I like reading the latest financial tips as much as the next person, but sometimes it’s redundant. I know how to budget, save, and spend responsibly. I don’t need a daily article telling me to do all those things, I can write a book on that. (Oh wait, I did.) Anyways, instead of dwelling on the next money crisis or offering another seven-point list on how to side-hustle, let’s celebrate some financial success.
Yes, things are tough when you’re young because, like most, you may have started with zero, or negative zero, if you had student loans. After some time goes by, the small actions count. Little by little, the emergency fund gets funded, the necessities are bought, then the pleasures can follow. One day, going to work may not feel so bad and your life won’t depend on your next paycheck. It’s when you realize that you have money left over from your last paycheck. You get a few raises and promotions and there’s finally more money than month with a small checking account buildup. The money gods have smiled on you and you can start moving on to bigger and better. This is what’s known as financial satisfaction.
So, you bought that stock and expected it to return a pile of cash to pay your current debt. How long has it been, four months? You watch it every day. It’s a good day when it goes up, if it goes down, it clouds your mood. Today, it’s down 12%, maybe it’s time to sell? You sell the loser and put the diminishing dollars into the bank or, worse yet, into another stock that you expect to skyrocket. Within a few months, you’re disappointed again. The cycle repeats.
Here’s a sobering thought. If you’re not happy with your investment returns, it’s your fault. If you’re new to investing, you would best follow research-based advice – it will alleviate future regrets.
This is a continuation on evaluating your financial behavior. See Part I for identifying your goals, gathering your financial records, and getting real with money attitudes.
The backdrop for each step describes what a financial planner would direct you to do; the self-study action is included.
These last three points put the plan in motion.
4)Develop and Present a Recommendation
Financial Planner Action: Communicate a plan, make recommendations, and identify alternative options. At this phase, the financial professional may sense resistance and ambivalence from their client. Financial psychology* suggests engaging the client in dialogue that fosters the client’s positive changes. This method of conversing provokes the client to recap their goals and why the goals are important. Instead of being directed by an outsider, which is typically not well-received, the client feels a sense of empowerment and autonomy.
Self-Evaluation: This is where you decide what changes you’re going to make and is most likely the part where your well-intentioned launch could lie like an unhatched egg. You’ve reached this segment, but your avoidance may kick on. Vacuuming dust bunnies and pulling weeds might look exciting compared to figuring out how to manage your wallet. If you sense hesitancy, acknowledge it, but don’t judge yourself. Identify your resistance and figure out ways around it. You should be sitting on that egg like a stubborn hen, not avoiding it.
I promised that I would write about my investing mistakes. I suppose it’s time to come clean.
Most of my career involved working at Big 4 accounting firms and large corporate tax departments in the financial services industry. Working for a Wall Street firm was no guarantee that I was proficient at making good investment decisions. The reality is that I was aggressively ambitious in my career and rarely paid attention to the important tenets of investing. Back then, my job required long hours and there were summers that I didn’t see the light of day. Inevitably, every other area of my life was neglected. Getting advice from colleagues was no help either. See my guest post on DistilledDollar.com. I read a few books, but my immature mind and stupid habits managed to squash my investing success.
Consider these blunders:
Betting on the next best thing: Nanotechnology. I thought I was catching an unknown trend in technology. Bye-bye $8,000.
Expecting Quick Results:
HD Home Depot – Bought Sept, 2002: $33.36, Sold in 2006 at $37.50; today $156.00.
AMAT Applied Materials – Bought Oct 2002: $11.91, Sold in 2006 at $17; today $44.00.
Let me state emphatically: I didn’t sell these stocks because I needed the money.I sold them because they weren’t blowing my socks off. Despite a 40% gain, AMAT wasn’t turning me on.
Ol’ reliable. Isn’t she a beaut? This baby is turning 20. While most people would rather be seen in the back of a hearse than a car this old, I embrace its charm. The visor sometimes falls in my lap, the radio volume lowers or becomes sharply louder when I hit a bump, and there’s that strange clicking when I put the fan setting on the front windshield.
She’s been sprayed a few times to cover up the bruises. The front bumper is secure, but if you look closely, it’s slightly askew. That’s left over from when an old man T-boned the passenger’s front quarter panel. She’s been punched in the gut by shopping carts and side-swiped by careless drivers but she rides on like a champion.
You know that soft whistle-y sound when the aura enters the room in the Twilight Zone? I hear that coming from under the hood. Those sounds are helping me secure my future as I’m aggressively working towards an early retirement.
Of all the things we buy, our car is the most personal and sensitive. Next to a house, it’s also the most expensive. And people love to judge, right? We are all judged on what we drive. Some will even determine if you are a good match for your car. Like, “What’s that old geezer doing driving a Corvette? There should be a hot guy in the driver’s seat.” Gotta love the American way.