In my role as a Certified Financial Planner over the past 36 years, I have advised thousands of clients with their financial plans and investments. In the process, I have observed and analyzed where and why some clients see financial success and do really well with their savings and investments, others do just okay, and some—a pretty small fraction—struggle to meet their investment goals despite sound financial advice. In addition, I’ve confirmed my observations with fellow financial advisors and looked at data on what drives investment success and failure.
So, today, I am going to speak from experience about ways I have seen investors be their own biggest motivators when it comes to savings, investments, and attitudes about money and financial success.
Innate Desire To Get Ahead Financially
In my analysis, one of the main drivers of wealth creation for financially successful clients is their innate desire to save, invest, and get ahead financially. What initially surprised me was that many of these men and women were not driven by the desire to get wealthy but by some form of higher calling… and understood that financial independence would free them up to do more of what they really wanted from life. Motivations for financial success vary but include things like saving for a graduate degree, supporting causes they deeply believe in, and starting their own businesses.
Eagerness To Seek Out Money-Saving Tips And Prevent Wasteful Spending
The other thing I noticed was that many of these future success stories are down-to-earth people who live well but always within their means. They buy good quality things and use them thoroughly and are always seeking value-for-money purchases. This means they will hold off on buying something if they know a Fourth-of-July or Thanksgiving sale is around the corner. They also have the knack—or perhaps a well-honed gut instinct—for spotting what is and what isn’t a good deal. There is an old saying that some people know the price of everything but the value of nothing. These people know the value.
I found that successful people enjoy the good things in life as much as anyone else, but always find ways to do them for less. For instance, they spring for good quality organic coffee beans, grind them, and brew their daily cuppa at home… and save a leisurely trip to a nice café for the weekend, foregoing a $5 mocha-frappuccino as an everyday affair. Or even if they choose to spend extra on this area of their life, they may choose to be more practical in other areas—in other words, trying to seek balance and moderation. They understand that it is important to cut expenses across the board, across big ticket items and small ones, and use economic logic to reinforce their focus on savings and non-wasteful spending.
No Pretenses, Honest With Themselves And Others
The third trait of winners is that they make no pretenses about their economic status and are generally honest with themselves and with everyone around them. This genuineness also seems to attract other like-minded people and creates a reinforcing and supportive socio-economic environment.
Their focus is on things like continuous learning, self-improvement, helping others, working sincerely, being team players, and openly seeking and giving advice. It is about winning as a team, not about getting ahead individually. Their spirit of positive generosity is somehow infectious, and I believe this helps them get ahead in their careers too, which keeps the money coming in so they can steadily save and invest. Their openness and honesty also mean they spend no time dwelling on negativity, bad-mouthing others, or wishing things were different without really trying to make them different. These financial success stories are doers who back-up their dreams and ambitions with hard work.
Calm Temperament And Intrinsic Optimism
My financially successful clients have calm temperaments for the most part and are intrinsically optimistic. It’s not that market crashes do not rattle them or make them angry that all their savings and investments get bear-clawed by a sharp drop in share prices; what helps them ride-out down cycles is their ability to control their instincts. They listen to the logic of staying in for the long run and eagerly add to their positions when things go south. In fact, I inevitably get calls from successful clients saying, “Steve, the market is down, what do you think I should be buying right now?” On the flip side, people who lack that faith in the market run for the exits when things get hot, and I’ve seen that too.
Save And Invest Through Thick And Thin
Like everyone else, my clients who ultimately did well over the long run have had their fair share of tough times, such as layoffs or injuries that reduced their earnings and savings potential. But even when the money wasn’t flowing in, I rarely saw them break their 401(k), IRAs, or investment accounts because their plan would always include a separate emergency fund for precisely such adversities. And, in the extreme cases where they would have no choice but to tap into their savings, they’d speak to me about their options beforehand and we’d work out a plan where they would put the money back as soon as they could and minimize fees and early-withdrawal penalties. Again, it was their unwillingness to get off the saving-and-investing train that helped them build wealth.
With some help from advisors, I’ve seen them plan their finances so there is money saved for college, a down-payment on a house, or both, and I have rarely seen them put their savings and investments on hold. In other words, they understand that stopping their savings and investments—even for a few years—does sizably reduce their nest eggs, and they live a lifestyle where not saving even when times are tough is generally not an option. So they minimize and juggle their expenses and always leave some money that they can put away.
Measured Risk Taking, Not Foolish Risk Taking
My financially successful clients understand that stock market investments carry inherent risks. So, depending on their age and family responsibilities, they build portfolios that include higher risk, higher return investments—but as a measured percentage of their entire portfolio. They also occasionally like to gamble on a few hot stocks, but with money that is less than 5% or so of their total portfolio. And the wise ones never bet big on a few select stocks, time the market, or try to ride market momentum. Instead, they are patient and wait for long-term returns, without worrying about watching the ticker every day or every hour.
As a result, they are less stressed, concentrate better at work, and are mentally and emotionally present for their spouses, partners, and families because they have clear investment plans and stick with them. And if they hear of a get-rich-quick scheme (think Bitcoin!) they inevitably walk away if something sounds too good to be true. If it’s really compelling, they come and see me, and we dispassionately look at the numbers to see if there is some money to be made.
Age No Bar
I have clients come to me at all ages, from those starting out on their first jobs to those who are nearing middle age or even retirement and want to know how they can better save for retirement, to pay for children’s college, and so on. And I welcome them all because it’s never too late to start saving…of course, the sooner, the better because you then have the advantage of compounding your gains over time. But as the saying goes, better late than never.
And remember, the government also knows that a lot of people do not manage to save money while they are raising families and therefore allows higher deductions for retirement accounts after the age of 50 so that you have some time to “catch-up” and put your finances in better shape.
My message here is if you’re behind on your savings or have ignored to save all along, don’t be shy, don’t leave things to fate. Get some knowledge by talking to a financial advisor who lives close to you and get back on track to financial success. If you want to learn how to choose a financial advisor simply go to stevepomeranz.com and check out our articles.
Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. The information contained herein is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. Please contact your financial advisor with questions about your specific needs and circumstances. There are no investment strategies, including diversification, that guarantee a profit or protect against loss. Past performance doesn’t guarantee future results. Equity investing involves market risk, including possible loss of principal. All data quoted in this piece is for informational purposes only, and author does not warrant the accuracy, completeness, timeliness, or any other characteristic of the data. All data are driven from publicly available information and has not been independently verified by the author.
Why retail investors almost always get burned
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