Short-Term Pain for Long Term Gain?

We often frame our vision of the world using cultural values.  In the United States, we value independence, equality and hard work.  These values are intertwined, but for of our entitled blog, hard work is what we are going to explore.

Hard work – which as a value is closely linked with our notion of work ethic – is a social contract of sorts.  To those who put the hard work in, good things are bound to happen.  We believe in this concept as Americans.  Sure, there are gratuitous examples of people succeeding without working hard be it through nepotism, good timing, cheating, or plain old good luck. However, by and large, hard work is something that we embrace and employ to produce positive outcomes.  And most often, it is not without its sacrifices.  Hard work can be time consuming, and it often involves pain.  The question at hand is whether short-term pain can turn into long term gain?

Tariffs

In case you have been sleeping for the past few months, tariffs are the hot topic in politics, economics and finance of late. The Trump administration believes that tariffs are a way to settle a distorted and unfair global trade system and raise funds for the federal government at the same time (by collecting tariffs which are akin to a tax).  Will it work?  Maybe yes, maybe no.  The argument in favor of tariffs is predicated upon the notion of enduring some short-term pain to receive long term gain.  The hope is that bygone manufacturing will make a comeback in the United States because of a leveled playing field. We think everyone understands that this type of reversion away from a global free trade system is going to create some (more) pain before it produces any gain.  Time will tell if it works.  Determining if it is a winning or losing strategy will likely take years, if not decades, before we will fully know all the implications.  Our advice?  Stay the course.  Consult your financial plans.  Make sure you are fortified for today and tomorrow.  Do not let the headlines get inside your day-to-day mindset.   Afterall, it’s better to put your focus on things you control vs. things you do not control!

Savings, Spending, & Investing

Does the concept of hard work and short-term pain for long term gain work in finance?  This is a space unlike tariffs.  There is much less fog here.  Deferring spending and increasing savings that you in turn invest wisely is a prime example of how the discipline of hard work pays dividends.  Does this mean that short-term pain produces long term gain?  Yes, but it comes with a caveat.  If you save early and often, you can produce some of the best results in the long run.   JPMorgan illustrates this with in the chart below.  

Of course, not all is lost if you do not save and invest early in life.  We work with many clients who are late bloomers financially speaking. It’s almost never too late to put the hard work in now to produce the results you desire later in life. Like we said at the beginning, we believe in the value of hard work.