Have we become a nation of whiners? Do we have to always find someone else to blame for our problems? Have we forgotten that life in general is basically tough for everyone, and generally a lot tougher on others than on ourselves? Sometimes I wonder if Americans have forgotten that most people of the world don’t lose sleep worrying about taxes, elections, stock markets, or their portfolio because they are spending most of their time trying to find their next meal, or clean water, or a safe place to sleep. Watch the news now and you may come to the conclusion that too many Americans have become spoiled, like little children complaining about not getting some treat.
Which is why I loved the Dixie rodeo last week. What a great American tradition the rodeo is and, by the way, not a single person was seated during the national anthem. I didn’t see any whiny-babies there. The event is always more about the spirit of America than the actual processes of riding and roping.
As the parade of horses kicked off Saturday night’s activities, we cheered as our nine-year-old granddaughter Rylee rode past our seats. Then, in the excitement, her horse stumbled and she went over the top and landed in the dirt. We gasped, but she immediately jumped up and took off running after her frightened horse. She covered the whole length of the arena before catching him, at which point she grabbed the reins and climbed back on. Her new rodeo outfit was dirty, but on that horse again her smile was as big as ever. Kicking the 1100 pound horse to get it going, that 65 pound girl reminded him who was in charge.
In those few tense grandparent moments we witnessed what is so great about the American spirit, and what is always on display at the rodeo. It is the realization that things do not always go well, that falls are common, and bruises part of the experience, but big cowboys, and little cowgirls, never stay down.
Some may think cowboys who climb atop a raging bull, or jump from a well-trained horse onto the back of an unwilling steer are a bit crazy, and maybe they are, but you have to admire their courage and commitment. They don’t always win, but they never give up. Rodeo contestants impress me because they focus on the next ride, not the last fall.
Retirement planning will not always go as planned. You will have surprises along the way, markets may move against you, health will change, and grandkids may not visit as often as you want. At those times when life tosses you to the ground, dust yourself off, get back on that horse and don’t complain about it! There are still some great rides ahead of you. Rodeos, like them or not, there is so much we can learn about success in life by watching those who participate in them. Thanks Rylee, for your great example to all of us.
Football season has arrived. I suspect few activities generate higher emotions than a football game. The world may be in turmoil all around them, yet nothing seems to matter more to the fans than another touchdown.
Investors also tend to get caught up in emotions. One of those emotions is the sense of our own mortality and the feeling that as we get closer to the end of our lives, we become more fearful of making investing mistakes. I find this very comparable to a strategy common in football games, a strategy which I despise by the way, known as the “prevent defense.”
In the remaining minutes of the game, the team with the lead often changes their defensive strategy from one of trying to stop the opponent from moving the ball, to simply trying to avoid a big touchdown play. They pull the defenders way back to prevent a big pass, and in the process give up very easy short passes. I have watched countless games where a team that has successfully held their opponent all game long, moves to a prevent-defense, and ends up losing the game in the final seconds. The team that is behind takes advantage of the natural weakness of the prevent-defense and quickly moves the ball downfield for the score.
I question why a coach, whose defense has been successful at holding their opponent for 58 minutes, would suddenly stop doing what was working and change to a different, and clearly weaker, defensive strategy for the final two minutes.
As investors age, they are often tempted to employ a similar type of financial prevent-defense. Fearful of making a mistake, they stop doing what has brought them success all the decades of their lives, and move to a defensive stance hoping to prevent a big loss.
The problem with the prevent-defense in football is that it yields control of the game, and the all-important clock, to your opponent, at a time when control is the most critical. The same tactic in investing turns control of your investing future over to outside sources, such as your life clock, at a time when control is also very critical. I have seen people in their 80’s employ a financial prevent-defense thinking there was only a year or two left on their life clock, only to still be alive 15 years later. I have watched older clients live beyond their life clock and find themselves paying up to $30,000 a month for 24 hour nursing care. It’s pretty difficult to maintain that much expense on a prevent-defense.
You never know for sure when life’s buzzer is going to go off. You cannot tell what your opponent, (time, health, disaster) has in mind for you. Though it is wise in football and in life to make some adjustments throughout the game, do not be too quick to abandon what has been working for you. Otherwise you may find, as have many football coaches, that the prevent-defense strategy only prevents your own success.
I was driving down a newly repaved highway when I noticed two large mounds standing prominently out along the shoulder. Curious as to their nature, I took a closer look and found that each mound, made of sand, was about three feet wide and stood ten inches high. From the center of the mounds were dozens of busy red ants carrying grains of sand, one at a time, through a small crack in the new asphalt and depositing them on the sides of the mounds. Given the newness of the paving I was fascinated at the size of mounds these ant colonies had built, one grain of sand at a time. I contemplated the marvel of a city that lay right below my feet.
I have the opportunity on the pro-bono side of my business to counsel people who are struggling with their finances. Some are young marrieds but many have been challenged for decades to get control of their money. In most cases the solution, and inevitably also the great roadblock for them, is to learn to develop a system of consistent correct financial behavior over a long period of time. Discipline and patience, can solve just about any financial problem, but they seem to be the two qualities most lacking in those who struggle.
