We are all such creatures of habit. We are told or warned about doing/not doing certain things. We instinctively, or even experientially, know that life would be better if we obeyed our inner voice, but we just don’t listen to ourselves—let alone to anyone else who is warning us or just giving us some friendly advice.
Some obvious examples relate to an activity nearly all of us have been, or are currently, involved in—driving!
- Don’t text and drive. My wife and I recently witnessed several near accidents—during the same one-hour trip—because the driver was obviously texting.
- Don’t drink and drive. The number of news reports about drunk-driving incidents proves that too many are not heeding this advice.
- If there is a center turning lane, use it.
There are many more! All you have to do is ask anyone if there is anything that they see drivers doing wrong and you’ll get a quick list.
Some other examples related to finances that seem to be obvious to me, but evidently are not obvious to others, are as follows:
- Don’t spend more than you earn—definitely the cause of many other issues, but really just a symptom of a deeper problem.
- Related to number 1—don’t abuse credit cards or car loans.
- Don’t buy an investment just because it has performed better in the recent past. This and number 4 are two of the biggest mistakes I see people make.
- Don’t sell an investment just because it is not performing as well as what you are looking at buying in number 3. Assuming it is a solid investment, selling when it is currently struggling could end up costing you a lot of return if the investment rebounds.
- If you can’t take the heat (down markets), stay out of the kitchen! I can’t make guarantees about performance, but I can guarantee you one thing—ALL STOCK PRICES WILL GO DOWN AT SOME POINT!! If stock prices never went down, the annual return would ultimately be the same as a money market fund. It is the risk of a downturn in price that produces the annual return that over time has always been larger than a money market or certificate of deposit.
- Be sure you always keep enough reserves in “safe” places like money markets, CDs, or certain types of bond funds so that you don’t have to sell a growth investment (like stocks) to meet a short-term need.
- Don’t buy a fixed indexed annuity under the premise that you will be able to earn most of the “up market” in stocks but never lose money when the market goes down. Indexed annuities were developed as a competitor to CDs, not stocks. When the insurance company attaches a guarantee to an indexed or variable annuity, the guarantee is NOT the same as a CD. I can guarantee if the “guarantee” is in the “income account” versus the account value “bucket,” you will NEVER receive that guarantee. You can find out more about annuities at PlanFirst.com/Talking-Money. There is a section called “Annuities” under which you will find several radio shows that I devoted exclusively to a discussion of the various types of annuities.
More to come—
