Dollars, Rocks, Pebbles, and Sand

I believe it was Steven Covey who I first learned this from. 

The concept is this: if you’re trying to fit a pile of rocks, pebbles, and sand into a mason jar, you first have to start with the rocks. Afterwards, pour in the pebbles and then the sand, as they will find their way through the remaining spaces. However, if you reverse the order and start with the sand and pebbles, the rocks won’t fit. 

This concept is mostly tied to time management and setting priorities in life, but I like to view finances through a similar lens.

We all have the big Rocks. These are our financial goals: generosity, retirement, kids savings goals, house purchase down payments, debt elimination, etc. And we all have Pebbles and Sand: eating out, clothes, some utilities, etc.

When we create financial plans - we need to start with the Rocks. Identify just how big they are (which will vary for each of us) and put them into our jar (budget/cash-flow plan) first. If we don’t, we run the chances that they won’t fit in after we fill up the jar with Pebbles and Sand first. 

Personally, I nerd out over the Sand with our personal budget. I track every penny. But not everyone does - and that’s fine. So what I encourage folks to do at the minimum is identify and measure the Rocks, and at the least budget for them each month. Then allow the Pebbles and Sand to trickle into their own places. 
Interesting Resources 

1. A Wealth of Common Sense - Competing Takes 
“Making extreme claims has become the default posture for many these days because we confuse outrage with truth in the social media era. Most things are a shade of gray, not black or white… This same idea applies to the advice-giving business. Rules of thumb, pithy one-liners, inspirational quotes and phrases that rhyme can tell a good story but that story is often incomplete because there are few iron-clad rules in life or business.”

A thousand times Amen to this. Ben Carlson uses the recent college admissions scandal as an example to show how things (and responses) aren’t always black and white, maybe especially in the investing world. 

2. Dimensional Funds Perspectives - Getting to the Point of a Point 
I long for the day when the media will stop measuring stock market daily movements in points. A point just isn’t what it used to be, because the Dow Jones and/or S&P 500 indices have grown so much in their total value over time. Great article here showing exactly why that is the case. Example: a 500 point decline in the Dow Jones in January 1985 would have represented approximately a 40% decline. Ouch. The most recent 500 point decline, in December of 2018, represented a 2% loss. Headlines about 500 point price movements get a lot of attention, but they arguably shouldn't. 
I've got an off-the-wall challenge for you today. Call, text, email or write a note to someone you know that you're proud of, and tell them why. You might be surprised at the result.

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