I enjoy working out and lifting weights is my workout of choice. Over the years I’ve read a lot of articles and research about lifting weights and the best ways to go about building muscle, burning, fat, and a lot of other topics in the health and nutrition sphere. I was listening to a podcast the other day about bodybuilding and I was struck by the speaker’s comment that the most important foundational principles of building an impressive physique hadn’t really changed in 50 years. Sure, there’s lots of new research since then and all kinds of different programs and machines and fads, but the core of a good program is essentially unchanged. As I was listening to his rationale I was struck by the similarities with personal finance that I wanted to share here.
The Basics are the Basics
The main building blocks of building a strong, muscular, and relatively lean body are timeless. It boils down to a solid exercise program and proper rest and nutrition. A weight lifting program that focuses on heavy compound exercises (such as squat/deadlift/press/bench) that gradually increases its weight/reps over time remains the most effective way for most people to get strong and fit. Diet should focus on quality foods with a slight caloric surplus for muscle gain or caloric deficit for fat loss. Combine a reasonable program with a good diet and sufficient sleep and you’re going to see results.
Those basic concepts might be relatively simple but that doesn’t mean they’re easy to execute. Sticking to quality foods in the right quantities is a challenge. Being consistent and sticking to a workout program is hard for many people. Beyond those barriers most of what people see in ads and on TV aren’t endorsing those basic fundamentals. It might be the most effective way to get stronger or leaner but talking about timeless fundamentals isn’t sexy. It doesn’t sell. Instead, so-called experts are pitching the latest greatest exercise program, trend, piece of equipment, etc.
It cracks me up seeing the fitness models selling the latest workout DVDs. They didn’t build their physiques doing P90x or beachbody DVD’s. They did it in the gym lifting progressively heavier weights… They also did it in the kitchen eating lean meats and vegetables.
Beyond trying to sell people on the latest fads, the fitness industry doesn’t do newcomers any service when they spend so much of their time splitting hairs over advanced nuances that don’t have much impact on most newcomers. There’s endless discussion over sets/reps, rest periods, how many days to workout, etc. And that doesn’t even get into ‘the best’ way to workout and debates between bodybuilding crossfit, high intensity interval training, and others.
Diets can be even more confusing. I think most people ‘know’ what kinds of foods they ‘should’ eat (lean meats, fruits, vegetables, etc.). But it seems like everything you read is debating the merits of keto or anti inflammatory diets or this or that. There’s a lot less attention paid to just eating quality foods and tracking the amounts you’re eating and your results.
Ultimately someone who finds a program emphasizing progressive overload of the major lifts and can stick to it over months while eating a quality diet is going to succeed. They just need to block out the other noise and make sure they’re executing those fundamentals.
The Basics of Personal Finance
Just like in personal fitness, I think the fundamentals of personal finance are basic principles that have proven timeless. These aren’t super complicated ideas, but just because they’re simple doesn’t mean they are easy to implement in real life!
So what are the basic fundamentals of personal finance?
- Spend less than you earn
- Start investing early
- Avoid credit card debt
- Build an emergency fund
- Develop an investment plan/strategy and stick to it
- Try to increase your earning potential over time
If you can nail those 6 fundamentals I think you’ll be ahead of the vast majority of people. There are plenty of other things that can help you achieve your financial goals but I think they’re all secondary to the basics above (automating your finances, maximizing retirement matches from employers, increasing your saving rate over time, budgeting, ensuring you’re properly insured, monitoring your credit, avoiding lifestyle inflation, etc.).
Just like in the fitness industry you’ll find a lot of noise and distraction in the finance industry. You could fill an ocean with different books that have been written about the best way to invest. There are different kinds of retirement accounts and differing suggestions of the best way to optimize your retirement savings.There are different methods/strategies to paying down debt. There are sales people pushing inappropriate products (i.e. high fee whole life insurance). But again if you get the fundamentals right you will be in a great position. You can optimize the details later and can even afford a few mistakes in other areas.
Time and Consistency are the keys to both fitness and personal finance
While you might feel more energetic and see some nice mental benefits and an energy boost when you start working out and eating well, seeing real results in the mirror takes time. However, if you stay consistent in your training and diet the progress you’ll see in the ensuing months can be significant (and amazing for those who stick to it for years!).
Similarly you might see a little boost in the short term when you implement a financial plan (i.e. no longer paying high interest on a credit card if you’re able to pay it off). But once you’ve saved consistently and allowed the power of compound interest to work its magic, the results can be life changing.
Scott Caufield, CFA, CPA