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Shakespeare on Finance 3

For centuries, people have studied Shakespeare for his wit and his wisdom.  Over the past few months, we’ve been sharing some of that wisdom in a series of articles called:

Shakespeare on Finance

Shakespeare never actually wrote about finance, of course.  But we’ve found many of his lines contain important financial lessons.  In this article, let’s look at one such line from one of Shakespeare’s most controversial plays, The Merchant of Venice:

Quote #3:
“How far that little candle throws his beams!”
The Merchant of Venice, Act 5, Scene 1

Imagine a dark room containing a single burning candle.  A candle is a small thing, and its flame even smaller.  But it still shines brightly – and its light casts large shadows.  So, in this case, the candle is a metaphor for an important truth:

Even small things can have big effects.

This is certainly true in finance.  Let’s take a (very) hypothetical scenario:

John is 30 years old.  He has $5,000 saved up for retirement.  John decides to invest that money, achieving a 7% return every year.  (Again, this is hypothetical.)  Furthermore, John vows to invest an additional $100 every month, which he does for the next thirty years. 

These days, one hundred dollars isn’t exactly a lot of money.  But let’s look at what the result is:

By the time John turns 60, he’ll have accumulated $162,529 for his retirement. 

I don’t care who you are.  $162,529 isn’t chump change.

Now let’s imagine John invests $150 every month – just fifty dollars more. 

By the time John turns 60, he’ll have accumulated $223,578

How about $200 a month…for thirty-five years instead of thirty?

By the time John turns 65, he’ll have accumulated $417,741. 

Now, you may be thinking, “Sure, that’s all well and good, but it’s just hypothetical.”  And that’s true, it is.  But the principle is what matters here.  Small things can have big effects, especially over time…and especially when done consistently. 

This doesn’t just have to be about investing, either.  Taking that small tax deduction or applying that tiny tax credit can be a significant savings boost, over time.  Taking ten minutes to check your credit score every year can make life a lot easier down the road, if you ever want to buy a new home, car, or even start a business.  Creating a stronger password rather than just using “password123” can save you countless hours and money if it protects your identity from ever getting stolen.  Shopping around for cheaper car insurance, looking for unclaimed money in old insurance policies, even turning off the lights…all these things add up over time. 

We’ve worked with all kinds of people over our careers.  Some were already wealthy.  Others were just getting started on their way to wealth.  But for everyone, the same rule applied: little things have big effects.  They add up.  They make a difference. 

We promise you: when you look back on your life, adding up all those small, seemingly insignificant decisions you made along the way, it’s not uncommon to think:

Look how far that little candle threw its beams.

So, as you work toward your financial goals, always remember: it’s the little things that matter! 

In our next article in this series, we’ll move away from plays and into poetry, examining a line from the first thing Shakespeare ever published. 

Check out other articles on Finance
Shakespeare on Finance 2 – Avoid Impulsive Decisions
Shakespeare on Finance 4
Shakespeare on Finance 5

Shakespeare on Finance 2 – Avoid Impulsive Decisions

For centuries, people have studied Shakespeare for his wit and his wisdom.  Last week, we started sharing some of that wisdom in a new series of letters called:

Shakespeare on Finance

Shakespeare never actually wrote about finance, of course.  But we’ve found many of his lines contain important financial lessons.  This week, let’s look at one such line from perhaps the most famous play he ever penned:

Quote #2:
“Go wisely and slowly.  Those who rush, stumble and fall.”
Romeo & Juliet, Act 2, Scene 3

In this scene, Romeo asks his mentor, Friar Laurence, to wed he and Juliet as quickly as possible.  In response, the friar counsels Romeo to “go wisely and slowly.  Those who rush stumble and fall.”

You can probably guess the lesson here: avoid the temptation to rush into rash, impulsive financial decisions.

Have you ever noticed how often people act on impulse?  Advertising companies sure do.  So do car dealerships, banks, and your local gym.  In fact, every time you go to the checkout counter at a grocery store, take a moment to look at all those candy bars and tabloids strategically placed to take advantage of people’s impulsiveness.

Entire industries are built on capturing the human impulse.  Most of the time these impulses are harmless enough, but the worst of them can have grave consequences.  In fact, one of the greatest dangers to our financial health is that we don’t always think before we act.  We rush into things.

Now, if you rush into buying a candy bar, it’s no big deal.  It probably won’t have an impact on your overall financial health.  But some decisions do have a major impact, and when people rush into them, it’s quite easy to stumble and fall. Here are some examples:

Major Purchases

Whether you’re buying real estate, a new car, or even that fancy new gadget that just came out, it’s so easy to be impulsive.  To let the sensation of “want” override all other concerns.  The result is often buyer’s remorse … or worse, debt.

Taxes

Everyone hates filing their taxes, and everyone wants the process to be as quick and painless as possible.  Unfortunately, quick and painless in the short term often leads to drawn-out pain in the long.  Rushing through your taxes can lead to mistakes, and it usually takes much longer to correct mistakes than to avoid them in the first place.

Investing

When making investment decisions, it’s easy to get excited about a hot new stock tip and decide to buy before the price goes up.  It’s also easy to get spooked at the first sign of market volatility and decide to sell.

Both can be very risky decisions.

Whenever you make an investment decision, it’s important you put in your due diligence first.  Take time to research the investment you have in mind.  Talk to an expert and get a second opinion.  Read the fine print.  The media often portrays investing as a frenzied sprint, but for most investors, slow and steady wins the race.  Making consistent, unemotional decisions will serve you far better in the long run.

Friar Laurence’s advice isn’t just for star-crossed lovers; it’s for all of us.  The fact is that when it comes to your finances, being hasty and impulsive can lead to missed opportunities, mistakes, debt, and other negative consequences.  But those who “go wisely and slowly,” who take their time, who look before they leap, are well-positioned to achieve their financial goals faster than they ever thought possible.

As Shakespeare might say,

“For never was a story of more woe,
than of the investor who made a financial decision too fast instead of slow.”

In the next Shakespeare article, we’ll move away from tragedy by examining a line from one of his comedies.

Check out other articles on Finance
Shakespeare on Finance 3
Shakespeare on Finance 4
Shakespeare on Finance 5