This is part one of a two part series. Read part twp: "How to Invest Your Time and Energy for Maximum Success."
Are you looking for more balance in your life? Of course you are. Pick up your favorite popular magazine or turn on the TV and you'll learn how to create a balanced life in "Five Easy Steps." Before you sign up for the workshop or purchase the new book that promises to reveal the secrets of a balanced life, I'd like to let you in on the one dirty little secret they'll never reveal ... a balanced life is for losers.
One of the main tenets of investing is asset allocation. As an investment advisor, I divvy up my clients' assets into different types of investments -- spreading the risk, and as we'll see, the return, among different asset classes. The result is a portfolio of many different kinds of investments categorized in colorful pie charts by sophisticated sounding asset classes, such as "emerging market local currency bonds." It's quite impressive looking. But as I tell my clients, asset allocation is for losers.
If I could predict the future and know with certainty which asset class would perform the best, I would reduce the once-multicolored pie chart to a single color representing the one investment that would perform the best. But short of a crystal ball or insider trading, nobody knows which investment will generate the very best return. So, we allocate assets across different categories in order to limit the chance of picking the wrong investment. It's a strategy to limit risk but also limits returns.
What does this have to do with you creating a richer life? Whether you're conscious of it or not, you do the same thing in your life. Instead of spreading money across different investments, you spread your time and energy among the different areas of your life. A balanced life is one where you spread your resources evenly; however, in order to get the best possible "return," you need to make a bigger bet in at least one area of your life.
So what does this look like in the real world? Consider the world-renowned concert pianist who was approached by a young admirer after an incredible performance. "I would give my life to play like you," gushed the boy. "I have," declared the pianist. If you want to achieve superstar success, it takes much more than hard work -- it takes sacrifice. An investment over here means there is less to invest over there.
But we've all seen what this can look like when taken to the extreme -- the workaholic that sacrifices health, family and social relationships to a company to achieve financial success -- but this is not what I'm advocating. There is a middle ground between the marginality of balancing your time across all of the areas of your life and the obsessional fixation of investing everything in one area.
Your homework over the next week is to gauge your current level of happiness in the areas of your life including health, social, family, career, financial and personal goals by assigning each area a number between 1 and 100. A score of one means you are miserable in this area, and a score of 100 means you couldn't be happier. Next week, you'll take your scores and learn how to best invest your resources to avoid the mediocrity of a balanced life.
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