Newborn babies are incredibly educational -- sometimes in unexpected ways. Here are five lessons about personal finance and investing that you can take from life as a new parent.
Do it now
Time flies in the life of a baby.
It's remarkable, actually: Infants go from zero to sixty in what seems like an instant -- you wake up and suddenly the first three months are nearly over. It makes every single day incredibly precious and interesting, and it means everything you postpone (taking a photo in the outfit your mother-in-law carefully selected, cutting those fast-growing nails before they get razor sharp, etc.) will probably cost you.
Therefore, if something needs to be done, do it now.
The lesson applies to our finances just as well. Every day you put off doing the important things, like starting to save for your retirement or addressing that credit card debt, is costing you.
It's not as visible a lesson as an exploding diaper, but it can get just as messy.
Babies are so small and cute, and yet they manage to invite chaos into every corner of your life. That fact, in addition to your chronic, bleary-eyed sleep deprivation, makes organization paramount.
In other words, you put systems in place for everything.
Diaper bags are constantly restocked, laundry runs near daily, breakfast occurs by a certain hour or not at all, and enthusiastic cleaning takes place at every opportunity. It's hard at first, but you quickly adapt to holding the fort together, because the alternative (a slide into complete entropy) is so unwelcome.
We don't usually have the same sense of urgency with our financial planning, but we should. It doesn't really take that long to track your spending, sign up for your 401(k), or set up auto-debit on your bills, so take those little spare moments you have to keep it organized.
Staying on top of things will make managing your money so much easier, and you'll never have to experience the financial equivalent of running out of baby wipes at that critical moment... in public.
Being a new parent imposes strange new stresses on a person: Baby is napping, so do you get some work done, shower, clean the kitchen, or sleep?
Deciding between potential activities comes down to setting and aggressively adhering to priorities. They might change from day to day, but you absolutely have to have them in place, otherwise you risk leaving a trail of half-finished projects behind you by the end of the day.
And as it is with babies, so it is with finance.
Life is inherently busy and pulls us in a thousand directions, and that chaos is always going to be there. So, whenever you can (remember, do it now!) it's important to stick to the plan of accomplishing your prioritized tasks.
Signing up for your 401(k)? Calling your credit card company? Whatever you need to do to get your finances together, make a list, set the day's priorities, and get it done.
Volatility is a fact of life
One day, your baby is grinning and happy and sleeping like that proverbial baby. The next day is filled with sleeplessness and mystery ailments and crying.
That kind of volatility is just a fact of life with infants.
But that's how it is with investing, too. One day things are going great, and your account is growing, then all of a sudden you're in the midst of a period of chaos and turmoil. It's extremely distressing, and it can wreak havoc on your emotions. You start thinking thoughts like, "Am I doing this completely wrong?" or "Am I just not cut out to be a good investor/parent?"
In both cases, the important thing is to stay calm and see the forest amid the trees.
Babies, as it turns out, cry sometimes, and markets go up and down. Instead of getting swept up in the squall, keep your head together, keep an eye on the big picture strategy, get help if you need it, and keep going.
You'll never have all the answers
Only when you have a child do you understand the immense amount of conversational and printed space devoted to uncovering the mysteries of infant crying. Colic (which, for the uninitiated, is infant crying on a whole other level), commands even more attention, not only because it's so distressing for afflicted infants and their parents but because no one actually knows what causes it.
The unfortunate fact is that, much as you want to have all the answers, you don't. And you never will.
All you can do, as a parent or as an investor, is to work hard to understand the situation and make the best decisions you can in the moment. Put in your best effort to get good information and research, apply the lessons and advice that sound credible to you, and keep moving forward.
As you learn, you'll become more skilled on both fronts -- especially if you can also get some sleep.