Think or Feel?
The financially optimal "spreadsheet solution" isn't always the right answer
Happy Wednesday!
I hope your 2024 is off to a great start and your college football team ended their season on a good note.
I’m a Florida State fan by marriage as Elizabeth and her entire family are lifelong fans.
Needless to say, we’ve been none too happy since being snubbed in the playoff picture.
And while we were hoping to see FSU stomp UGA over the weekend… it seems like most of the FSU starters decided not to dress for the game and they were crushed by the Dawgs.
It was painful to watch…
Today I’d like to revisit a critical topic that I’ve touched on before…
It’s the importance of considering your feelings when making financial decisions.
In July, 2021, I wrote about the fact that:
And back in July, 2013, I wrote about how most financial advice seems geared toward always rational, robotic thinkers. As humans we’re very rarely either:
While many financial advisors, armed with spreadsheets and/or software, can make a compelling financial case for doing something, I believe it’s worth looking beyond the spreadsheet and asking yourself an important question:
How does this make me feel?
I’m reminded of this idea based on some recent conversations I’ve had with clients and other folks…
But let me first say that it’s not a good idea to completely abandon rational, critical thinking in favor of your feelings.
There needs to be a healthy balance.
I’m sure many of you have thought to yourself in the last couple of years that you’d feel better if you got out of the investment markets. Just for a little while, until things calmed down a bit.
I know because many of you told me so using those exact words. Or other very similar words.
And while I’m always in support of only taking the level of investment risk you need to take versus the level of risk you’re willing to take, you also need to consider the “think / feel” continuum in the context of your financial plan.
And your life.
Also, if you’d like a soundtrack for this week’s email letter, here’s a good one from Beat Connection. Of course, the song is called “Think Feel”
But “thinking” versus “feeling” isn’t limited just to investment decisions.
For example, financially it might make the most sense to carry a mortgage.
This would allow you to keep more of your money invested for the long-term and you might also benefit by itemizing your mortgage interest on your tax return.
But many people - myself included - would rather have their home paid for.
Because it feels right. Better. More comfortable.
Regardless of what the spreadsheet may say.
No one has ever told me they regretted paying off debt, including their mortgage. And I’ve been having these conversations for 30+ years.
Some people plan to give money to their kids or grandkids.
Many of them would rather give it to them during their life, while others would rather leave it behind after they’re gone.
It generally makes the most financial sense to wait and pass along whatever is left over because who knows what might happen later in your life.
But I have clients who tell me it’s important to give money sooner when their kids can benefit more from the gift and they get to experience the joy of giving the gift right now.
Some clients - and their CPAs - are willing to take a more aggressive approach to filing their taxes.
Others much less so.
What are some other examples that come to mind for you where feelings deserve some - or A LOT of - consideration in the financial decision-making process?
I can think of many more examples.
How about you?
Hit reply and let me know.
And just between you and me, I’m trying to be more consistent in asking my clients not just what they think about a decision we’re exploring, but also how it makes them feel.
Next time we’re talking, I invite you to hold me to this.
I think AND feel it’s the right way - the only way - to truly deliver personal financial planning.
Now it’s your turn…
How does this week’s email letter make you feel? 😉
Links & Things
As we kick off another year, here’s a good list I’d encourage you to browse. Another great opportunity to consider not just how you think, but also how you feel about these:
And a great quote I stumbled across recently:
Courage is knowing it might hurt, and doing it anyway. Stupidity is the same. And that's why life is hard.
—Jeremy Goldberg
Thank You!
I’m glad you’re here. And I’m grateful to have you as a reader.
If you have any questions or an idea for a future email letter, blog post, or YouTube video, I'd love your input.
Or if you just want to say hi 👋
Simply hit reply - I read (and genuinely appreciate) each and every message you send.
Until next Wednesday,
Russ