Consistently Good Is Better Than Occasionally Perfect

By John T. Chorne, CFP®​ | Tuesday, May 08, 2018

If we are facing the right direction, all we need to do is keep on walking. – Jack Goldstein

Recently, I was listening to a podcast on health.  In this episode, one of the podcasters made a statement that struck a chord with me, “It is better to be consistently good than occasionally perfect.”  The podcaster was talking about diet, suggesting that eating healthy foods 80-90% of the time was a far better approach than eating “clean” 100% of the time, because nearly all of us will fail to eat “perfectly” all the time and this failure often results in our giving up the effort of maintaining a healthy diet.  Whereas, if we eat healthy foods most of the time but allow for some leniency, we are far more likely to stick with this approach and increase the likelihood of reaching the goal of an overall healthy diet.

This concept of pursuing consistency rather than perfection can be applied to our finances as well!  If we can implement incremental changes to our finances toward the goals that matter most to us on a regular basis, we are much more likely to stick with these changes and increase the probability of reaching those goals as opposed to setting very lofty goals that require near perfection to obtain.  When we set a goal with unreasonably high expectations, we will usually find out we cannot meet these expectations and may abandon taking steps towards reaching that goal altogether!

As financial advisors, we see this quite often.  People come in and tell us about the generic “perfect” advice they’ve received or read somewhere to contribute the maximum into their 401k plan.  However, this generic advice can be more harmful than helpful!  In our experience one of two things often happens when someone hears this advice without examining it more closely given their unique circumstances:

1. They realize they cannot contribute the maximum to a 401k without living beyond their means, so they do nothing or possibly only contribute enough to get the maximum match (a good starting place, which I will address in a bit).
2. Or they try to contribute the maximum, start living beyond their means because of the reduced cash flow and begin to take on credit card debt.  Soon they realize they cannot continue to contribute the maximum to the 401k, so they drop it down to nothing or possibly to the amount where they receive the maximum match without ever increasing it in the future, even when they have the ability to do so.

The “perfect” contribution of the maximum allowed to a 401k ultimately failed for the person who never tried as well as for the person who tried but was unsuccessful.  A better approach for many would be to start with a lower contribution rate they can manage into their cash flow and then to increase that amount each time the person receives a raise.  This is often what I recommend to people when they begin their careers.  If they start at a contribution rate early in their career that gets the maximum employer match (good) and increase the contribution by 1-2% every time they receive a pay increase (consistency), there is a high probability that person is going to be in a great position for retirement at a reasonable age.  This approach helps maintain quality of life now by not reducing cash flow to the point where the standard of living is greatly reduced, while improving the quality of life potential in the future by systematically increasing contributions designated for retirement.  Although the impact of this approach is greatest if used early on in one’s career, it will benefit most people regardless of how many years they have until retirement.

Here are a few other ways we can be consistently good instead of trying to be “perfect” or waiting until we can be “perfect”:

• Work on building a reserve of 1-2 months even though the recommended amount might be 3-6 months.  Once you get to 2 months, then work toward 3-6 months. 
• Find ways to cut expenses from areas that add little to no value to you or your family’s lives by $50 per month rather than trying to slash $500 in a short period of time.  Then, a few months later, find ways to cut another $50 from other low priority areas.  
• Once you pay off an auto loan, use the monthly amount you were paying for the loan to contribute to a fund that will be used as a down payment on the next vehicle.  Continue this process each time you pay off a car loan and eventually you may be able to pay cash for your vehicles without any financing.

This idea can be applied to many other areas of finance such as paying down credit card debt, starting a college fund for children or grandchildren, or saving up for that dream trip.  It is the process of continually improving our finances in manageable ways that will ultimately lead to financial success far more often than the “New Year’s resolution” approach where we expect to make significant changes in a short period of time.  Instead of trying to do too much, too quickly, simply take the first small step or two in the right direction of your most important financial goals and then just keep on walking….

*All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy.   Opinions expressed by the owner of the attached content does not reflect an endorsement by the named broker dealer or its affiliates.