The first half of 2014 is over and we can look ahead with great expectation to the second half of the year. No, that doesn’t mean your investment portfolio will rise (or that you’ll hit the lottery). It means that you have the opportunity to focus on the issues you value that you can control, and move them forward with strong action.
Regardless of the New Year’s predictions, the S&P 500 has gained 6.1% through the end of June and the Dow and NASDAQ are in positive territory. What does that guarantee you? Hmmm, exactly nothing. While the pundits, prognosticators and gurus will argue for their particular predictions for the second half, it’s all, as Shakespeare said, “much ado about nothing.”
Devotees of Barrons, WSJ, Financial Times and other outlets of financial wit and wisdom will continue to be treated to unabashed headlines designed to stir the emotions and fears of you, the reader.
But there’s another way to look at financial reality using a better measuring stick than today’s headlines.
Here’s my list of 15 financial realities that might help you put things in a better perspective.
1. Risk is everywhere and only you can determine how much risk you can handle. Risk goes beyond the stock market: there is business risk, interest rate risk, tax risk and inflation risk, just to name a few.
2. Risk management is not about how much cash you have or what percentage of your investable assets are in short-term bonds; it’s the other factors that can change your life and that of your family: think, accident, disability, death, sickness, hurricane, Alzheimers.
3. Your skill sets and ability to continue to learn, grow and evolve have more to do with your success than what the stock market does this year.
4. If you cannot pay off your current debt with your resources, you are insolvent. There’s nothing good about that.
5. Having an emergency fund of cash (or cash equivalents) is prudent and should not be viewed as money that is not growing; it’s there for another reason.
6. There are more economic uncontrollables than controllables. You have no impact on the economy and certainly on global economic decisions, cycles and interest rates. Get over it.
7. Investing for your retirement, regardless of how young you are, is a good idea—even if it’s just a small amount. Something is better than nothing.
8. Not having a will, Durable Power of Attorney and Health Care Directive is stupid and selfish. Next in line is having one that is out of date or irrelevant.
9. You are entitled to every tax deduction and credit allowable by law. Rely on experts to help you take advantage of whatever you’re entitled to.
10. Don’t count of the cost of college or health care to level off or fall in line with regular inflation. If it happens, GREAT, just don’t count on it in your planning.
11. A well-conceived and written financial plan is a useful tool to help you stay on track, provided you start with your values and what’s truly important to you. The only thing better is a plan that is updated periodically and tested for appropriateness.
12. Don’t get emotionally attached to a stock. It doesn’t know you own it and the company—while preferring to have a higher stock price—is not going up for you.
13. When you sell a security, there is a willing buyer waiting to pay that price. Which means that while you might believe the stock has reached its zenith, someone else believes otherwise.
14. Understand the difference between short-term, mid-term and long-term. Each time block requires different thinking and different types of asset positioning.
15. It takes real courage to stay the course while everyone else is freaking out over every headline. Remember the mistakes of the past.
As you ease into your beach chair, take a hike in the mountains or simply kick back on your patio or front step, think about what you need to do to become more financially secure and successful. It’s as essential as sunscreen.