Our son Luke, about to finish grad school, recently asked for my advice about which car to buy for getting around Philadelphia, for himself and his wife-to-be. I quickly jumped in to help, but for a moment we lost sight of the bigger picture. Every choice today has short-term and long term implications. This post is about the habit of keeping an eye on the long-term, while meeting short-term needs.
When Jen and I were a young couple we also needed a car. I did very little research because I already « knew it all », and wanted to impress my new mate with my « car guy » ninja skills. So I found a great deal on a one year old Mazda RX-7 that I purchased with cash. I was so smart.
The nearly new Mazda was very hip and fast. We were sure we would fit in with the cool kids now. To our surprise our insurance company thought it was amazing too, so they doubled our insurance rates. With much higher rates, the realization that the RX-7 wouldn’t haul much stuff, and that the cool kids didn’t care, we didn’t keep it very long.
Around the same time there was this little company called Apple Computer, that a few years earlier had introduced something called the Macintosh. There was a lot of excitement around its products back then. But the company also faced a tough road as all startups do, so it’s stock was very cheap. In fact that little company almost went out of business and had fired its founder, Steve Jobs just a few years earlier.
So, being focused on a short-term need, I ignored the long-term opportunity as almost everyone else does. Both the Mazda and Apple stock were available to us at a very deep discount. A truly smart person would have cut his or her car budget in half and hedged. Maybe split the funds between an older less exciting car, while leaving room for some longer-term purchases. Just a few shares of those rare companies doing something special, that customers and employees are super excited about.
So, my advice is always keep an eye on the forest while sawing away at those trees. Be sure you balance your short-term hip spending, with some hip long-term investments.