Thelma & Louise
Don't drive off the cliff, just turn the wheel...
Good Wednesday morning!
Let’s say you’re driving a ‘66 Ford T-bird convertible with your best girlfriend.
And you’re driving at high speed toward a cliff.
What happens next?
I’ve never seen the movie “Thelma & Louise” but I’m familiar with the ending.
Maybe you are too.
Granted they’re being pursued by the cops, but they ultimately choose to drive right off the cliff.
The end.
But what about you?
I’d like to believe that if you’re behind the wheel of a car and are heading toward a cliff, you’d simply turn the wheel and go in a different direction.
Or you could hit the brakes.
Regardless of how you react, it’s clear that you have options.
Choices.
If you’re headed toward a cliff, you’re not destined to drive off it.
Stating the obvious?
Maybe.
And while there are often times when you might feel like you’re hurtling toward disaster, the solution is often a simple adjustment.
Here’s a not-so-little secret among many financial advisors…
Financial planning won’t ever end in disaster.
But that’s only true if you regularly review and update your financial plan and make necessary (and hopefully small) adjustments along the way.
Also, notice I didn’t say a financial plan couldn’t fail.
It can.
Once again, this is me beating a dead horse about the value and importance of ongoing planning. Not just creating a plan one time and hoping for the best.
But even if you believe what I’m saying here, that doesn’t eliminate your emotions which can make you feel like you’re speeding headlong into ruin.
While it often feels like “this time is different,” it typically isn’t.
In fact, Carmen M. Reinhart said,
“More money has been lost because of four words than at the point of a gun. Those words are ‘This time is different.’”
But this raises an interesting conundrum.
If we can agree that you should regularly review your plan and make adjustments to keep your plan on track with a high degree of comfort and confidence, what do you do when the market’s falling and someone like me is telling you NOT to turn the wheel - at least when it comes to your portfolio.
This is one of the big head scratchers of personal finance and financial planning.
If the market’s dropping and your portfolio value is going down, you might feel like your money - and your life - is ending.
Feelings like fear, regret, and even anger, can leave you feeling like you should do something.
Anything!
Just make the pain of uncertainty stop, please!!!
I’m not immune to these feelings either.
And if you’re investing for the next 3, 5, or even 10 years, it might be reasonable to just stop what you’re doing and reset.
Take a breather.
Note: If you’ll need a pool of money within the next 5 years, my advice is to keep that money away from the investment markets. Safe, liquid cash is the only option that makes sense for funds you’ll need in 5 years or less.
But since most of you reading this have 20, 30, 40, or more years ahead of you, when it comes to your investment portfolio the best thing to do in most circumstances is absolutely nothing.
Or as I like to say,
Don’t just do something, stand there.
Because inflation.
Despite recent data and rising prices, the long-term inflation average is still around 3% or so.
This means that over 25 years, your life will cost about double what it costs today.
As I’ve written before, over long periods of time diversified stocks are one of the safest investment options available.
It’s our short-term emotions that often conflict with our long-term plans.
We can’t control the markets.
Or the economy.
Or politics.
Or interest rates.
Or the price of a gallon of gas.
Or the weather.
Of course, not having any control doesn’t stop us from thinking about, talking about, and worrying about all these things.
And more.
So back to Thelma and Louise driving off a cliff…
In the movie, they stop, clasp hands, and keep on driving. Over the cliff. The end.
While these are fictional characters in a movie, they actually exercised their control and made a choice to drive off the cliff.
And since you’re in the figurative driver’s seat of your own life, you can choose NOT to drive off the cliff.
Instead, you can focus on all of the things you actually can control or influence.
When it comes to your money, this includes:
How much you spend
How much you save
When you retire or plan to make other money decisions
How much you’d like to contribute your time or money to organizations that are important to you
How much, if any, you’d like to leave behind to your family once your gone
Or how much you’d like to give to or spend on your family while you’re alive to see them enjoy it (or for you to enjoy with them)
How much investment risk you’re exposing your portfolio to
But your life isn’t just about money. You can also control:
What you eat - and perhaps more importantly, what you don’t eat
The information you consume
The people you spend time around
The work you do
Your sleep and the amount of rest you get
And much, much more…
Just know that regardless of the crisis du jour and the media doing everything in their power to prey on your emotions so they can capture your attention and sell more advertising, you always have choices.
You always have options.
You can always make adjustements.
You can turn the wheel.
And keep on driving.
And living.
Links & things
NHDD
April 16th of every year is National Healthcare Decisions Day. This is day created to encourage adults of all ages to think about and plan ahead for potential health needs or crises. My friends at Five Wishes have created some resources to help:
A $50 Fable
Wanted to share this short post from my friend and fellow advisor, Jeremy Walter. It succintly sums up much of what I write and think about, and I’d ask you to give it a read:
The Federal Budget In Context
This comes from another colleague, David Hulstrom, and is his attempt to provide some helpful context around the Federal budget by relating it to a single family. Warning: it ain’t pretty…
Thank You!
I’m grateful to have you as a reader.
If you have any questions or an idea for a future newsletter, blog post, or YouTube video, I'd love your input.
Just hit reply - I read (and truly appreciate) every email you send.
Until next Wednesday,
Russ