Creating Financial Staying Power

One of the most difficult disciplines to build is financial staying power and yes, it is a discipline. Staying power is the ability to maintain a certain level of performance in the midst of the stress and pressure of life. Some call it stamina, others call it endurance, but there are subtle differences between these that can cause you to miss the mark when trying to achieve your financial goals.

Stamina refers to your ability to sustain effort, period. Stamina has little to do with negative or stressful situations. It is all about your effort and the ability to sustain your effort when there is little or no real reason to suspend such behaviors. For example, if one has the stamina to save money that means he or she can sustain the effort of saving as long as there are no impulses to spend. Someone who does not have financial stamina would spend the money instead of save it.

Endurance refers to the ability to bear up under an unpleasant or difficult process or situation. Whereas stamina is more about your ability to maintain a set behavior, endurance is more about your ability to maintain a set behavior in the face of pressure to do otherwise. For example, if one has the stamina to save, he or she can sustain the effort of saving as before. However, when there is a requirement to spend (not an impulse, but a requirement), he or she will have the endurance to continue to save and find the resources necessary to meet that requirement elsewhere.  

Staying power is different than stamina and endurance because it is not about your effort or the circumstances. It is about how you have positioned yourself so that you can maintain an activity or commitment despite an unpleasant or difficult situation. In 2007, my wife and I began developing financial strategies to change our financial picture. In 2008 I was laid off. Using this layoff as a springboard, we solidified our strategies and moved on.

Because of our staying power, I was able to accept employment (at a 33% reduction in pay), yet never miss one of our financial goals. In 2015 I experienced a second layoff. Since we spent the last seven years positioning ourselves to withstand financial headwinds, we just kept on executing our strategy without blinking an eye. After two months, I was hired by another company (this time at only an 8% reduction in pay), and again, we never interrupted our financial strategy because of the staying power we had developed.

Why? Because beyond stamina to keep focused on our strategies and beyond the endurance required to ride out the negative financial events, we were positioned to continue to take advantage of financial opportunities. Even now, I continue to position myself to take advantage of financial opportunities to continue building wealth. Stamina says “I can do this for a long time as long as things remain easy.” Endurance says “I can do this for a long time in spite of some things becoming difficult.” Staying power says “I can do this for a long time in spite of some things becoming difficult and regardless of how weary I get because my strategies continue to position me to achieve my ultimate goal.” 

Because of these experiences, I wrote Simple Wealth Building Strategies as a way of sharing our experiences and strategies to help others navigate the turbulent waters of the new economic oceans. 

Creating financial staying power is not easy, but it can be done, even on an average income. This list briefly highlights five ways you can build financial staying power.

Five ways to create financial staying power.

1 Expect the unexpected and be ready for it. In my book, Simple Wealth Building Strategies, I outline my recommendation to have a tier-three emergency fund. Most every financial planner believes in having an emergency fund of at least three to six months worth of expenses. However, in today’s economy, a traumatic financial event can last far beyond that. This is why I recommend a tier-three emergency fund equivalent to one year’s gross salary.

2 Protect your credit like it was your daughter. I am not trying to offend anyone here, but men will know exactly what I mean. Like it or not, fathers are far more protective over their daughters than they are over their sons. It is part of the fathers DNA. Just like a father would put up barriers to protect his daughter from unsuitable young men, you need to protect your credit from unscrupulous individuals. In chapter 4 of Simple Wealth Building Strategies I give you the best way to put up a hedge of protection around your credit so you are not vulnerable to the thieves that seek to separate you from your resources. It might surprise you, but the best way to do this is not a credit monitoring service.

3 Document, document, and document. Every major financial goal needs to be monitored. How else will you know you are making progress without a scorecard documenting the results? Chapter three of Simple Wealth Building Strategies provides an in depth lesson on tracking your progress. This aspect of financial staying power helps you know when a shift in strategy is advantageous. Without documentation, you are blindly shooting at a moving target. You might hit the target occasionally, but it would just be dumb luck and unsustainable in the long run.

4 Use momentum like bacteria. When scientists want to experiment with bacteria, they put it in a petri dish to encourage its growth. Well, building wealth needs to be cultivated in the same way. You need to place your money in the petri dish of the market and take advantage of compounding returns. However, you have to know that building momentum takes time. Once you have built a substantial amount of momentum, the impact of an unpleasant or difficult process or situation is reduced. Staying power increases as the impact of negative financial events is decreased. That is the purpose of my book. I provide you with eleven strategies that, when worked together, will produce staying power. Collectively, the strategies I discuss in Simple Wealth Building Strategies work together to build, not just wealth, but also financial staying power. In other words, they build momentum.

5 Don’t overthink the obvious. Keep this phrase in mind whenever you feel the urge to over-complicate your financial strategies. If the plain sense, makes sense, seek no other sense. So many people lose staying power because they believe that wealth building is a sophisticated or complicated process. It isn’t. There are ways to keep it simple. If you do not understand something, stay away from it. There are so many ways for the do-it-yourself investor to build wealth with a small amount of common knowledge. Don’t compare your strategies with those of others. That will cause you to overthink what you are doing. Stay committed to your strategy so long as it is meeting your goals and expectations.

When you recognize that something is unsustainable, be willing to back off. I once talked to a young man who had a goal to fund his 401k to the maximum allowed by IRS standards. His strategy was to commit a large portion of his income towards his 401k and use credit to provide for his needs. He rationalized that in the long run, it would be better for him. Great goal, poor strategy. Eventually he would have to pay off that debt but he wouldn’t be able to use the money in his 401k and he didn’t have any income left to meet his commitments. He would be light years ahead if he funded his 401k with any income above his obligations and necessities. Instead he was digging a hole from which it would take him longer to get out.

Financial staying power is 10 percent income and 90 percent common sense. Having the right strategy, based on your individual circumstances, will go a long way in allowing you to position yourself so that you can maintain an activity or commitment despite the fatigue that can set in because of an unpleasant or difficult process or situation. If you have a personal finance question that you would like to see answered in a future blog, send it to me by going to http://kenrupert.com and completing the contact form at the bottom of the page. Who knows, your question might help someone who is struggling with the same issue you are.