Envision thousands of M&M’s and an empty mayonnaise jar sitting on your table. Drop one M&M into the jar. A minute later drop two M&M’s into the jar. A minute later drop four and a minute after that drop eight, continuing to double the number of candies you drop into the jar at one-minute intervals.
Imagine that you start this precisely at 10:00am and that the jar is completely full at precisely 12:00noon. At what time is the jar half full? *
Albert Einstein probably did not say the process of compounding interest is the strongest force in our universe. But if you can find a place that will pay you a 6% annual rate of interest, whatever cash you have put into that savings “jar” will double in value after a dozen years. It’s well worth the wait.
If you are 50 and you plan to retire at 62, a 6% rate of return on what you put into the “jar” now will double in value again by then. If you can arrange not to draw out that money until you are 74, whatever was there at 62 will have doubled again.
Simply amazing. And profound.
Are you doing this?
Every now and then, a new twist can change things in a nice way, for a lifetime. When you tie your shoelaces, you probably start with an overhand knot, make a bow and secure it with another overhand knot while pulling out the second bow. The finished job is a granny knot with two bows, and you probably stop to re-tie your shoelaces on long walks.
If that happens, make the first knot an underhand knot and do everything else your usual way. The finished job should be a square knot with two bows, and it doesn’t work loose on long walks.
As with shoelaces, some of us never learned to incorporate a financial square knot into our money habits. We all know that tying up loose ends can prevent things from unraveling in the long run, but few of us think of seeking guidance from a skilled financial planner.
Make that a goal, if you haven’t already done so: it is never too late to learn a new and better twist.
The “tiring house” was a three-story structure built into the back of the Globe Theater in William Shakespeare’s time. Actors were able to enter the “tiring room” easily from the stage, to change costume and props for their next role as the performance went on.
Freshly “re-tired” actors entered the performance again as a different character entirely.
This is a far more intriguing prospect than many of us now arrange for ourselves in retirement; more often than not we tend to consider retirement as the time to stop working, rather than as a chance to play a new role in our lives…appropriately attired, at that.
Shakespeare’s actors followed a script and its cues into retirement; most of us are not so well prepared. We know we should be setting money aside for our retirement years, but surprisingly few of us consider what role we want to play, much less how we should dress for the part.
A clever financial planner can help clients achieve entertaining and well-rehearsed performances after retiring. After all, we have it on good authority that “All the world’s a stage…”
“And all the men and women merely players;
They have their exits and their entrances,
And one man in his time plays many parts…”
From William Shakespeare, As You Like It, Act II, scene VII
This is the Chinese character kuan. Kuan is all about what one does with money but it is also used to express other meanings—like “entertain,” “signature,” and “commit.” The “money” and “commit” connection within kuan grows more meaningful to financial advisors who have spent years working with their clients.
Making more money is not the only reason to seek help from a financial advisor: not losing money is equally important… but shaping a fulfilling life is most important. All three pursuits are intertwined; the best prospects for success start from a willingness to commit to a vision of a fulfilling lifestyle and to a plan for achieving it.
The financial planning process starts there, with the commitment, the vision and the plan. What one might do with money comes next.
Many of us believe we shall begin to live well when we are rich and retired; the real trick is to begin to live well now. Wealth can definitely enhance a chosen lifestyle but the choice and its plan come first.
“Commit,” then “money.” Kuan.
It was 8:32am on a sunny California winter morning and traffic was moving smoothly at 60-65 miles an hour on the 405 out of Los Angeles when I felt a hard jolt at the back of my car, accompanied by the sound of glass and plastic tinkling onto the freeway. The driver in the adjacent lane misjudged his lane change and hit me instead.
If you have your driver’s license, registration, and proof of insurance handy, you are well along in the process of working out the accident report with the on-scene officer.
Other nice-to-have items at such times include a cell phone and your insurance company claims department number, membership in an outfit that will respond to help you glue back the pieces, and a card listing contact names and numbers in case you prove incoherent…or worse.
Should this ever happen to you, it will happen fast. You won’t have time to think about all the steps in the process. So…check periodically, and be sure your glove compartment holds the up-to-date basic items you may need to recover well from an accidental connection with another driver.