Arrive alive - Don’t take more risk than you need
Speeding drivers
My daily commute includes a 1.5-mile leg of Interstate 80 along the north side of Lincoln. On this stretch of road, the speed limit is 65 MPH, and that is where I set my cruise control. Could I drive faster to reach my destination sooner? Yes. But the most important thing is that I arrive safely.
Every day, I see cars who rocket past me, leaving me in their dust – let’s call this type of driver “Tim”. Tim, I imagine, believes he is saving precious minutes every single day by hammering the gas and passing everyone, but the truth is not so good for Tim.
Even if Tim were traveling 80 mph for the entire stretch of highway, he would only reach the end of the road 15 seconds sooner than I do. (And in this case, the “end of the road” is an aggressively curved off ramp where traffic slows and tends to compress, reducing the distance between us to a negligible amount.)
So, Tim gains up to 15 seconds a day, but at what cost?
The dangers of speeding
Everyone knows how unsafe it is to drive fast. NHTSA says driving fast can increase the potential for losing control of your vehicle and can reduce the effectiveness of occupant protection features such as seat belts or air bags, among other risks. Not to mention, driving fast is stressful, as at higher speeds you have less time to react to hazards.
Every day I see Tim swerving into tight spaces and forcing other drivers to slam their brakes. He drives so close to the cars in front of him that I worry every day about a chain reaction pileup.
By driving the speed limit and maintaining a safe following distance, I am increasing my chance of survival. And, at the cost of up to 15 seconds a day, I am greatly decreasing the stress of driving.
The dangers of a reckless investment plan
These lessons can be applied to your personal finances as well. The two-second gap between you and the car in front is your emergency fund of cash, giving you a buffer from danger in case your situation changes.
Driving fast is like investing in high-risk, high-reward assets; you will probably get a higher rate of return, but you are more likely to crash and burn.
Finally, driving slowly gives you a chance to enjoy the scenery - the airplanes in descent while approaching the nearby airport or the migrating gulls flocking over the lake. Similarly, a balanced (and not overly-risky) investment plan allows you to enjoy your life without constant worrying about huge losses.
As you consider your own investment strategy, I encourage you to question whether you are taking the proper precautions to ensure you arrive alive. You only live once.
About the Author
Joseph Fowler, CFP® is a financial planner and co-owner of 402 Financial in Lincoln, NE.
402 Financial helps people who are in or nearing retirement spend their money. Joe always acts as a fiduciary and never takes commissions on product sales.
If you are considering retirement, click this link to see if you have enough.
