Let’s discuss managing trade-offs in our lives.

I recently was having drinks with a friend of mine and got into a conversation about some of the choices that we have made in our personal and professional lives

What was great about the conversation is that we did not only address the good parts of our decisions, but also the drawbacks of the decisions that we made as well. It is balancing the good and the bad, understanding both, and still moving forward with the best decision for ourselves. Managing trade-off in live that Is what I’m  going to talk about in this week’s Inside Look at Building Towards Wealth.

During this conversation, one of the ideas that I talked about was our decision about buying a home inside the Chicago city limits. I’ve talked about the home buying process previously. 

There’s a lot to love about this house. The size of the backyard, the kitchen, the layout, the airiness of it, its proximity to all of the wonderful restaurants in the Albany Park neighborhood. 

It does come with some drawbacks, as would any house in the city. You are paying Chicago and Cook County taxes. Theres no doubt that there is some crime issue in the city of Chicago, and you also have to navigate the Chicago Public School System.

You are always going to have to pay to live where you want to live. Paying those taxes to be close to my family and the careers that we’ve built, as well as everything that we love about the city of Chicago, the museums, parks, the world-class food scene, makes it worth it to us.

It also can be definitively said I am a person that loves living in a city and not the suburbs. The inability to walk your neighborhood the general lack of diversity etc. My wife and I find it important to make sure our children are exposed to diverse cultures and backgrounds.

For all knocks on the Chicago school system, there are lots of great schools within the system. There are adequate resources to be able to navigate the system. This ensures that your child is able to go to a quality school.

Does that make me right and a person who decides to live in the suburbs wrong? Absolutely not. It’s just a matter of what we are really willing to make most important and what we are willing to deal with. That answer is different for me than it is for you as it is for the next person.

Another topic that came up in that conversation was our decision to send our kids to a daycare versus having a nanny.

Even with two children and going to a relatively costly daycare it is still less expensive all-in than hiring a nanny. In addition, we also get the advantage of our child being able to socialize regularly. Also, as mentioned previously, our daycare means getting exposed to many different people of different backgrounds.

While a nanny would certainly make it easier and we would not have to deal with quite as many sick days at home for the children. Which, is the reality in the Covid world, it is still worth it for us. 

Does that make me right and a person who decides to hire the nanny wrong? Absolutely not. It’s just a matter of what we are really willing to make most important and what we are willing to deal with. That answer is different for me than it is for you as it is for the next person.

So that brings us to investment options. I mean this is still a blog about financial planning. No matter what investment strategy you choose, there are going to be some pros and some cons to it.

Everybody wants a huge return when the market is going up. But they don’t always want to accept the volatility when it goes down. This is one example of managing your trade-offs.

If you are fine with both the upside potential and the downside risk of the riskiest investments then those could be perfectly appropriate for your overall investment portfolio. 

The same is true for conservative investments. Most people like the protection they can provide them when the market is down or turbulent. But it can be difficult sometimes for people to accept gains that are less than what they see advertised on the evening news.

Investments are merely tools to complete a job. As with tools, there is no bad tool or good tool there’s just the right tool for the job. Oftentimes people get stuck on the idea of the tool that’s being used as opposed to what is being built. 

If you were building a house from scratch, you probably wouldn’t get upset at the workers for their tool selection. You just care that they give a well-crafted finished product. That’s a big part of what investment success is. It’s not necessarily getting the highest gains or experiencing the least amount of losses. It is making sure that you have picked the right tool for the job. And that you are comfortable with what you’re trying to do. By managing trade-offs you can look at the big picture of your decisions. 

Remember, begin with the end in mind and ask “Which Financial Path is Right for You?”.