Cruise Ships, Retirement Accounts... and your GPA?

What do cruise ships, retirement accounts, and your GPA have in common?

I promise it’s not what you think.

As the years pass and we get closer to retirement, we readjust our investment portfolio based on changing spending habits, risk tolerance, and overall financial goals. Some of us do this portfolio adjustment ourselves and some rely on a mutual fund, advisor, or financial institution to do it on our behalf. Either way, this readjustment is known as “rebalancing” and it’s an integral component of our long-term investment success.

Rebalancing is the act of getting your portfolio back on track to best achieve your original goal, be it comfortable retirement, passive income, or a nest-egg for your family's future.

Like a cruise ship, our investment portfolio will naturally veer off course with the tides of the unpredictable ocean that is the global economy. If left unattended, our portfolio can deviate and become overburdened with an asset mix that’s ill suited for our financial goals. Much like the cruise ship captain, we have to intervene every once in a while to maintain trajectory and ensure our portfolio isn’t stranded in open water (or worse, starts to sink). Many retirement investments are passive and autonomous, but that’s not an excuse to ignore them and remain negligent to the necessity of rebalancing.

So how does your GPA fit into all of this? You’re probably thinking about that exam you failed in high school or the lecture you skipped in college (maybe that's just me) - but that's not what I'm referring to.

A GPA that’s far more critical to your future success than your grade point average is your Goal, Plan, and Action.

Writing down 1-year and 5-year goals is one of the simplest yet most powerful steps you can take to ensure your success in any domain.

Start with your 5-year goal: What do you want to accomplish? Where do you want to be in life? What skill do you hope to master? From there, identify landmark goals that you can achieve in the first years leading up to your 5-year goal.

For example, if your 5-year goal is to be fluent in Italian, your 1-year goal could be to finish one book per month on Italian. Your plan is to build each year on your overarching 5-year goal. For each 1-year goal, break the years into four quarters and identify smaller, bite-sized quarterly goals. In the above example, your quarterly actions for the first year could be to study Italian for 1 hour each week, turn on Italian subtitles on your TV, and switch your phone’s language to Italian. These actions play into your plan which all drive toward your long-term goal.

Now, don't skip this step: the key is to write your GPA down and keep it nearby so you can motivate/remind yourself and rebalance as necessary. Sometimes life gets in the way and you need to readjust (i.e., rebalance) your goals - just like your investment portfolio. Maybe you realize you can’t read 12 books on Italian in your first year, but you can listen to educational podcasts in the car instead.

Rather than giving up entirely because you can't meet your original expectations, rebalance your GPA and write down your new action of listening to podcasts. Your course has slightly changed, but you’re still riding the tide to get to your destination of learning a new language. Your actions are also quantifiable, so it’s easy to know if you’re on track.

Grab that sticky note sitting by your desk or tear off a sheet of paper and start right now – it only takes 5 minutes to change the course of the rest of your life (or at the very least the next 5 years).