I believe I wrote about this a number of months ago as the election season was starting to ramp up, but I feel the need to mention it again: Don’t let politics drive your portfolio decisions. In the weeks leading up to the election, it can be easy to get caught up in the theories and predictions about what might happen if a particular candidate wins or a certain party gains power. Some will take those predictions and make portfolio decisions in the hopes of getting ahead of the curve regarding how the markets might react to certain administrations. First off, it is incredibly difficult to predict how the markets will react to elections. What economic pundits predicted at the start of the past two administrations did not come to pass with the markets performing much stronger than expected. Rather, you should make your portfolio as you normally would and ignore the election when doing so. Don’t give you portfolio any special treatment between now and Nov. 3. That can be hard to do, especially with the news cycle (and social media and conversations with friends) being filled with election talk, it won’t be easy. However, trust me, it will be worth it to keep your portfolio on the same road it’s be going on.
If you’re serious about saving for retirement, then you’ve probably done a lot of research and reading about the strategies you can use to do it, the tools the use, and things to look out for. Over time, that knowledge can really build up and it can be tough not to want to share it with family and friends. Guess what? There’s nothing wrong with that. After all, knowledge is power. That means the more you–and in this case, others–know the better you can be when it comes to making financial and retirement decisions. Now, before I go any further, I want to caution to you to be careful when it comes to giving advice regarding taxes or particular investments. Furthermore, if you find that you’re gathering a large following or are taking payment in return for financial advice, you should be very careful and maybe should consider becoming a financial advisor or wealth manager so as to protect yourself and get the credentials needed. In regards to taxes or tax-based strategies, you can potentially open yourself up to some legal liability, particularly if you are not properly credentialed to do so and if things go south (in other words…don’t mess with people’s taxes or tell them what to do with their taxes if you’re not a CPA). Anyways, in regards to sharing your knowledge, maybe you’ve learned some really great tips from an financial advisor or maybe you really like crunching numbers and want to help others who aren’t so skilled. Don’t be afraid to share your knowledge and skills to help others obtain a better grasp of their finances and retirement savings. Even if it’s just a matter of helping a friend set up a spreadsheet to track their expenses or helping a family member research an investment opportunity, you can share what you know and help others. Of course, if you aren’t comfortable with helping others with financial planning or preparing for retirement, you could also always just pass on the name of a reputable wealth manager or financial advisor.
There are many reasons why people retire. There are also many reasons why people continue to work well into what some consider the “retirement years”. If you are one of those people working well into your 60s or 70s–or have decided you want to continue working well into those age ranges–what keeps you motivated to stay in the working world? In recent years, many have said that health and retirement benefits are a big factor for staying employed. For others, it can be the social aspect of the office that keeps them motivated to keep working. Some may have no choice but to work so as to pay off debts or build up a bigger nest egg. If this current recession that we are in remains for a prolonged period, many older workers may continue working so as to be able to afford retirement. Such decisions were common as well a little over a decade ago when we went through our last serious economic downturn. Whatever your reason for continuing to work into your golden years, just make sure that you fully embrace your decision and that you are doing so for the right reasons. Also, don’t lose sight of retirement and the wonderful time that it can be for you. Set retirement goals and celebrate when you meet them.
Don’t spend more than you make. It’s one of the basic tenants of being financially responsible. Yet, many people don’t realize that such a practice doesn’t mean you have to be cheap. No, you don’t need to drive a cheap car. No, you don’t need to give up a small daily luxury (Starbucks, anyone?). Yes, you do still need to be smart with your purchases. However, that doesn’t necessarily mean you have to be a miser or penny-pincher. Too often, people equate living within their means with being frugal and cheap–sometimes way too much in that direction. Many think that in doing so they will become wealthy and have more money. Yes, that may be momentarily true, especially if they make a lot of money and spend very little, but that doesn’t always play out that way. For example, if you buy a new car that costs $18,000, you’re buying a car that you will probably have to replace sooner than if you bought a higher quality $25,000 car. That’s called being financially responsible and thinking ahead. The price difference is clear, but so too is the quality. What’s most important with such a purchase is whether you can actually afford the $25,000 car. If you can, then you should factor quality into your purchase. This thought process doesn’t just matter for cars, but for all major–and some minor–purchases you make. Living within your means is a sweet spot between being cheap and making purchases that can put you underwater. Also, just being cheap won’t make you rich. Instead, it needs to be combined with two other tenants of financial responsibility: investing for your future and spending on things that you deem to matter most in your life (and making associated decisions). Living within your means isn’t always easy and it may require some tough decisions, but it is easier–and more reasonable–than just being straight-up cheap.
