Repechage

If you have been binge watching the Paris Olympics as I have, you know where this is going.

In some track and field events, every athlete has two opportunities to make the semifinals. The athletes that do not qualify in their heat races have a second possibility to race again in the repechage round for inclusion in the semifinals.

Repechage is about second chances.

Just as in Olympic running, in your financial life you are rarely, if ever, one and done. There are few financial mishaps that cannot be overcome with the additional effort of a repechage round.

An obvious example would be closing in on your retirement years behind in savings. Sure, save harder, but if there is only a narrow gap between your income and your must-pay expenses, your second effort round will also need to include hard choices to reduce core retirement years expenses. This might mean, for example, downsizing your home to create more free cash flow.

Less dramatically, those in their middle-aged years who did not prioritize retirement investing over saving for their children’s higher education will spend their repechage round redirecting discretionary spending to their 401(k)s and IRAs. Depending on your income and how far behind your desired goal you are, you may not even break much of a sweat.

For example, if you are 50 years old and expect to retire at the usual age of 67, an additional $400 a month to your retirement account for the remainder of your working years could yield an additional $135,000 for your nest egg. To put that in perspective, that could support an additional $5000 or so in yearly spending (in today’s dollars). That might be an annual vacation trip in retirement that you may not have been able to manage before, the ability to make changes to your home to make it possible for you to stay in place as you age, or simply a feeling of greater peace.

If you have never in your life been too deep in debt, I salute you. For the rest of us, the exhausting repechage heat will be characterized by much less spending on “wants” as you chip away at account balances. The key to winning this race is, just like a runner, having a plan for success. Not just run fast but run smart so that you can finish the race. Yes, prioritize getting out of debt…but do so at a pace that you can maintain, and that does not introduce other vulnerabilities in your life. (Or in race terms, don’t run so hard that you pull a hammie.) That means making sure that you have locked down a basic level of cash savings and are not missing out on the free money of your retirement account employer match.

Of course, the bankruptcy code is the ultimate personal finance repechage. The very idea that you can wipe the slate clean of (some types of) debt and start your race again is incredibly powerful. It’s not a decision to take lightly or without professional guidance. It’s also not a decision that should be accompanied by shame. One of the biggest drivers of personal bankruptcy is medical costs, either direct expenses or the knock-on effects of lost wages while ill.

In the men’s 1500-meter race, a runner from the repechage round will contend for the Olympic gold medal. I can’t think of a better example of the potential of second efforts.

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