Do What You Want, When You Want
July 16, 2019
Often, people perceive their current financial situation as one of the largest barriers preventing them from living the life they aspire to have. Yet it’s no surprise that when it comes time to confront this obstacle most people don’t know where to start. I believe the best place to start is with yourself. No one has more control over what your money does than you. And when it comes to making any financial decision, it is important that you be level headed and clear about your path moving forward. You need a plan in order to avoid detrimental mistakes.
While making the right decisions is important for financial success, it is also important to ensure you have the mental stamina to back it all up. For example, you could have the most well-trained dog in the world, capable of performing hundreds of tricks, but if it is easily distracted by other dogs or the neighbors playing catch then unfortunately your pup will never be first in show. The way I see it, everything going on in the world around us has potential to derail our plan for financial independence and yes, I do mean everything. Whether it be your coworker’s fancy new car or that extravagant vacation your friends just go back from, they are all distractions. The truth is, you don’t know anything about what is going on in someone else’s life, and even if you did its relevancy to you achieving your goals is near zero. Focusing on what others have is a drain of your valuable mental energy, energy that could be spent on things like your own future success or improving relationships with loved ones and close friends. The point is, the person with the single greatest impact on the outcome of your life is you. Don’t dwell on the actions or achievements of others. Stick to your plan!
Hopefully, I have effectively persuaded you to filter out the actions of others. Now it’s time to evaluate the actions you make. Remember, it’s important to focus on the things you can control—not the things beyond your control. The stock market can be a lot like a rollercoaster. It may surge like a rocket or plummet without warning. This is a prime example of something that is out of your control. No matter how hard you try, nothing you do will ever have a substantial effect on the ups and downs of the market. What you CAN do is approach the market in a careful and calculated way to ensure that no matter what happens you will be ready. And remember, historically speaking long term investors who have a plan and abide by it have been bountifully rewarded in the long run.
By having a plan, you can avoid nearly all of the mistakes commonly made by inexperienced investors and give yourself the best possible chance to watch your portfolio blossom. One of the biggest problems many investors run into are high fees and expenses. These are the darlings of Wall Street and the negative impact they have can put a sizeable dent in your portfolio. Never forget, the Financial Services Industry is the master of hiding expenses, so if you aren’t careful you may find yourself in the position of paying huge management or transaction fees that inevitably eat away at your investment returns.
How then, can you avoid these fees and get the most out of your treasured investment? I believe the two most important factors to protect your investments are (1) to primarily focus on no-load (no commission) passive mutual funds, exchange traded funds and similar investment vehicles that track specific asset classes as measured by a default index and, (2) choose a Financial Advocate who has your best interests at heart. By choosing to invest in the passive investments mentioned above, you avoid the high fees and expenses associated with an actively managed mutual fund. Active managers typically try to “beat the market” which itself is very difficult to do, in fact by trying to do so it is so very easy to underperform the market. This is a classic example of risk vs reward where, in my opinion, the risk simply outweighs the reward. Now comes the importance of choosing a financial advisor who puts your best interests first. I recommend an independent Registered Investment Adviser (RIA) firm. I do so because RIAs are Fiduciaries and as such are required to use their skills to promote their clients’ interests and are not allowed to make personal gains at the expense of the client. Additionally, RIAs and their employees don’t work on commission, which helps align their interests with those of the client. To put it simply, the client always comes first.
Now this all may seem like a lot to take in, but the key thing to remember is that there is only one person with full control over your financial destiny…you. By making educated decisions and staying laser focused on your goals there is no limit to what you can achieve. So take the bull by the horns, make a plan and stick to it. By doing so you can achieve true financial freedom and live the one life you have, the best way you can!