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Personal Finance: The intermix of Tactics and Strategy

A few years ago, I took management training at my current employer. Honestly, most of the training was a very generic soft skills primer. The reality is my employer probably could do a better job preparing new managers. In any case the training session they provided focused the most on the intermix of tactics and strategy.

Ensuring you see Strategy in times of Tactical Need

The number one saying the training kept repeating was take time to go to the balcony. Essentially by saying take a regular balcony moment, they meant that you need to take a step back from the day to day. It’s very easy as a manager to get stuck in the mire of today’s problems and lose track of where you want your organization to go strategically. Without that perspective, the fires of today remain as the fires of tomorrow, and your tactics never change. By taking a step back, and observing where you are you can change your organization’s direction and make your life easier later. At least that is the theory.

Ensuring you see Tactics in times of Strategic Planning

In personal finance keeping an eye  on your strategy can also yield dividends (pun intended). If you just focus on paying today’s bills and having fun today, you miss out on the opportunities tomorrow. Things like building financial independence, choosing an asset allocation, saving day in and day out, and even your career require that long term strategic look.

But the thing is, while my management training focused heavily on stepping back to see the forest over the trees, I’ve also seen managers take it to extremes. I’ve seen a manager so obsessed with strategy and the long term that his team often delivers failures because he does not pay attention to the details. The tactics of the day to day are just as important to a manager’s success as the strategy.

In personal finance the same is true. Sure, my savings rate and asset allocation are an aspect of my strategic direction. However, you can also miss some very important tactics while focusing on strategy. For example, expense ratios on investments. Sure, they are a tactic for the here and now, but a fee of 1% a year compounded over the life time of an asset can be massive. Take the hypothetical $10K investment. 1% a year in fees over 20 years would take over $7K in return (assumes 6% return on investment). That would amount to 30% less in dollars. The tactical error would have a massive impact on your long-term achievements.

Tactics and Psychology

The thing is though; good tactics might not even have a math component. Take the concepts of index investing and dollar cost averaging. Mathematically both are superior strategies/tactics to achieving the best return. But humans are not robots. We tend to make many investing mistakes and often need a psychological boost to stay with the right strategy in both the up and downs of the market. So, you might have tactics that you utilize to get you over your tendencies to stray from your strategy.

For example, if you tend to invest your money directly into companies to feel like you have control, you might use a tactic to fulfill this desire. You might be able to combat this tendency by setting aside a small portion of your portfolio for active investing. The impact to your overall portfolio would be small, but you would have the psychological benefits to keep you from tweaking your overall direction. Another example might be if your gut tells you the market may collapse, but you know trying to time the market is fool hardy. To satiate your gut, you might time a very small portion of your portfolio to give yourself either a reminder of how fool hardy it is or a feeling of accomplishment if you get lucky.  The point is personal finance tactics are not all about money. In the tactics come the emotions that can also affect your long run strategy.

The intermix of Tactics and Strategy

I’m not sure if you noticed the same thing in this post that I have while writing it. I started out with very strategic actions. I ended with very tactical actions. But some of the items in the middle can almost fit the definition of strategy or tactic. I struggled with determining which bucket to place the item in. Take savings rate. While I wrote the above as your yearly savings rate, which is surely strategic, you could just as easily write it as your daily savings rate. Your daily savings rate is obviously a tactic.

Which leads me to my final point. Ultimately, in any good plan you need both strategy and tactics. They need to work together to deliver your goals. You also need to keep an eye on both. But, you also need to keep an eye on the interplay between them. One day of a poor daily savings rate will not appreciably harm your yearly rate. Hundreds will kill the possibility of having a good yearly savings rate.

How do you balance the need to keep an eye on the strategic, or long run, with the tactical, or short run, in your personal financial planning?


  1. “In personal finance keeping an eye on your strategy can also yield dividends” – love it haha

    I’m just 24 and my investing runway is many years. Given this, I know that time is on my side and I should let the magic of compounding do its job. That being said, I need to build up my nest egg, so tactically, I need to keep building my savings.

    • April 5, 2017

      There’s no better time then the present to get started. I wish I’d started more down this path in my early 20s.

  2. Leo T. Ly @
    Leo T. Ly @ April 5, 2017

    My long term strategy is to buy and hold my investments, grow my net worth to $2M. My tactics are to take advantage of all the tax breaks, free money from employers and government on an annual basis when I save. By ensuring that I am saving diligently, I keep reaching towards my long term goal. They work hand in hand.

    • April 5, 2017

      Exactly, they are interrelated. You have to manage both to succeed.

  3. Matt @ Optimize Your Life
    Matt @ Optimize Your Life April 5, 2017

    This is a great point. Most people seem to get too caught up in the day to day and don’t take their balcony moments. But there are others who overcorrect and totally miss out on the details. It really is all about finding that balance.

    I think a big part of finding that balance in personal finance is automating as much as you can. Automation can be either big picture (automate savings enough to reach your annual goal) or smaller picture, but either way it frees up more time and brain space to focus on both the balcony view and the nitty gritty.

    • April 5, 2017

      I too like automation. It helps to ellivate a lot of the tendency to get decision fatigue. Great add.

  4. SMM
    SMM April 5, 2017

    My strategy is to buy and hold now. But many years ago, I would look at penny stocks whom are about to publish their earnings and buy and sell a few days before and after. That was too much work and hassle and I lost money too sometimes. Now I just want to slowly buy and hold to supplement my retirement savings. The tactic I suppose is to keep diversified in the process and reallocate periodically; maybe not once a year, but maybe not once a quarter either. Somewhere in the middle.

    • April 5, 2017

      We follow much the same process as your current tactic. Trying to Time the market and do better then people way smarter then me whom are devoted full time to the market seems like a fools errand.

  5. Mrs. BITA
    Mrs. BITA April 5, 2017

    I think it is an interesting observation that perhaps FIRE works a little bit differently than other areas of life. In most other areas we tend to be very focussed on the day to day (the trees) and are at real danger of losing sight of the big picture – what do we want from our lives? What are our lifetime goals (the forest?). When on the path to FIRE, the forest is extremely clear and top of mind – save blah to retire by blah. The trick in this case is keep an eye on the day to day so that we eventually make it to that long term goal.

    • April 5, 2017

      Thanks for adding your perspective. I agree, most people are more likely to miss the day to day. Debt, low savings rates, etc tend to sneak up on people.

  6. Mustard Seed Money
    Mustard Seed Money April 5, 2017

    This is definitely one of the things that I struggle most with. I have a difficult time living for today while keeping my eyes on tomorrow. In many ways I feel like I spend too much focus on tomorrow and not enough time in the here and now. So it’s definitely something that I have been working on.

    • Rich @
      Rich @ April 6, 2017

      I’ve been thinking about this a lot every since you wrote your own post on the subject MSM. You’re adding the time element that tactics are in the present while strategy is about the future.

      I LOVE thinking about the future and planning. But lately I’ve become very sensitive to the present moment. Sorry to get philosophical, but people at the end of their lives tend to have a common refrain, which is that they regret spending so much time worrying about things (usually uncertain future things) rather than enjoying the present moments, where life is actually lived. I could go on forever but will stop there for now!

    • April 6, 2017

      It’s a delicate balance. The major problem is spending too much time in the future can lead to regrets down the road and Rich pointed out. Happiness is a present sensation. You want that through most of your life ultimately, so if your worrying too much about the future it is not present.

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