I am writing this column 400 kilometres into a 3300 kilometre road trip by motorcycle. I’m on my way to Banff to meet an old rugby buddy, and then we are off to Regina to see the Saskatchewan Roughriders play the Winnipeg Blue Bombers in the Labour Day Classic.
Perhaps it’s because you have plenty of time to think when you are on the road, but I’ve used motorcycles as analogies for financial planning concepts on multiple occasions over the years.
One of my all-time favourite columns compares steering a motorcycle with navigating through financial decisions.
In order to turn a corner at speed on a motorcycle you need to counter-steer. Counter-steering is a pretty weird idea when a person is learning how to ride. It is the exact opposite of what you might expect needs to be done.
Think of riding a bicycle. If you want to turn right, you steer around a corner by turning the handlebars to the right. The right handlebar will come towards your body.
Riding a motorcycle requires the opposite actions. At speeds over 20 kilometers per hour centrifugal force takes over and the motorcycle acts like a big gyroscope. What this means is that in order to turn right you will actually push the right handlebar away from yourself. To turn left you must push the left handlebar away. Push right, go right. Push left, go left.
So riding a motorcycle requires action that is opposite from what initially seems natural. Similarly, being an investor in the stock market can require action that is opposite to a person’s initial natural reaction.
A person makes money by buying low and selling high. However, it is a natural reaction to do the opposite- to buy high and to sell low. Just like counter-steering a motorcycle, a true investor will do the opposite of the natural initial reaction.
Another one of my favourite columns compares planning a motorcycle trip with planning your finances. In 2003 I rode my bike to Huntsville, Ontario for an investment conference. 5 provinces, 4 time zones, and 8350 butt-numbing kilometers.
On this trip I wanted to hit as many Harley-Davidson dealerships and make as many Rotary meetings as I could along the way, and still make Huntsville, Ontario in time for the conference.
This meant that I first had to figure out where Huntsville was. Then I had to figure out how long it would take me to get there. Then I figured out where the Harley-Davidson shops and Rotary meeting were along the way. Knowing all of this stuff I had the information I needed to figure out when I had to leave and how many miles I would have to make each day to meet my objectives.
Of course things don’t always go exactly to plan, and I had to vary things slightly to take into account snowstorms, two oil leaks, and a late start the morning after former FSJ resident Jim Roszell did a fine job of showing me what Sudbury has for nightlife.
Also, plans can change over time. I was originally going to come home through Banff and Jasper, but at a random fuel stop in Somewhere, Saskatchewan I serendipitously discovered a 600-bike toy run just up the road in Medicine Hat.
Anyway, that’s a lot like how financial planning works. You figure out where you want to go, what you need to do to get there, and you make adjustments along the way.
Unfortunately, a lot of people do not spend much time planning their financial future. And you can imagine the results. If you are happy just riding along with no idea of where you are going then you don’t need a map or a timetable. But you are also probably not going to get to where you want to go on time.
The insight that occurred to me on this most recent trip was somewhat more metaphysical. I was thinking not so much about the mechanics of riding or the logistics of planning the trip, but something deeper.
I was thinking about why I was making this trip in the first place. Even further, why is it that we do what we do.
Stay with me on this, because superficially the answer to why I am on a bike heading to a football game might appear underwhelming. The simple answer is I am doing this because it’s what I want to be doing. I’m taking the scenic route through the Rocky Mountains on my favourite mode of transportation to connect with my dear friend so we can have a buddies weekend. I am exactly where I want to be right now.
But here is the deeper message. You see, the particulars of what I am doing are unimportant. The important part is that I am actually doing what I truly want to be doing.
And that’s really what financial planning is all about. It’s about making decisions with your money that are consistent with your objectives in life.
Here’s the thing. This particular trip isn’t something in isolation. It’s one event in a lifetime of events, and it’s possible because I have had the right combination of talent, opportunity, work ethic, luck and decision making that has positioned me to be able to do the things that I want to.
And that, my friends, is what financial planning really comes down to. Making the decisions that position you to be able to do the things that you want to in life.
How is your plan working out? Are you on track to do the things that you want to do? If not, what is it that you need in order to get on track?