Find Your Elusive Balance

August 24, 2023

Elite athletes know that superior balance is essential for strong performance. The role of balance is obvious in the gymnastic grace of Simone Biles on the balance beam. It is equally important, but perhaps less obvious, in the dominating plays of tennis great Rafael Nadal. But you might be surprised to learn that balance is also critical for the subdued and quirky sport of curling—a sport described as 1/3 shuffleboard, 1/3 bowling, and 1/3 janitorial services.

Balance is so important in sports that trainers often recommend exercises focused on reestablishing physical and mental balance to athletes struggling with their performance. As the athlete’s balance improves, their movement becomes more fluid, and they return to winning form.

Balance is equally essential in the world of financial planning. Rather than physical balance, I refer to balancing current desires against long-term needs, balancing fear of failure with the need to take risks, and balancing liabilities relative to assets. A good financial plan will help you strike the right balance between these different factors; a good financial planner will help you keep that balance over time.

We only get one shot at this life, so learning how to balance our immediate desires with long-term needs is crucial. Psychologists refer to this today-versus-tomorrow decision-making process as “intertemporal choice.” According to psychologists, many people prefer small, frequent payouts today over larger, less-frequent payouts tomorrow. This explains why some people fritter away their money in the moment, while failing to save for weightier obligations, like retirement, in the future. Most of us have dealt with people who act like this—though surely none of us have ever done this ourselves.

On the other extreme, some are so focused on saving for tomorrow that they stop living in the moment. A family I worked with several years ago struggled with this. The husband enjoyed a well-paying technology job in San Jose. To save money, he and his wife bought a foreclosed house in Morgan Hill. The house had no functioning kitchen, as the previous owner had cut off his remodeling when it was clear he would lose the house. As this family moved into their new home, the husband assured his wife that he would fix the kitchen quickly. Unfortunately, that did not happen.

Months went by, then years, and the gaping hole remained where their kitchen was supposed to be. Apparently, the husband enjoyed having money in their investment accounts more than he wanted a functional kitchen, focusing instead on securing their retirement and preparing for possible future medical bills. He did not appreciate how hard the unfinished kitchen was on the rest of the family—especially his wife. The father’s lack of balance in his intertemporal decision-making caused tremendous stress in his family, including resentment from his wife and alienation from his children. A financial plan could have helped this father understand how home improvement would enhance their financial future instead of detracting from it. At the very least, it would have given them means to discuss these concerns in an open way. It could have been a real game-changer.

Sometimes, new clients tell me they don’t want any risk in their portfolio. When I ask what they mean, they say they don’t want their account value to go down. I understand that feeling completely. I don’t want my account values to drop, either. However, I also understand that all asset values fluctuate; stock market fluctuations are simply more visible than most.

Unfortunately, it’s impossible to protect against all risks. We all experience stock market volatility. However, if your portfolio is designed correctly, you can endure market fluctuations without fearing the negative effects of down markets. Finding appropriate balance in your portfolio between stocks, bonds and cash—i.e., the appropriate asset allocation—is a primary objective of prudent financial planning.

Another area that requires balance is deciding how much debt you should have. Some people resist any and all debt and usually I agree with them. Being in debt means being obligated to someone else. Too much debt means being in bondage. A well-written financial plan can help you know how much debt is too much for you. If you have too much debt—a very common situation in today’s world—a good financial planner can help you reclaim your freedom.


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Steven C. Merrell  MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., an independent wealth management firm in Monterey.   He welcomes questions you may have concerning investments, taxes, retirement, or estate planning.  Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to smerrell@montereypw.com.