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Our Decisions Tend To Compound – For Better or For Worse

Iulian Ursu

Some people just have a habit of having good habits.

I’ve known many men (and even more women) that fit that description. They just seem to have a habit of having good habits. And good stuff follows.

People like this make the most of their lives and are content with the results.

Financially speaking, they know how much is coming in the front door and that if the same (or more!) is going out the back door, there’s going to be a problem. Knowing this, they’re usually pretty good savers. I’m not surprised to see them save 15% to 20% of their income.

As a result of such habits, these folk weather storms better and take advantage of opportunities that come their way. In fact, to the onlooker, these people can tend to look “lucky.” I say that’s the wrong word. They aren’t lucky, they’re thrifty. And thrift tends to attract opportunities.

Decisions (good or bad) tend to compound over our lifetimes; choices that we make become larger and more significant than we’d ever imagined. Time tends to expand the results of the choices we make, so that the oak trees of our consequences are unrecognizable as the seeds of our initial choices.

This can work out for your benefit. Or it can haunt you.

Charlie and Theresa (not their real names of course) live on his $75,000 per year income, are debt free and were able to save up enough money to pay for an adoption. By any measure they are content, even very happy, with their lives.

Joey and Kathryn both work (a lot) and bring in over $200,000 of household income. They live in a very expensive house and drive import luxury cars. They didn’t build the house of their dreams and buy those lovely cars to be unhappy. But they are. Money is tight, they feel pressure to keep up socially with their friends and beyond a modest contribution to his 401(k) plan, they have almost no savings. They love each other, but they feel constant financial pressure from a lifestyle prison built with their own choices.

For Charlie and Theresa, and for Joey and Kathryn, the clock is ticking. And the consequences of their decisions are not static but growing. Compounding, actually.

Odds are good that Charlie and Theresa will see the day they can declare themselves financially independent. Charlie will be able to go to work because he wants to, not because he has to. Most of this will have been made possible because years earlier they made a choice to spend less than they earned.

For Joey and Kathryn, it’s hard to imagine a financially happy ending to their story. Financial pressures may eventually drive their marriage apart. As they age, professional and financial stresses may impact their health. The death of either breadwinner could have devastating consequences to the lifestyle of the survivor. And the numbers would indicate they will both work longer (and harder) than they wish they had to.

Most of us have people in our lives that have provided at least in some measure a worthy (and thrifty!) example to follow. They’re more like Charlies and Theresa and less like Joey and Kathryn.

And if you’ll begin following their example, perhaps your story will have a happy ending too.

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.
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