Consistency is Key When Fighting the Dad Bod and Growing Your Investments
On September 1st, my beautiful wife and I welcomed our new son into the world. His arrival has brought our family much joy during this season. Like all newborns, he has also brought sleepless nights, an abundance of comfort food, and disruption to our schedules and disciplines. As a result, I am here to tell you from personal experience the “dad bod” is real (find out if you have a dad bod here).
As I begin the journey to get back in shape, exercise and clean eating seem more difficult than ever before. Had I maintained my regimented sleep, diet, and exercise schedule throughout the entire pregnancy, returning to my baseline wouldn’t be as challenging. In physics, we call this inertia. In finance, we call this the compounding effect.
Like most things in life, there is a compounding effect on our actions.
Consistency in showing up to work → proficiency at your job.
Consistency in showing up in the lives of loved ones → richer relationships.
Consistency with a sustainable diet and exercise plan → greater physical health.
Consistency in following a prudent investment strategy → increased net worth.
Consistency is integral to the compounding effect
The inverse is also true. Disruption is a detriment to the compounding effect, a truth for our fitness as well as our investment accounts. To quote Charlie Munger, Warren Buffet's partner at Berkshire Hathaway —“The first rule of compounding is to never interrupt it unnecessarily”.
I would argue that someone’s consistency often has a greater impact than their effort and resources. Take the following example of two investors:
Investor A - saves $2K/year from age 26-65.
Investor B - saves $2K/year from age 19-26 and stops there.
Both achieve a 10% annual return.*
At age 65, who ends up with more money?
Investor A: $883,185
Investor B: $941,054
By saving and investing $2,000 at the beginning of each year from age 26 to 65 (39 total years), Investor A can expect to have a final balance of $883,185. Investor B only saves for 8 years but starts to save earlier in life than Investor A. Investor B benefits by taking advantage of 46 years of compounding growth, finishing with a balance of $941,054.
What Investor B lacks in consistency of contributions, they make up for in consistency of not interrupting the compounding effect on their investment account. I know you are probably curious, what would happen if Investor B did not stop contributing at age 26? Investor B’s account balance would be $1,902,309. Once again consistency wins out.
Start now and stick with it
There are no shortcuts to saving for retirement and fighting the "dad bod". Starting can be difficult and sometimes painfully slow, however, the long-term results can be powerful.
The easiest advice to give is “never get off track.” However, like your sleep schedule with a newborn, there are some things you cannot control. It is important to know how to reassess and get back to work.
Building anything valuable and defensible takes time, effort, and energy. Build a plan today.
If you want to compare notes on raising a newborn, see baby photos, or discuss the impact of consistency when building a prudent financial plan, please reach out. We are here for you.
*This is for illustrative and discussion purposes only. Investment results will vary.