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Kinetic Energy And The Pitfalls Of Saving Too Aggressively

What do windmills and your personal finances have in common?

Answer: They are not perfectly efficient.

It is known to be windy here in the Tri-Cities, and there are numerous wind turbines around the area to capitalize on the local forecast. When the wind blows, air moves the turbine blades, and eventually, that wind energy is converted into electricity.windmills are compared to saving HFG Trust

But how efficient are these fans?

In 1919, a German physicist named Albert Betz published a paper deriving the math behind this exact phenomenon. What he ultimately concluded was that a single turbine cannot capture more than 59.3% of the kinetic energy of the wind passing through it.

Many young and ambitious people want to be aggressive with their saving. They’ve been taught good financial habits and can be consumed by optimizing retirement contributions and saving as much as they possibly can. For some, it can reach the point where it becomes a stressor in their life. The windmill example above is just one way to show that maximum efficiency is not always possible.

It can be tempting to tuck away as much money as you can for retirement. However, problems can arise when you don’t have enough cash on hand to meet short-term financial obligations. Most people are aware that they should have an emergency fund of 3-6 months’ worth of expenses set aside in case of emergencies. This is the cornerstone of ensuring you have enough cash available to meet potential future obligations. It can be tempting to let funds sit in the bank as the stock market goes up and still tell yourself you are not saving enough toward retirement!

This is when your financial plan becomes key. We often think of budgeting and financial planning as tasks for those who fall on either end of the spectrum: those who are struggling to build wealth and those looking to preserve it. However, if you already have great savings habits in place, a sound financial plan can be the key to easing anxieties when it comes to creating a budget that fulfills both long- and short-term needs.

If you find yourself falling into this category, I encourage you to reach out to your financial advisor to create a plan tailored to your immediate financial obligations as well as your goals for the future.

Don’t have a financial advisor? Click here to find your perfect fit. (link to teams page of HFG site)

My final piece of advice is to not be blinded by ambition. Create a plan, stick to it as best you can, and enjoy life in the meantime.


Wealth Planner, HFG Trust


This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. Community First Bank, HFG Trust, and HFG Advisors have no duty or obligation to update the information contained herein. Further, Community First Bank, HFG Trust, and HFG Advisors make no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is potential profit there is possibility of loss. This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services, banking services, or an offer to sell or solicit and securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Community First Bank, HFG Trust, and HFG Advisors believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, included the information contained herein, may not be copied, reproduced, republished, or posted in any form without the prior written consent of Community First Bank and/or HFG Trust and/or HFG Advisors. HFG Advisors, Inc, is a wholly owned subsidiary of HFG Trust, LLC. HFG Trust, LLC is a Washington state-registered Trust company and wholly owned subsidiary of Community First Bank.