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, learning a new skill, improving your health 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 dish that gave him heartburn last time. People who furiously pay down debt by directing every last penny to their debts while eating Ramen noodles. Being someone who can stick to a goal and achieve it is admirable. But there are times when it’s not admirable. Being someone who sticks to a goal that no longer has a clear benefit 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 mutual fund investing (or even investing in stocks). The conventional wisdom is that “market gurus” exist. Bill Miller’s Legg Mason Value Trust beat the market for 15 years and looked like a gold mine (and made Bill Miller a rich man). Since 2005, though, that fund has lost 60% of its value. The truth is that index fund investing is the investing pattern with the best possible return for a non-knowledgeable investor. But far too many people continue to cling to the idea that the market can be “beaten.” It can’t, unless you’ve got the time to focus on studying the market 24/7.
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.