Thrive in '25! 1/10/25

Happy New Year NFC clients and friends!                    

       I love this time of year!  Durham Public School teachers had our first snow day of 2025 today!  And while the first snowflake did not fall until 5pm EST as forecasted, it was “Nine O’Clock Somewhere” (to bastardize Jimmy Buffet)--- so we played it safe.  Growing up in the Chicago suburbs, I always find it amusing to watch the state’s bureaucracies go to DEFCON 3 anytime a meteorologist uses the S-word.  To be fair, the citizenry does lose its collective mind despite the ever increasing number of northern transplants to the Research Triangle and North Cackalacky at large. Case in point, I had the misfortune of witnessing first hand the ever predictable tragedy of the commons play out at Costco yesterday as I helped a friend haul his newly purchased sectional (Kirkland?) couch from the warehouse.  Ahh the joy, privilege, and assumed social contract when owning a pickup truck.

But “What does all of this have to do with personal finance?” you might rightly ask. Well, unless you operate on the Mayan calendar, January is the perfect time of year for each of us to “assess, address, and audit”-- a core discipline for financial fitness and all NFC clients.  January specifically  is an excellent time to “Audit,” evaluating our successes in 2024 and opportunities going forward.  Much of this work is in our direct control. Some is not. 

        What we control: NFC clients have all established and automated their monthly giving, saving, and investing on their NFC “Formative Assessment” Google Sheet, illustrating their assets & liabilities, monthly cash flow, their current and projected net worth.  For those of you who started working with me prior to 2024: 1) consider reaching out for the updated, interactive version of this financial planning tool, and 2) be sure to audit your progress, as you create new tabs for 2025— copy, re-label, and continue with your updated inputs.  After doing so, acknowledge the progress you have made in your journey to FI (financial independence)!  I find this to be the most rewarding part of the financial planning/fitness journey!

       What we do not control: The markets. “Prediction is difficult, particularly when it involves the future, “ Mark Twain.  I have no idea what 2025 has in store for us, but I do know what the equity markets have provided over the past 100+ years— the greatest wealth building machine for disciplined, passive investors known to man. While we must guard against the well known cognitive heuristic/behavioral finance misstep of recency bias, the past nonetheless provides an encouraging prologue for investors.  Back to back years of 25% returns can certainly inflate our confidence along with our net worth, but it would be prudent to remember how we felt in 2022 when the sky was falling(?).  This is a roller coaster, not an escalator.  Speaking of metaphors, Visual Capitalist is a fascinating resource for those who prefer pictures, or pyramids, over words to tell this story. For the educators amongst us inundated with “data informed instruction” PDs, this simple visual I created for my Economics & Personal Finance students may be more your cup of tea.  Each shows the S&P 500 returns since 1874 and 1926, respectively, and my students each see it somewhat differently.  All tend to draw the same conclusion, however.  Will you?

      Either way, I hope you can appreciate and celebrate the success the markets have provided, understand the risk associated with short term expectations for returns, and are motivated in 2025 to harness the power of compounding over the long term. Eventually, your investments will be earning more than you do with your back, your brains, and your hands. Really!  #mathisreal

       The best part of financial fitness New Year’s resolutions is that they can be automated!  Consider increasing your monthly contributions this year. Play with my favorite compound interest calculator on your next snow day to see the impact even incremental changes can have over time.  And if one of you can figure out a way to automate my umpteenth New Year’s resolution to exercise more and eat healthier, please let me know.

Yours in Financial Fitness,

David

Norman Financial Coaching