Reflect, Celebrate, Recharge

Reflect, Celebrate, Recharge | Christmas Ball | DESMO Wealth Advisors, LLC

This is the last post of 2019 and we want to take the opportunity to thank all our followers: clients, friends, family, readers, and everyone else I may be missing, even deleters and unsubscribers!

I know everyone is rushing to get all the holiday shopping done, finish up decorations, and help various charities with holiday events. You are doing great, you got this! You are almost at the finish line.   

We tend to think that time is always running short, and we end up doing way less than we were hoping, but a lot of it is just perception, not reality.  We typically want more of everything, so it’s perfectly normal we wish we had more time too. But if you look back there is a lot you accomplished in 2019, I am sure.  Don’t believe it? Take some extra time off during the holidays, and find out. 

Take a break

Yes, cut ties completely from work, you deserve it.  Let go of everything for a few days, ignore the news, get into the holiday spirit, and enjoy this time with your loved ones. Binge-watch your favorite movies, eat your favorite foods and stay hydrated with plenty of prosecco. And, after the holidays are over, use the time to reflect on 2019. Go through the year, starting with the positives. You’ll discover you did amazing. We tend to overestimate how much we can do in a day, but underestimate how much we accomplish in a year.  Then think about the negatives. Start with things you had to go through but you didn’t want to. You may find some positive aspects when you reflect on them. And then think about things that you wanted to do, but didn’t get to. You may find that you are glad you didn’t. And if there is something you still think it’s important, there is always 2020! 

So, use your time off to reflect, celebrate your progress, and recharge; and stay tuned for exciting news from us in January! 

Best wishes from everyone at DESMO Wealth Advisors!!!

Massi De Santis is an Austin, TX fee-only financial planner.  DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives.  As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

The Power Of Budgeting

The Power Of Budgeting | Texas Instruments Calculator | DESMO Wealth Advisors, LLC

Budgeting is the heart of financial planning. Achieving your goals starts by being aware of how you use your money, so you can make changes that align your money choices with your goals. Learn how you can create a budget and how to make it a central piece of your financial planning process.

Last month we proposed our 30-day spending challenge. We suggested, as a way to get most of the benefits of a budget without actually doing one, to track your spending for thirty days. I know some people did it and told me about the benefits of going through the challenge.  Tracking your spending really goes to the heart of financial planning, which is making the best use of the resources available to you to achieve your life goals. Monitoring your spending for a while creates awareness of how you are using your resources now, and what you can do going forward.

So if you haven’t started it yet, there is no better time than the Holiday Season to track your spending. Whether you have done it or not, what are the benefits of the challenge, and what comes next?

Why do it?

You need to know where your resources are going to be able to make the best of them.  After paying taxes, some of our money is used to cover basic needs, including shelter, food, and basic social interactions.  After that we have what is called discretionary spending, which is spending on our wants rather than needs. What’s left after spending on today’s needs and wants can be saved towards future goals. By tracking our spending, we can create awareness about the relationship between our resources and our goals. 

Night guy, morning guy

For most of us, there is a tension between our discretionary spending today and the savings required to achieve our long term goals. It’s what economists call a tradeoff. Many times, the way we make this tradeoff is exemplified by Jerry Seinfeld in his night guy, morning guy piece. We spend on things that yield instant gratification and we don’t think about our future selves. When you track your spending, even for just 30 days, you will start to make the connection between the two.

Small spending adds up

Ever go to the Home Depot, Ikea, Target, Pottery Barns, [you name it] wanting to get one thing? What happens next? You find ten other items on sale and all of a sudden you need a cart to carry them.  We think we saved on great deals, but did we really? How much did we spend on things that don’t really make a dent in increasing our overall life satisfaction? If you write it down, you will see how much.

It’s quite likely that a few days after your excursion to one of the above places, you need to go to another one in the list. Do you remember what you did the previous time? Not really. If you tried our challenge you know this. As you write it down, you see that you have done it a few times in the past month. Small spending here, small spending there. And it adds up to an amount larger than you expected. Tracking helps you remember what you spent on and how much. After a while, you may realize that a sales sign does not necessarily means saving.

How does it feel? 

We often desire shiny new things like jewelry, new clothes, expensive bikes, big SUVs, etc.  Sometimes we even reason how the purchase will be valuable to us for years to come. How does it feel when we get the new thing? Remember that one of the things we suggested writing down along with the purchase was your feelings about it. Usually, we feel pretty happy right off the bat. Then what happens? That good feeling of happiness does not last very long. We get used to it, and move on to the next thing we desire. Why is that? Unless a purchase is aligned to our values and long term goals, happiness does not last. Go back to your notes. How many of the purchases are truly aligned to your goals? Be honest. I like to spend on cycling gear. I do ride a fair amount, and spending time outdoors riding is one of my values. But do I need the lightest, carbon-made bottle holders available? 

Awareness, not judgment

Don’t get me wrong, tracking isn’t about judging or feeling bad about your spending habits. It’s just about creating awareness of your habits. If you see a pattern that is not fully consistent with your values, you have just found an opportunity to make a change that will make you feel better. 

Your spending habits may also reveal something about your values. How we spend our money, and our time, may reveal what we really care about. If I consistently spend on cycling, maybe I should direct my efforts to cycling more, reaping greater benefits from my purchases, and at the same time reduce my spending on wines or movies.

Take it to the next level

If you haven’t started our challenge, the best time to do it is now! But whether or not you have been tracking your spending, here are some of the things you can do to make the most of your resources.

