Foolish consistency is the hobgoblin of little minds.
– Ralph Waldo Emerson, Self-Reliance
When beginning any sort of ambitious self-improvement project – be it paying down credit card debt, investing, losing weight or reading the 100 greatest books of all time – you should have a clear idea of when to cut your losses and try a different path.
I have seen many people attempt to avoid quitting at all costs. You know the type – your friend who insists on watching the movie to the end. Your cousin who will eat the same brand of pizza that gave him heartburn last time. People who furiously pay down debt by directing every last penny to paying it down while eating Ramen noodles. Being someone who can stick to a goal and achieve it is admirable. Being someone who sticks to a goal that has ceased to benefit from that goal is foolish.
The best example in terms of personal finance can usually be found in investing. Many investors will establish a pattern of investing that suits them, and then defend that pattern to others (and to themselves) even if it doesn’t work. A good example is index fund investing. The conventional wisdom is that it cannot fail. The truth is that it’s the investing pattern with the best possible return for a non-knowledgeable investor, but even then it’s subject to a number of caveats. If you happened to be withdrawing your money now, the last eight years would have been essentially 0% returns on those funds. A dividend-paying stock, or better yet an investment in a single company that had a great run over that time (think Google, for example) would have been far better.
A foolish consistency – an attempt to hew to a failed philosophy – is going to be the road to failure for most of us. If what you’re doing isn’t working, it’s unlikely that it’s going to improve. I know that persistence is considered to be a virtue, but in investing or life it isn’t. You have to admit that what you’re doing isn’t working sometimes, and try to find an alternative. In investing, this is called cutting your losses. If you invest 10,000 and lose 2000, you need a 25% gain to recoup your 20% loss. Think about that.
So think bigger. Think about moving past goals. Think about ambition and think about money like something new, every day. I’m constantly reevaluating my goals and my ideas about how to generate (and grow) my money, but not as much as I should. If you get to a point where you’re comfortable, you’re in bad shape. Life requires growth, in one form or another. Think bigger.