I’ll be the first to admit that building wealth is hard, boring and tedious. It requires grit, discipline and focus. Much like running a marathon
… or a half marathon.
I ran a half marathon at the end of September. Here are the similarities between that and wealth building.
Monitoring Progress: I had my phone and watch with me during the race, so I knew which mile I was on. This helped me pace myself and monitor how much energy I had left. In the same way, I spend an hour or two every month measuring our assets, liabilities, income and expenses to see where we stand compared to prior year, prior month and annual goals. We have debt pay-off goals, operating margin goals, etc.
This has become a lot easier with tools like Quicken and Mint, but I would try to avoid too much automation. See my other blog post about the dangers of too much reliance on these financial tools.
Setting goals: My goal was to run it under 2 hours which required me to run a sub 9 minute mile. I finished at 1h57m and a 8:45 minute pace. After the race, I could see my splits showing that I ran some miles at an 8 minute pace and others towards the end at a 10 minute pace (I was cramping pretty bad at the end).
Similarly, setting goals is part of building wealth. They can be super detailed or general in nature, but having them is the goal (pun slightly intended). These can be set on any of the four financial statements, Income, Expenses, Assets or Liabilities. And having longer term goals helps smooth out the highs and lows.
Similar to my race where I ran miles at different speeds, some periods might see a huge increase in your wealth, while others are more “lean”. But as long as you have a goal and plan to get there, you can hopefully see progress over the long run.
Do the Homework: I could have researched my race more, but did enough to know the basics. The length, elevation gains, the fact that I had to wade through a river 3 times, etc.
To build wealth, you have to know what you’re aiming for. So figuring out your retirement number is a good place to start. You might not hit it or you might blow past it, but having a goal has benefits in itself. Also, becoming educated on investments and basic financial principles such as taxes, leverage etc will help. My goal is to have at least 20 times our projected annual expense amount.
Mental discipline/Grit: At about mile 2 my feet started getting blisters. I probably picked the wrong socks or should have trained on trails more, but it meant that I had to run 12 miles on what felt like spikes going into the arches of my feet. There might be something really sick with me, but there was a part of me that relished the mental challenge of having to ignore the pain.
In the same way, we live with a lot of daily discomforts that we could avoid if we bought a new house, hired a house cleaner, hired a lawn maintenance company, etc. But my wife and I have built up a culture of toughness. And when one of us gets pissed off at the discomfort of it, we encourage each other.
Set some rules: My one rule in the race was that I couldn’t stop running. There were folks who took breaks at the hydration stations or walked up the hills, but they always had to run faster to catch back up.
Similarly, a budget or purchase criteria are our “rules” for wealth building. Setting those rules is easy, but at some point we struggle to stick with them. But that is where the mental toughness and grit come in.