Financial Rubbernecking—And How to Avoid It


11-17-16Few things are more frustrating than being in a long traffic jam only to find out that the reason for the delay is because drivers are stopping to look at an accident off to the side of the road or, worse yet, on the other side of the highway.  What a colossal waste of time and effort that produces nothing and delays you from getting to your destination. If that doesn’t make you want to scream, I don’t know what does!

Unfortunately, when it comes to our financial lives, we are too often guilty of the same intense waste of time and effort. Many people will stall their efforts toward financial happiness and success to stop and look at what others are doing. This behavior is based mostly out of fear (FOMO strikes again!) and an insecurity that someone knows something you don’t—and they’re right, and you’re missing the boat!

Our minds often work in a way that seems to lead us away from our best interests and overall success. Take the example of selecting a stock (no, I am not recommending stock picking). Every stock YOU decide is a good deal is concurrently hitting the trash heap of the investor looking to sell that very same stock. But your brain has decided that it’s a good idea.

If you have a current financial plan, a roadmap that outlines your goals and provides you with appropriate options and choices, the only justification to get off the track is because you suspect someone else knows better. But perhaps the person who is espousing these appealing ideas doesn’t even have a financial plan, a qualified advisor, or a team of professionals focused on their success—but their story sounds intriguing nonetheless.

Several years ago, a physician client called to tell me about a stock that a friend of his was promoting. When I asked him about his friend’s qualifications, he replied, “He’s a nephrologist.” My response was to ask how that qualified him to make investment recommendations. “He’s a very smart guy and makes a lot of money,” he replied.

After reviewing the offering, I found that while returns were highly touted, significant risk was hidden, and my clients’ risk tolerance was well below the risk involved in this speculation. The draw of having the same investment as this very rich and smart doctor, however, was too tempting for my client.  Despite my warnings, he went ahead and signed on. Thirteen months later, the investment was in trouble. Twenty-two months later, it was bankrupt.

We can be our own worst enemies when we allow outside influences to capture our imagination and take us off the task of managing our financial lives within the confines of a well-conceived and constructed plan. The delays and distractions can have a disastrous impact on our success and the ability to reach our goals in a timely manner.

Knowing the difference between a fanciful emotional reaction and a real reason to investigate other options—in other words, making the right decisions for the right reasons—is critical to your financial well-being. It takes a level of self-control and confidence that you’re getting appropriate advice and assistance. Those who are DIYer’s are especially susceptible to getting stalled in financial traffic jams, if for no other reason that the lack of objective advice.

So, how do you avoid the traps of financial rubbernecking and continue on your way to reaching your financial goals and living your values? Try the following tips:

  1. If you have a financial plan, make sure it is current and clearly reflects your values and your goals.
  2. If you don’t have a written financial plan, find a planner who works only for you to help you create one.
  3. Monitor your progress with your short- and long-term goals. Assess what’s working and what might need to be addressed.
  4. Turn off the financial shows—the advice they give is not for you! They don’t know your situation, your goals, your risk tolerance or your values.
  5. The same advice goes for financial columns that appear to have all the answers. The more time you devote to these forums, the more time you will question the validity of your planning.
  6. Avoid the folks who offer stock tips like candy on Halloween.
  7. Understand that your emotions play a big role in your satisfaction. Don’t fall prey to rash decisions.

Remember: The best way to navigate the sometimes treacherous path toward financial success to keep your eyes on the road and steer clear of the problems and mistakes that cause delays at the least and disaster at the worst. And don’t forget to keep your seatbelt fastened—sometimes, that road is bumpy!