I often hear the discouraged response, “It will take years to do that.” To which I commonly reply, “The years will pass whether you do the right thing or not. The only question is what your situation will look like when they do.”
Building a strong financial future involves beginning today, not tomorrow, to set aside a certain amount of money on a consistent and regular basis. It also involves continually adding to your education, which can be done in many ways, not just going to school, so that you become increasingly more valuable to potential employers, or clients. In our rapidly changing society, as soon as you stop learning, your economic value begins to decrease. Likewise, each month that you don’t set some money aside, inflation creeps up on you and sets you back.
We can learn a lot from ants. They only move one small grain of sand at a time but they do so consistently, and all the grains add up to surprisingly large mounds. Some may say that ants have the advantage because they are not working alone, but neither are those who save. Every dollar you set aside becomes a little worker ant for you. As you move one dollar at a time into your retirement plan, those dollars begin working for you, moving dollars of their own through reinvested earnings or interest. If you are patient and disciplined, before long you will have your own little army of dollars working like busy ants moving grains of sand and building your own mounds of money. We can sure learn a lot from ants.
One day a nice lady came to my office seeking advice. She seemed quite distressed. When I asked what her main concern was she said, “My financial advisor has not made me any money in eight years.” As we reviewed her portfolio and the decisions that had been made along the way it became clear there was a need for some changes. I asked about her relationship with her advisor and she responded he was a nice person but that he had a narrow approach to investing and was resistant to change even though she often expressed concerns over the lack of progress. After I suggested some ideas to her, she graciously thanked me for my time and went on her way.
Several weeks later I ran into the same lady and asked her how things had worked out with her investing problems. She told me that she had gone to her financial advisor with her concerns and they had decided to just give it another year. She said she wasn’t totally happy with this decision but she figured she had given him eight years already so just one more wouldn’t hurt.
As humans we are wired to resist change. Most people keep way more stuff in their house than they need because they can’t bring themselves to get rid of it. We like to go on vacations to places we are familiar with and when we go to a restaurant, how many times do you find yourself looking at that huge menu, and then choosing the same thing you always choose? We develop similar habits with money. Young people who learn to save find it quite easy throughout their lives to keep saving. Those who are spendthrifts are constantly thinking that as soon as they get out of college, or get a promotion, or get the next job, money will flow in, only to find that they never seem to be able to get ahead.
As was the case with the lady who came seeking advice on her poor investing experience, there is a truth in life, (attributed to many authors), that goes like this. If you always do what you’ve always done you will always get what you’ve always got. It is such a simple concept yet so difficult for many to accept. Somehow we think things will magically change, though we continue to do things just the same.
If you have struggled with debt, then stop hoping things will get better and start living on a reasonable budget. If you have been married for several years and your savings account is still empty, stop pretending the next raise will make a difference and start today saving 5-10% from every paycheck. If your investments have not worked out for many years, change the way you invest. Stop living on the hope that things will magically change while you keep doing the same things. Otherwise, like the lady who visited my office, you better plan on continuing to get the same disappointing results.
I went cycling with my friend Chuck this week. We started in the cool morning air and headed out through Washington Fields. It was such a beautiful ride and I found myself thinking, “I sure love this bike.” I have a pretty nice road bike and though I am not a serious rider, it allows me to cover 15-20 miles in about an hour’s time, giving me both a nice workout and a wonderful way to start the day.
As we entered Hurricane, we decided to cut across a short dirt road over to the city’s paved trail. I quickly found myself struggling to maneuver my bike, with its skinny and hard tires, through the gravel and soft dirt. I found myself saying, “I do not like this bike at all right now.” My road bike does a great job on pavement but in the dirt, it is a disaster waiting to happen.
I have another bike, a hybrid, that I bought several years ago. It has large tires suitable for dirt riding, but smooth tread patterns, appropriate for the street. Initially I enjoyed riding that bike, but I quickly learned that a bike designed for both pavement and dirt, is ok for both, but not great at either.
In my recent columns on annuities, I received a response from a gentleman who said, “You clearly don’t like annuities.” I am sorry if I gave that impression as it was not my intention. My point was that all investment products have a purpose, and to get the best benefit from them, you need to first establish what the purpose is.
It is sort of like when I went to a friend who owns a wonderful cycling shop downtown and asked for his help in purchasing my current road bike. Before showing me anything, he took the time to ask me about my skill level, what type of riding I wanted to do, whether this was for pleasure or competition, and many other questions to define the purpose for which I was buying a bike. Then, when he had enough information, he walked me over to a beautiful road bike and said, “This is what you will want.”
Investments, like bicycles, are merely tools. Using a great tool for the wrong job can be disastrous. Tools that purport to be “all-in-one” like my hybrid bike, often do multiple things ok but nothing really well. Tools that are very specialized for one purpose, can be quite useless doing something else, much like my road bike in the dirt.
Some investing tools seek capital appreciation while others are designed largely to protect principal. Others focus on income. There are also hybrid investing tools that may offer to do multiple things at once. Investors should first establish what it is they need an investment to do, then choose the correct tool for the job. More likely than not, as with bikes, they will find the solution lies in using several useful tools to accomplish their goals.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 1173 S. 250 W. Suite 505, St. George, UT 84770.
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