If you follow tech, you will notice an interesting trend over the last 2-3 decades or so:
First, you have Microsoft driving away with the personal PC operating system market, leaving Apple and others in the dust. The Windows operating system has achieved near 80% dominance in the market for over 2 decades. Then there was this thing called the internet, and despite Microsoft having dominance over the PC market, through various missteps, it failed to capture and lead it. This time, it was Google that would take the lead and run away with it, and still does for the most part. Then came mobile in the mid-2000s, and this time, it was Apple that took the lead, despite Blackberry being the dominant name in enterprise mobile and having an earlier start. In the early 2020s, we have a new buzzword in tech – AI – and so far, we have some new and old players trying to win the new game, OpenAI and Microsoft!
Can you spot any trends here? Among many other factors aiding these tech giants, including innovation and beloved new products, there’s also momentum. Momentum, this elusive force that can either propel you to the top or, if mishandled, drag you to the bottom, regardless of past success. Tech behemoths like Microsoft, despite their complete dominance in the PC market, missed the mobile wave due to lack of focus, allowing Google to seize control and generate billions in annual revenue over the last two decades or more.
Momentum in Personal Finance
Momentum plays a significant role in personal finance and how you manage your money. It can either propel you to financial freedom and millionaire status or lead you into financial hardship, necessitating a lifetime of work just to regain stability. Your position in this spectrum depends on your understanding of momentum and your ability to leverage it to your advantage. In its original sense, momentum simply means “to move.” In personal finance, it signifies any sustained movement over time, supported by various factors. Once momentum is initiated, regardless of its direction, it often operates effortlessly, akin to magic. Little additional force is required to sustain it, as it continues unabated until acted upon by an external force, either to halt or redirect its course.
Positive Momentum
Have you ever automated your savings through payroll deduction or regular contributions and then forgotten about them? That’s the perfect example of positive money momentum. As long as you don’t interrupt or stop it, your wealth will continue to grow like a snowball rolling downhill.
Another example is your investment portfolio and how it grows over time, driven by good stock picks, reinvestment of dividends, and consistent contributions. While stocks and the market may experience fluctuations in the short term, it’s important to remember that the market tends to trend upward over the long term. However, this doesn’t negate the need to periodically check your portfolio and rebalance it once or twice a year.
Positive momentum in personal finance involves consistent improvement and progress towards financial goals.
Negative Momentum
The most obvious form of negative momentum in personal finance is debt accumulation and how it can quickly spiral out of control. Unless you have a firm grip on it and aggressively pay it down, it can overwhelm you, making it difficult to overcome unless you have an equally strong or better force to counter it. It’s a common scenario where the weight of debt is so heavy and persistent that people either resign themselves to living with it or resort to extreme measures like debt consolidation or bankruptcy.
Overspending is another significant challenge that can escalate beyond control, becoming ingrained in your brain’s neural pathways. Procrastination is also detrimental to personal finance. Delaying crucial financial decisions, such as saving for retirement or investing for the future, can lead to negative momentum in wealth creation. Missing out on opportunities for compounding returns and growth can impede your financial progress over time.
Negative momentum in personal finance could involve making poor financial choices, accumulating debt, overspending, or experiencing significant financial losses.
It’s crucial to identify negative financial indicators in your life and address them promptly before they escalate into insurmountable challenges that jeopardize your financial well-being. Conversely, when you notice positive financial trends, it’s essential not only to sustain them but also to step aside and allow momentum to work its magic uninterrupted. By actively managing your finances and nurturing positive momentum while mitigating negative forces, you can pave the way for long-term financial stability and prosperity.