I recommend reviewing the year just past and the year ahead between Christmas and New Years Day. I used to set goals for the upcoming year.
That is a young person’s activity. Young people who just read that are thinking “No, I want to keep striving my whole life.”
Take a moment to ponder the question of why.
Things to prove
Young people have a lot to prove to themselves, to relatives and friends, and enemies. Can I get and keep a good spouse? Be a good parent? Can I earn a living and become economically independent from my parents? Can I achieve extraordinary success in business, athletics, the arts, popularity with others, politics, or some other vocation or avocation? Can I be famous and admired?
At 72, I either did all that stuff or found out that it was not me. We have more than enough money to live the rest of our lives in more comfort than the prior years. Why earn more income or any income? Income is taxed in America and again in California. Wealth, generally, is not. Property taxes are the exception.
One of the lines in a parody song my Harvard Business School classmates performed at our 35th reunion was “Nothing left to prove.” Young people still have things left to prove.
We old guys do not have goals like more net worth so much as bucket lists of things we have yet to experience. We also have goals for our kids and grandkids—to help them have successful and happy lives.
I recently saw mention of John Bogle’s claim that all you need to know about financial investments could fit onto an index card. Here is one version of it: https://www.businessinsider.com/the-index-card-rules-2016-3…
I think that is an exaggeration, but it is a good starting point.
I disagree with #3 “max out your pension accounts” [401(k), IRA, SEP]. They are too restrictive in terms of what you can and cannot do. If your employer matches your contributions, that is another matter. Those are more likely to be worth the restrictions. Pension accounts also convert capital gains to ordinary income which is exceedingly stupid.
And I fear the federal government frantic for money to pay entitlements in the foreseeable future will try to confiscate them or impose financial repression laws which typically force you to move all the money into U.S. government bonds (for your financial safety, they claim—a lie—it is a way to sell below-market-interest-rate or risky, unsaleable bonds). Obama already tried such a special bond (MyRA) that was a voluntary attempt to do that. It flopped.
I will modify #5 to say to the extent that you buy stocks, buy broad-based index funds, but I prefer that you put money in home equity and your own business if you have one. In other words, I would generally put a smaller percentage of your net worth in index funds than the rest of the financial advisors. The stock market fell about 90% in the Great Depression.
The market values of homes fell similarly then, but their VALUE IN USE was unchanged and if you owned it free and clear or could make the mortgage payments, it provided you with a place to live. Near worthless stock certificates provide you with near nothing useful.
Skip the financial advisor—with no crystal ball, he is near useless
#6—make sure you have a fiduciary financial adviser—is self-serving for the financial-advice industry. The main basis for the index card list of financial advice is that you do NOT NEED a financial advisor. Fiduciary ones may be more expensive. You don’t need an advisor to save 10% of your income. You don’t need one to buy index funds—indeed, low-cost index funds are low cost BECAUSE they do NOT employ financial advisors.
The older one gets, the more holistic your view becomes. Young people tend to be the opposite—obsessed with raising their net worth or income or job title. You LIFE is the correct focus, not just your MONEY.
Not just finance
In addition to financial goals—net worth, income, debt-to-equity ratio, and a schedule for achieving the goals—you need health and safety goals, education goals, and goals for helping your children and grandchildren. You may have to care for your disabled parents, grandkids with failed parents, or older relatives, too.
For example, you should inspect your house and workplace and surrounding areas with regard to the natural disasters that are a risk where you live and work. Make your house and yard less flammable, more hurricane or earthquake proof. If you live or work or own property in a flood zone, get rid of it.
There are also dangers like assault and other crime. Get your annual physical and recommended screenings and vaccinations. Get to a healthy weight and blood pressure and cholesterol. Exercise. Buy a safer car.
Check the balance of your life. Is the pie chart of your life too big in chasing money and not big enough in chasing women (assuming you are a single male) or spending time with family, friends, and other relatives? You will miss your kids’ childhoods if you are not careful—they grow up fast.
On 9/11, no one on the doomed planes called their brokers. They all called the ones they loved.
You can do better in 2019 than you did in 2018, but it will probably not happen unless you stop and reflect, analyze, think about where you want to go and how best to do it. You need new goals. They must address all the financial, spiritual, and health risks and rewards and important people in your life, not just your own money or status.
Share this post