12 Ways Personal Finance Is Like Riding a Bike

Sherrill St. Germain, CFP®

By Sherrill St. Germain, CFP®
Sherrill St. Germain is a CFP® professional turned freelance writer. She writes financial content with style and substance for a wide variety of clients and readers. Her work and ideas have been featured in books, online, and in magazines including Kiplinger Personal Finance, The Wall Street Journal and Financial Planning Magazine. When she puts down the pen, she can be found travel hacking her way to her bucket list destinations or hanging out with family friends, and cats (hers and others).
Posted on 05/27/2018

Personal finance is just like riding a bike. Never mind if yours is a dusty, rusty old bike you scored for $100 back in college. It still functions much the same way as the tricked-out $12,000 high-tech beauty you secretly covet. Riding either one (or anything in between) can teach you a lot about managing your money.

  1. Safety first!

    Helmets are by no means the most glamorous part of cycling. The same could be said for cash emergency funds in the personal finance realm. It's hard to get excited about helmet head – or interest rates near 0%. But ask anyone who survived the Great Recession of 2008 or Stage 9 of last year's Tour de France. You'll be glad you have something to cushion you in the event of an unexpected crash.

  2. Plot your course.

    Rusted-out old bike or cutting edge new one, if you don't know where you're going, you'll probably end up somewhere else. So too financial goals. Whether you're aiming to ride from sea to shining sea or retire at 50, it pays to pick a target destination and plan out in advance how you're going to get there.
  3. Choose the right ride.

    Elite athlete aiming to crush it at the 2019 Kona Ironman World Championship? Skip the beach cruiser, and go for a more aggressive, albeit less sturdy, less comfortable, tri bike. Millennial decades from retirement? You'll want to fill your employer's retirement plan (most likely 401k) with diversified investments that may deliver strong long-term returns, short term volatility notwithstanding. The trick is in matching your gear to your circumstances.

  4. Take the long view.

    Mountain bikers are taught to look down the trail in the direction they want to go, not focus on nearby hazards they are trying to avoid (e.g. giant rut.) Managing your money may take you over some rocky terrain as well. Looking past day-to-day market fluctuations at the big picture affords a better view and more informed decisions.
  5. Glance in the rear view mirror.

    Whether history repeats itself or merely rhymes, there's a lot to be gained by educating yourself about what's behind you. A cyclist who's aware of a semi about to overtake is less likely to get spooked and crash. So too an investor who's read about the deleterious effects of cashing out when markets dip.
  6. Expect detours.

    Even if you're riding a perfectly-tuned bike over familiar roads on a bluebird day, there is no guarantee you'll reach your destination. Whether due to road crews fixing potholes or a thorn-induced flat tire, odds are you'll be diverted off course and have to find a new way forward. Similarly, think of your financial plan as a guide, but expect to make mid-course corrections when you encounter a roadblock (e.g. job loss.)

  7. Hold your line.

    It's also important not to overcorrect or quit when the going gets tough. Time in (the market or the saddle) is everything, and measured actions are safer and more effective than big moves. You won't win The 24 Hours of Adrenalin if you fly off a cliff trying to avoid a puddle. And you won't succeed in investing by panic selling.

  8. Train to win.

    Even riding a bike isn't just like riding a bike. True, once you learn how to balance and ditch the training wheels, you can go pretty far. But if you're aiming for a higher spot on the podium or higher net worth, it pays to invest in yourself. Upping your game through education and practice works the same kind of magic as compound interest by building on itself over time. (To increase your wealth of knowledge about financial concepts, check out the courses offered by Society of Grownups.)
  9. Keep good company.

    On the bike or in the market, you'll go further faster if you ride with a cadre of well-trained teammates who agree on a destination. Plus you'll have someone to turn to for help if the road gets rough or your gear malfunctions. The same goes for your financial life. Consider adding a financial advisor to your team to help you navigate your financial life, and consider recruiting a tax professional to help guide you through tax season.
  10. Steer clear of "squirrels."

    In the cycling world, a squirrel is a nervous, unstable rider prone to causing crashes. You'll run into similar animals in the personal finance realm. There, they usually show up as other investors, the media, or the three F's (friends, family, and fools), whose ill-advised actions can knock you off course. Whether you encounter them on the bike or in the market, give squirrels a wide berth.
  11. Get regular tune-ups.

    Left unattended, both bikes and portfolios can get riskier over time. That's because bike parts wear out and more aggressive investments may grow faster than more conservative ones. Doing periodic reviews helps ensure that your asset allocation stays in tip-top condition. Even if your trusty old steed is as pristine as the day you bought it, your needs may have shifted. Let's say you just started a new high-paying, mission-critical job. Maybe it's time to upgrade your rickety old hand-me-down, whether that's the bike you're commuting on or your 401k.
  12. Buyer beware!

    An innovative upgrade or a professional bike fit can make all the difference between a joy ride and a saddle sore. Greatly improved financial products and services are cropping up all the time, too. But in both realms, the landscape is littered with overpriced, oversold fads that came and went. And paying more doesn't guarantee a better result. Moving your bike seat ½" forward (free) might improve your ride more than a next-gen pair of Assos bike shorts ($299). An index exchange-traded fund might outperform an inefficiently run fund costing 5 times as much. Do your research before you buy.

So now you know the rules of the road. With tax season and Nor'easter season firmly in the rearview mirror, why not take your bike for a spin and see if you don't come back richer for the experience?