Inertia: Financial Friend or Foe?

I do things in bursts. I let messes accumulate until one day I decide that is enough and clean everything. I don’t like making calls so I will wait all year for a burst of energy one Thursday afternoon when I book a dentist, doctor, and car maintenance appointment one after another.

It’s important that when the wild energy hits I ride it out, because it might be a while until I feel like tackling more chores again. I find that once I get started chipping away, the mountain of chores crumbles easily.

Newton’s second law– an object in motion tends to stay in motion— describes inertia. Whenever the urge to be productive strikes, I take advantage of it. This is also how I work on my finances, in bursts of energy that will get the ball rolling and the compound interest growing.

Inertia is your friend

When talking about investing, most people will invoke the magic of compound interest. The idea is that if you can start saving early, your wealth will balloon over time. It might take a while to start seeing the exponential curve but eventually, your money starts making money. The earlier you start the more it will grow.

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Source: Legg Mason. You may notice I switched Tom and Susan because women save more and earn higher returns on average

In this graphic, all three investors contributed $5,500 annually to an IRA. It assumes a hypothetical pre-tax return of 7%, compounded annually. The more time in the market, the more earnings ‘compound,’ demonstrated by the exponential curve. The example demonstrates the difference 20 years in the market can make: Susan ends up with $933,500 more in her savings than Tom!

Inertia can be your friend in other ways than compound interest. Small efforts now make it easier and easier to get your financial house in order. Spend two hours checking up on your 401k allocations and make sure you are only invested in low cost funds. Sit down to automate your payments to your credit card and never miss a payment. Take the time to set up automatic investments and put the time up front while you have the rush of energy to set you up for down the line.

Unfortunately these things are easy to ignore and let fall by the wayside. However, in the last few years, providers of 401k plans at firms like Vanguard have done some legwork for you by offering auto-enrollment to their plans for employers. When 401k plans at Vanguard started automatic enrollment, 90% of employees joined the plan, very few taking the option to opt out. Without automatic enrollment, only 69% participated, losing out on tax benefits and employer matches (free money!)

Stats from

For young people the numbers are even worse. If they have to enroll themselves, only 27% enroll into their 401k. This is a shame because saving early in their career means more savings through compound interest as time goes on.  With auto enrollment decreasing the barrier to entry, a shocking increase of 85% of young employees stay in their plans.

Let inertia be your friend, set aside the time to get the ball rolling, and it will pay off in dividends. Literally!

Inertia is your foe

Unfortunately, compound interest isn’t all good. In a twisted, diabolical turn it can work against you when it comes to debt. If you are dealing with debt with high interest rates, it will exponentially expand until paying it off seems unfathomable. It is vitally important to pay off debt as fast as possible, targeting the highest interest rates first.

Inertia can also start working against you psychologically. When you spend money it’s easier to keep spending. When you are already putting down money on a big purchase it can be easy to drop more on smaller add-ons. Stores will take advantage of this at check-out and ask if you want to include insurance or other accessories to your order.

Fun fact: Americans will eat an estimated number of 20 million hot dogs this year! – From Rachael Ray Mag

Major culprits of this scenario are sporting events, vacations, and other entertainment.  You already bought the $100 ticket to the concert, so $40 for a t-shirt doesn’t seem like much to commemorate the occasion. You bought $100 tickets to the game, so you add $13 for beer and a hotdog to the tab. You already spent a couple grand on this vacation, so what does it matter if you upgrade from the hotel to the suite? These are small expenses that add up over time, and the higher the original expense, the higher the cost of the add-ons.

Danger can happen when larger sums numb the brain. After sitting down at the dealership and looking at cars, a couple hundred on upgraded heated seats doesn’t seem like much. After buying a house for hundreds of thousands of dollars—might as well furnish it with high quality furniture! Get the walnut dining room table for $2000, sectional couch for $1,500 and other pieces to fill out the space… suddenly your savings are depleting rapidly– or worse, you’re going further into debt to pay for it! Recognize when you are spending based on inertia, and slow the roll. Here are some tips for how to recognize when inertia is taking control of your wallet.

Set a budget for events before you go. Before you go to an event, have a set amount in mind for what you want to spend. If you want to get a t-shirt, that is fine, but only if you thought about it and considered it beforehand, otherwise it’s just another impulse buy.

Plan to bring items you need to an event. The reason so many vendors are successful at large events is that they anticipate the needs of the attendees beforehand. Anticipate your own needs first and bring water, food, and whatever else will keep you comfortable at the event.

Be intentional about asking yourself if you really need the item. Take some time to imagine future-you two months from now– will this item still be enhancing your life in a measurable way? Not only that, but sometimes you might need something but you don’t need the item right this very second. If you need new furniture for a new place, it can be tempting to knock it all out in one go, rather than wait a few weeks while cruising Craigslist.

It took me a while to accumulate the furniture I needed in my first place. I made a makeshift picnic for a week in order to avoid spending $600 on a dining room table.

My makeshift picnic

It wasn’t glamorous, but it was bearable. I started searching on Craigslist and put in a couple offers for $50-$100 sets. In a fortunate coincidence, a friend was moving into a fully furnished apartment and didn’t need her set anymore. I also got an Ikea coffee-table, lamp, and bookshelf all off of the Craigslist free section.

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The generously provided table and chairs, perfect for two with the ability to expand when we have guests

Friend or Foe? Let us know!

It took a while for me to identify when I should step into the inertia to get stuff done, or step away and figure out if I was spending heedlessly.

Has inertia been your friend or your foe? Share stories of when you took advantage of it or let it sneak up on your wallet!

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1 Comment

  1. I enjoyed this post. It gave me lots to ponder. I always think of inertia as not being able to get started. Are you saying that inertia also means not being able to stop?

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