June 27, 2022

“Give me a lever long enough and a fulcrum on which to place it, and I will move the world.” –Archimedes

On my sixteenth birthday, my grandmother kindly gifted me her old Saturn. As a teenager who worked for gas money and drove most Saturdays around the state to compete in wrestling tournaments, gas was a prized commodity. I would squeak over hills without hitting the gas pedal, go exactly the speed limit (except when I rocketed downhill), drive with the windows rolled up, keep almost nothing in the car, and generally try to optimize how far my tank would take me.

Today, it seems a little overkill. Much time and energy was lost laboring over this. Had I occasionally spent an extra hour or two working, it would have made up the difference and then some. The memory still makes me laugh–especially in light of today’s elevated gas prices that are nearly double the prices then.

It was a classic case of over-pulling a lever.

I often talk to my clients about pulling levers. In the financial world, there are all kinds of tweaks we can make to accomplish the same thing. Most of the time we are searching for choices that lead to having enough money for someone’s life. Sometimes there is a shortfall, and it becomes particularly important to pull the right levers in the right order in the right amounts.

I like to imagine someone’s financial plan as rolling through one of those elaborate domino-effect marble runs. The marble hits little things that trigger all these different changes in trajectory and momentum to keep the marble on the way to its ultimate destination. Like a physics problem for a lifetime, the goal is to keep the financial marble from ever completely stopping.

A simple but powerful example: someone wants to stop working. There are hundreds of possible levers we can pull, but there are a few main ones we need to get right: what age do they stop working? How much should they spend afterwards? How should they save now? How should they be invested? The question is less about whether these levers should be pulled and more about how much they should be pulled. One more year working? Five? Forever?

Our clients tend to be financially responsible people. They usually come to us because something is too complicated and high stakes to risk pulling the wrong levers.

Of course, we have all run into people who are fixated on certain levers. They try to squeeze every last bit of optimization possible out of that one decision, sometimes to the detriment of the overall goal. They might be the stubborn guy driving across town to save a few dollars at the cheapest gas station. Or the bargain hunter who buys food in bulk “for just a few more dollars” and then only eats half the food before throwing the rest out. Or the penny-pinching friend who jams his entire bodyweight on the toothpaste tube to extract that last teaspoon. It is easy to be distracted by the little decisions or optimize unimportant minutiae and miss out on the bigger picture.

Put another way, Rosamund and Benjamin Zander wrote “I will have to remember ‘I am here today to cross the swamp, not to fight all the alligators.’”

I have seen people agonize over whether to pay off their mortgage more quickly or add to investments. For some, it made a remarkable difference–for others it really did not matter.

People are generally good at identifying if something is helpful or harmful. The tricky part is getting specific and identifying what is the most helpful. Am I pulling the right lever, or am I beating my head against the wall?

Credit cards are another lever we see pulled the wrong way. Unless you are a manufactured spending extraordinaire (there are people who actually make a questionable living from the points and rewards and loopholes in credit cards), credit card points are not a huge deal. Far too many people obsess about the 1-2% rewards they earn when the real battle is actually the balance they carry with a 20%+ interest rate.

Perhaps the most abused lever is the one people do not realize they are even pulling–their time. How much is your time worth? If you are doing something you dislike, is it worth it to pay and delegate the chore to someone else to reclaim your time? If you make $70/hour, love your job, and hate shopping, should you be the one grabbing groceries? Or should you pay someone to do it for $20/hour and work an extra half hour? Better yet, should you order pickup from Target or Albertsons for free and spend an extra half hour with your family? The world is full of people who misuse their time.

With a Pareto principle style of deliberate prioritization, we can better place our energies and attention. If we can get the biggest decisions right, we can often avoid worrying about the little things.


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