Healthy finances have a lot less to do with numbers than most people think or are willing to admit. We all know that you have to spend less than you make in order to save, yet we are generally terrible at it. Why is this so? Because we are not honest with ourselves.
In order to consistently spend less than you make to then save more, we have to discover what is really in control. Are our impulses in control or are we in control. To some degree there will always be a little bit of both. The goal is to not be perfect but to be more in control than not.
So where do we start to find the areas of being out of control? Well, it starts with a willingness to look inside yourself to find things that are not aligned with who you want to be. Your daily financial transactions are a window into who/what is in control. To help you to discover areas of weakness, we have partnered with a firm that creates Financial Behavioral Assessments to help you to find weak areas to begin strengthening. Clients have access to full fledge assessments but we also provide free versions for everyone else.
If you are willing and open to be honest with yourself, I encourage you to click the link below and take some of the assessments.
Investing means so many different things to different people. One person will call something investing and another could call it gambling. Outside of the financial world it means, “to put money, effort, time, etc. into something in order to improve it or get an advantage”. Some key words in this definition is effort and time.
If we are honest with ourselves, effort and time is not something that we like. We want things to happen quickly with as little effort as possible. The irony is that we all know quick and easy usually is not very good. For some reason we do not care and continue to pursue quick and easy.
When it comes to investing, quick and easy is certainly not your friend. There are tons of research to support this and I will provide some links at the end to reference. When it comes to investing, time and effort go hand in hand.
Warren Buffett has a famous quote on time. It goes, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”. He even proved his point when betting a hedge fund that he would beat them by investing in an S&P 500 index fund over a 10 year span. Buffett crushed them. If you are not familiar with what hedge funds are, they basically buy and sell regularly. This is a gross simplification of a complex strategy, but it is the opposite of what Warren Buffett generally does.
Now on to effort. Keeping the theme of Buffett, it takes patience and discipline. He has strict guidelines before investing in a company. If it does not meet his criteria then he is fine with waiting or passing it by. Now ask yourself, how often do you say no to something you want? For most of us, the answer is rarely. It takes a lot of effort to calm our thoughts down enough to put things in perspective. Often times we rationalize, or rationaLIE, to ourselves so that we make it ok to do something.
The point of this is to not say that Buffett is superior to everyone else with picking stocks. The opposite is true. Warren Buffett understands that he can not predict the future and is often times incorrect. When it comes to investing he uses discipline and time to his advantage.
Basically, if you are constantly changing based on current news and trends then you might be gambling more than investing.