As I’ve mentioned in many past blog posts, saving for retirement is a long-term mission. If done properly, saving for retirement usually involves saving for something that won’t happen for decades in the future–that is, if you start saving young. In this day and age, though, it can be tough to think so far in advance, especially for those of younger generations struggling to get situated in the real world. For those who are decades away from retirement, staying focused on saving can be tough. It can be tempting to spend that money in the current day instead stashing it away for your post-working life. These decisions can be things such as deciding to limit your nights out per month or buying a cheaper used car. It can take some serious willpower to save up for retirement and to think about the future like that. The idea of using the money in your current life is often too overpowering for many. Now, I’m not saying you can’t enjoy life a bit here and there in the present, but I am reminding you that you should also be thinking about your future and you should be smart with your money and decisions to spend it. That means having the strength to say “no” to yourself and put that money into your retirement account or savings. Remember, no one said saving for retirement would be easy!
If you follow the markets and investing, then you are probably aware of the terms “bull” and “bear” when describing their projected activity. A “bullish” market is on the upswing, while a “bearish” market is in decline over a period of time. This is important because given how the stock market has performed over the past year or so, it’s not very clear as to where exactly things stand, so you will likely have people with various views and opinions about whether it’s a bear or bull situation. You may even find yourself feeling strongly about one trend or the other. While there is nothing wrong with having such opinions, you should be sure to analyze your investment decisions from both sides before purchasing a stock or investment. For example, if you are considering purchasing a particular stock that suits your bullish tendencies–hypothetically–and have read many bullish takes on this stock, you would be wise to find a report that takes a bearish approach. That bearish report may bring forth information that you hadn’t thought of before that may change your opinion. If can be easy to stick with the opinions and viewpoints that are comfortable and familiar, but sometimes looking at things from the other side can be beneficial. Any good investment professional will do that. If you have questions about investing or want to grow your portfolio, talk with an investment professional or wealth manager.
When it comes to finances, there tend to be two approaches that people take: They either ignore their finances in the hope that things just work out or they constantly look at every little aspect of their finances and analyze every decision. And no, neither approach provides a healthy way to view your money. Instead, they can lead you to over-analyze your decisions or to ignore warning signs that your financial future might not be so bright. What you really want to do is find a sweet spot somewhat in the middle. That means checking on your finances enough to know what’s going on and make good decisions regarding your money, but not stressing or worrying about every little decision. For example, you can check your bank accounts–and another financial accounts you use consistently–daily, but you probably don’t need to check your retirement accounts every day. Instead view those lesser used accounts weekly or a few times a month. This will allow you to know what’s happening and to catch potential issues early, but will prevent you from making too many decisions that could hurt your savings in long run. Also, keep in mind that many things regarding your finances are outside of your control (i.e. market swings). Thus, there is only so much you can really worry about and only so many decisions you can make. However, you can be on the lookout for signals that things may change in the near future and take action based on those indications. So, do you constantly check your finances and over-analyze or do you ignore your money and hope it will be fine in the future?
Chances are, “buy and hold” is a part–quite possibly and important part–of your retirement savings plan. It’s most likely a strategy you are taking in regards to some, if not all, of your investments. However, it is not as easy as it seems. Holding requires virtues that not all investors or retirement savers have; it requires patience. To be successful with a buy and hold strategy, one needs to be able to ignore the markets and not get caught up in trends, but rather focus on the long-term goals and benchmarks they have set. Setting guidelines and rules to follow as part of the strategy can help you to remain focused on holding as well as protect yourself from not holding on too long, if such a situation arises. Remember, emotion is not helpful when making investment decisions and can prevent you from making rational decisions regarding your portfolio and investments. The more emotional your decision-making is when it comes to your investments, the more risk you run of damaging your portfolio. One last thing regarding the buy and hold strategy, it’s very important that you have reasonable asset allocation and that you rebalance your portfolio from time-to-time. Aside from that, you really shouldn’t do much else with a holding strategy. If you have questions regarding a long-term hold strategy or investment, you should speak with a certified financial planner or investment professional.
You can plan all you want for retirement, but unexpected events and unanticipated opportunities may still arise and require you to make a decision. Those decisions may be anything from whether to take a trip to visit a friend or family member or whether to make a home improvement or repair. If you planned properly for retirement or built up a large nest egg, those decisions may be easy. However, if you do not have much financial leeway in retirement, those decisions can be difficult. Regardless of whether it is difficult or easy, you will still need to make a decision. Depending on what the decision entails, you may want to take a number of factors into considers, including: cost, how it impacts your savings, whether it changes your life, and whether the decision is necessary or just a luxury. How do you plan on making decisions in retirement?