In investing, there is something called rebalancing your portfolio. A portfolio has different asset classes in it (such as stocks, bonds, and cash), and there is a particular allocation that best serves your financial goals.
Over time, however, your portfolio might go out of balance. One asset class might outweigh the others because its price increases rapidly. The allocation will then deviate from its ideal.
What should we do then? How can we handle such a situation?
The answer is rebalancing.
Rebalancing is the act of getting the asset allocation back to its ideal. You do it by selling the asset class that’s overweight and buying the one that’s underweight. With this, your portfolio will once again be in a good shape to serve your financial goals.
I believe that the idea of rebalancing also applies to life. You need to make sure that your life is balanced and if it’s not, you need to rebalance it.
In investing, the asset classes are stocks, bonds, and cash. In life, the ‘asset classes’ are the five aspects of life:
We need to rebalance our lives from time to time. Here are the steps to do that:
1. Find the aspects that are underweight.
Look at each of the five aspects. Which ones do you think are underweight? Which ones do you think need more attention?
2. Find the aspects that are overweight.
Now, do the opposite and find the ones that are overweight. Where do you spend so much time and energy that it takes away from the other aspects? Which aspect dominate everything else?
For many people, the answer might be work.
There is another possibility actually. It’s idleness. This is when you do things that are not included in the five aspects above. For example, you might be watching too much TV. In such a case, it’s the idleness that’s overweight.
3. Find ways to reduce the overweight aspects.
Next, you need to find ways to reduce the resources taken by the overweight aspects. Think about how you can spend less time there. Think about how you can become more efficient.
There are three actions that you could take:
4. Spend more resources on the weak aspects.
Now that you have freed up some resources, put them into the weak aspects.
The key here is to plan ahead what you are going to do. If not, your extra time might only be spent on idleness which is the default way of spending time for most people.
If the weak aspect is learning, for instance, think about how you are going to learn. You might want to buy a book and put it beside your sofa to remind you to read. You might even want to set an alarm to remind you to read.
Remember, a new behavior won’t happen automatically. You need to plan for it to happen.
5. Review your life regularly.
Just because you have rebalanced your life once doesn’t mean that it will stay balanced forever. Over time, things might go out of balance once again.
That’s why you need to review your ‘life portfolio’ regularly. Doing a weekly or monthly review is a good way to do that.
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Rebalancing your life puts you in a position where you can live your life to the fullest.
Do you have tips on rebalancing life? Feel free to share them in the comments.
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By the way, investing has always been a passion of mine. I’m currently working on an investing course and it’s going to be ready soon. Stay tuned!
I love quotations. They are short but contain a lot of wisdom. They allow us to learn the lessons of life in a concise way. We can learn a lot just from reading and pondering good quotations.
I’m always on the lookout for good quotations, so I’d like to ask you:
What is your favorite quotation?
Let me share mine first. Here is my favorite quotation:
“Say no to good opportunities so that you can say yes to the great ones.”
~ Rick Warren
This quotation has helped me make many decisions in life.
Now, what’s yours? Please share it in the comments so that everyone can read it. Thanks!
Do you want to live your life to the fullest? If you do, then there is a big obstacle that you need to overcome. That obstacle is fear, and among the different kinds of fear, a major one is a fear of failure.
Imagine putting a lot of effort into something but it doesn’t work. What you get in return is nowhere near your expectations. It wouldn’t feel good, would it?
The problem is, the fear of scenario could prevent you from taking any action at all. And taking no action means making no progress. It means that your life will just stay the same. This, of course, is not the way to live your life to the fullest.
What should we do then? How can we overcome a fear of failure?
I found an answer when I read Originals by Adam Grant. The book is about people who dare to be different. There is a statement there that caught my attention:
“They know in their hearts that failing would yield less regret than failing to try.”
Failing would yield less regret than failing to try. You need to keep this in mind. The mindset that you need to have is this:
The regret of failing is less than the regret of not trying.
Yes, you might have regret when you fail. But guess what? The regret will be less than the regret of not trying!
When people are on their deathbeds, their regrets center around things that they didn’t do. They regret not taking risks. They regret not taking the actions to realize their dreams.
Don’t let this happen to you. Aim to have the least possible regret in your life. Yes, you might fail when you try. But the regret will be less than the regret of not trying.
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A while back, I read Grinding It Out. It tells the fascinating story of how Ray Kroc built McDonald’s.
One interesting thing is that he only started building McDonald’s when he was already 52! You might think that at that age someone’s ‘golden age’ has passed; they wouldn’t build something new, let alone something big. But the story of Ray Kroc proves otherwise. It proves that it’s never too late to build something big in your life.
I learned some success tips from his story. Here they are:
How could he make such a big commitment at the time when most people already think about retirement? How did the possibility even enter his mind?
A key factor was the mindset he had. He believed that the best was still ahead of him. He was eager for something more. He didn’t just stay in his comfort zone.
This mindset, if you have it, can make a big difference in your life. Believe that the best is still ahead of you. Believe that there is more to come.
When you believe that the best is still ahead of you, you will be on the lookout for opportunities. You will open your eyes for them.
Kroc already had a good business selling multimixers at that time, but he didn’t stop there. He kept looking for the right opportunity. Eventually, he heard good things about a restaurant named McDonald’s that intrigued him.
Being on the lookout for opportunities helps you recognize an opportunity when it comes. Otherwise, you might miss an opportunity even when it’s right in front of you.
Now, what should you do when an opportunity comes? You should act… fast.
That’s what Ray Kroc did. When he heard good things about that far away restaurant, he decided to fly there to see it himself. And when he saw the great potential the restaurant had, he didn’t delay. He negotiated with the McDonald’s brothers to open his own restaurants.
There is a window of opportunity. If you are too slow, the window will close.
The McDonald’s brothers could have built the chain themselves. But the problem was their way of thinking: they were thinking too small! They were already satisfied with their one restaurant and the comfortable life they had. They had no desire for something more.
Kroc, on the other hand, already imagined hundreds of restaurants across the country even before he came to the negotiating table. He was thinking big. He had a vision. And that makes a big difference.
When Kroc decided to take the opportunity, he focused on it. He devoted his time, energy, and money there. In fact, he didn’t even take a salary in the first years to help the business get off the ground.
He didn’t allow himself to get sidetracked either. He had a vision of how McDonald’s would be, and he rejected short-term opportunities that didn’t help him reach the vision.
One key to success that Kroc had was his team. He had a strong team. He found the right people and put them in the right place. He found people who built upon each other’s strengths and complemented his own weaknesses.
Many of these people stayed with him for years as McDonald’s became a worldwide brand. With their help, he could build the company fast.
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I learned a lot of lessons from Kroc’s story. What about you? Feel free to share your thoughts in the comments.
P.S. I have a deal coming soon. Stay tuned.
Sig Nordal 