? We have seen enough YouTube videos of children and adults losing control and flying off a backyard setup. In every case someone seems to be having a great time until their bounce angle gets a little off kilter. Away they go onto the ground or into a bush or something that looks painful.

Well, that is the analogy I am going with for this brief post. Everything is fine, until it's not. We have things under control, until suddenly we don't. Our sense of financial stability is important to our sense of a satisfying retirement, but sometimes things stop working as well as they did before. We go flying off in an unexpected detour.

I'm pretty sure most of the folks who use trampolines for fun and exercise are confident in their ability to bounce up and down without a problem. I've tried it myself a few times (in my younger years) and never had a mishap.

Virtually all of us have made enough successful financial plans to be able to retire, maybe not in the grand style we once envisioned, but retired nevertheless. We have gotten on the trampoline and have things under control.

An unexpected gust of wind, a slight shift in your balance, a momentary lack of focus is all it takes; off you go toward the padded edge. Most of the time, there is no damage, just an embarrassed smile or laugh. If we are talking about a financial pratfall, the consequences might be a little more lasting but rarely land someone in the financial intensive care unit.

Except for a truly epic disasters, trampoliners do the same thing: they get right back up and start again. The loss of balance, the ungainly fall on their rear end, even the bounce that takes them all the way off the contraption, do not end the experience. 

Long term financial stability requires the same response. The loss of some money, the bad investment choice, the feeling of panic when the stock market does something scary, should not throw you totally off your retirement plan. 

Just like someone on a trampoline, you must get back on. You must shake off the setback, figure out what when wrong, and try to not repeat that mistake.



10 comments:

  1. When it comes to investing, and most everything else too if I am honest, I figure I am never going to get it right all the time. I work with an adviser (though that's not required) to build resiliency into my financial investments and plans such that when something goes wrong, as it always does, it won't wipe me out.

    My view is that in retirement high-risk high-reward behaviour isn't in my best interest and if I miss out on the next big thing (like bitcoin or whatever) I am okay with that. Hopefully this strategy also means I miss out on the next big disaster too (Enron, WorldCom, etc. etc.)

    Of course no matter what one cannot control the future -- stuff happens. All you can do is prepare as best you can and be prepared to adapt when the future throws unexpected curveballs at us.

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    1. Like using a trampoline, financial wellness requires keeping your balance the best you can, getting back up when something throws you off your plan, and realizing you have the skills and mindset to keep yourself together.

      And, yes, stuff happens that we simply can't control. We have to learn how to adjust and adapt (good word).

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  2. Hmmm, I can't think of what you might be talking about, except for a stock market crash (which hasn't happened ... yet) or a big medical issue which as we all know can, like you say, send us flying head first off the trampoline. Hope that hasn't happened, either.

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    1. Nothing that major (yet). A company you have invested in declares bankruptcy, the rate on your Home Equity Line of Credit increases, you need a new car when the old one dies on the Interstate...the kinds of things that can throw you off balance and maybe toss your budget in the bushes for awhile. Then, you climb back up and keep bouncing.

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  3. There isn't a lot of mystery to what will keep many/most retirees on a glide path to a successful retirement financially. It was encapsulated by Charles Dickens in "David Copperfield" -

    "Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

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  4. I think anything that affects your health or mobility would be the thing that throws one's plans out the window. You can adapt your finances, but your health is more difficult. You get cancer or a chronic illness everything changes. Do you take the big trip, stay home more, quit work sooner. How does that change your relationship? Will it bring you together or pull you apart? It would certainly make one think seriously about time and mortality.

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    1. Absolutely. Getting back up on the trampoline after a financial mishap is easier than after a serious health issue. Good point.

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  5. So much of what happens in the stock market is driven by fear and greed, and is outside of the control of individual small investors. Like it or not, we are all impacted. Opting out is not a real option, so we stay invested and do our best to diversify and invest ethically.

    Jude

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    1. We are affected by so much we cannot control, but you are right: opting out is not a realistic option unless there is a few million dollars stashed under the mattress.

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