How to Protect Yourself from Two Common Money Management Mistakes

How to Protect Yourself from Two Common Money Management Mistakes

Did you see the movie, “Forrest Gump?” If so, you may remember this – one of Forrest’s many profound quotes: “My mama always said, ‘Life is like a box of chocolates. You never know what you’re gonna get.’” That’s exactly how I feel whenever I field questions for Savvy Ladies’ Financial Hotline; I never know what questions I’m going to get. Yet, the questions tend to be more similar than dissimilar. And, they are questions you’re likely to have as well. Which is why I’m giving you a glimpse into my hotline experience this week – by highlighting two callers with similar questions, even though their demographic profiles are as different as different can be. For example: There’s a thirty-year age difference; They are located in different parts of the country; They are of different financial means — one is a millionnaire, the other isn’t; one works with an investment advisor and the other doesn’t – she’s a self-directed do-it-yourselfer. However despite these differences, they both started our conversation with, “I lost money in 2008, and I panicked and sold most if not all of my stocks.” This was then followed by: How can I get back to investing and not lose what money I have left? What they didn’t realize is that the underlying premise of their two-part question represented two (2) common money management mistakes… Mistake #1 – They confused a negative (or low) return with poor performance Fortunately for you and me they are not one in the same! However, this only holds true if you remember that investment return is not the same as investor return,...
What’s Your Money Personality?

What’s Your Money Personality?

Are you an extravert or introvert? I suspect it was fairly easy for you to answer this question as you have probably been aware of your general personality type for quite some time thanks to comments from family members, teachers, and friends. I’ll leave it to those of you who are psychologists and psychotherapists to tell us whether our personalities are innate, constructed by environment and choices, or a combination. But as a lay person there are a few things I’ve come to believe about personalities: a) others are quick to ascribe “who” we are as early in our lives as birth; and b) our behavior and approach to life usually tends to live up to this description – even if we aren’t aware of the influence. You might also know your personality type because you took an assessment. Perhaps you did so in college or as part of the recruitment process for a job. The most common tests given are DiSC and Myers Briggs, with each using a different set of metrics to evaluate and describe your dominant behavior and preferences. Since your personality shapes so much, from how you view the world; to what choices you believe are available to you; to what you believe you deserve; to the actions you take, to name a few, it makes sense that there would be a sub-area of your personality related to money. But while it may feel familiar to have someone ask – “Are you an extravert or introvert?” – when was the last time someone asked, “What’s your money personality?” Hmmm…I think I hear silence! Within behavioral...

Does a Financial Plan Make You Cringe? – Part 1

October 4 – 10, 2010 is financial planning week. According to the Financial Planning Association, at least. And I couldn’t help but wonder: a) how many people are even aware of this, b) if people know what constitutes a financial plan, or c) if they even have a one? Actually, I couldn’t help but wonder how many people are like me: Walking around with all of the elements of a plan, but not an actual document that is the plan. To explain, it might be helpful to state the six (6) elements of a full financial plan as practiced by most financial planners (the parenthetical comments will be explained): Establish goals (have them written down) Gather data (collect weekly & monthly using Quicken Deluxe) Analyze & evaluate your status (analyze (hmm…); evaluate, yes – as in did I meet my goal?) Develop a plan (for some goals, but not all) Implement your plan (mostly) Monitor your status and re-balance (monthly & yearly) My performance as benchmarked to this list are the parenthetical statements. As you can see, I don’t completely hit the mark on each step; and, at times, this is frustrating because I feel like I should be better at this – especially given what I do in the world and my goal to “walk the walk.”  When I took a random, unscientific poll to my query, “Do you have a financial plan?,” the responses ranged from “I have a spreadsheet of expenses; I know what amount I want to save; I have a budget.” Each response was followed by, “What do you mean — a plan?” Interesting!...