Work on your values

Read our blog on identifying your own values. Values are the why of our plan; they act as a motivator to work on your life goals. Combined with our spending records, values can help us identify areas that we can work on to save more or to get more value out of our money. Clear values will come to mind the next time you are flirting with bad habits, like overspending on something you don’t need just because it’s on sale. Reviewing something we believe in during tough times can appeal to our aspirational nature, and help us find the strength to overcome setbacks. Research in behavioral economics and psychology backs this up.

Try budgeting 

We used the 30-day spending idea to get the most out of budgeting without actually doing it. Realizing how valuable this awareness can be, why not give budgeting a try? Here are a couple of ways to get started. Continue for another 30 days, or even 60. This will give you a total of 90 days if you have done our 30-day challenge. Three months is a good amount of time to be representative of what your spending looks like on average. Then group your expenses into

  1. Fixed necessities (rent, loan payments, health insurance premiums, etc.)
  2. Variable necessities (utilities, taxes, food, home or car repairs)
  3. Fixed discretionary (club dues, various subscription services)
  4. Variable discretionary (entertainment, vacations, eating out, most wants purchased as lump sum)

Why these groups? Necessities cover your needs, so there isn’t much you can do to reduce them in the short term. Knowing how much of your spending is variable can help you understand how much your needs may vary month over month. Discretionary items are ones you can work on to reduce or control your spending. Discretionary isn’t just an expense that you don’t necessarily need. It also includes spending on a good or service more than what is strictly necessary. Everything in the fixed category is a financial commitment. It may take longer to change those spending items than changing variable discretionary spending. Consider this the next time you make a purchase that requires a long commitment. 

Budgeting as a guide

Once you have divided your spending and identified your values and goals, you have great information to take the next steps. What do you need to change? What are you willing to change? Plan to make the changes for the next 30 to 90 days. Use an app, like our complimentary budgeting tool, to monitor your spending and stay within your goals. The budget will give you a yardstick to measure your progress towards your long term goals. Stay within your budget and celebrate progress at the end of your 30 days!

Life and Money, the two sides of planning

At DESMO, we emphasize the importance of planning, and not the plan itself. You can create the most detailed plan, only to put it in a drawer and never follow it. Planning is a dynamic process where we link your money choices with your life choices over time (Desmo is a Greek word that means link).  The process we offered through our challenge is an example of that. 

Start by setting your values and goals. Monitor your spending. Review your goals, and revise if needed based on your spending habits. Review your spending, categorize expenses. Set spending goals. Follow your budget guidelines. Celebrate progress, you are getting closer to what really matters for you. Set goals, monitor, review, revise, and repeat!

Happy Thanksgiving from all of us at DESMO Wealth Advisors, LLC!

Until next time!

Massi De Santis is an Austin, TX fee-only financial planner.  DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives.  As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

What Is Budgeting Anyway?

What Is Budgeting Anyway? | Pen and Notebook | DESMO Wealth Advisors, LLC

If I told you there was a tool that can help you reduce unnecessary spending, solve your money problems, and achieve your financial goals, would that get your attention? Probably. If I told you that tool was budgeting though, your reaction would be more like, “what else you got?” There is just something about the word budgeting that makes it uninviting. And it maybe even more off putting if you actually know what budgeting is. Carl Richards of the Behavior Gap compares budgeting to flossing. We know flossing is great for you dental health, but most of us do regularly only around dental visits, about two weeks a year. With budgeting, we may get started along with all our New Year’s resolutions, but we how long do we keep up?

Our Challenge

So, as I was thinking about a budgeting post, I asked myself.  What if there was a way to get most of the benefits of budgeting, without actually doing it like a financial planner?  I thought about it, I asked Carl Richards, and I came up with a fun way to start. And I challenge you to try it, starting today! Post about the challenge on our facebook page!  At the end of it, you may want to pick up budgeting. If not, I am sure you will learn something valuable about yourself. Now, if you already do budgeting, just like flossing, keep doing what you are doing, you are doing great!  But join us anyway, you may learn new things about yourself. 

Awareness without a budget

Here is the big idea. If you want to get good at anything, where do you start? The answer is awareness. You need to know your strengths and weaknesses. Only then can you hope to improve your game at anything, from sports to enlightenment. Budgeting is so crucial to financial planning because it brings awareness about your financial strengths and weaknesses, and you can use this awareness to achieve your life goals. I am happy to tell you more about budgeting and how we do it with our financial planning clients any time. But is there a way to increase financial awareness without setting up an actual budget?

Just track your spending

So here is the challenge. Give it a shot. Track your spending for the next 30 days. Yes, that’s it. Don’t worry about what app to use. The best way for the purpose of awareness is writing down each purchase. Just carry around a pen and a little notebook, and each time you make a purchase, write down what you spent and how it made you feel. This is a no questions asked, no judgment exercise. Just behave as you normally would, and simply track spending. If you think tracking your spending affects your behavior, write down how it does so.  At the end of the 30 days, go back through your notebook and just notice. Become aware. That’s it.

You can use apps and your phone or tablet if you want. Use Notes or Keep, or your favorite note tracking app. You can use Mint if you like. But I suggest simpler is better for this exercise, so find a little notebook and start writing. Make this fun, challenge your significant other or best friends to do it. Remember when you walked around the office with the step pod or fitbit to measure your steps? A spend-tracking notebook is way cooler.

Focus and awareness

Here is why it works. For each expense over the next 30 days, you take an extra moment to reflect on that spending, just by writing it down. That’s why I suggest writing; it increases your focus and awareness. You can learn a lot about your behavior in 30 days. 

At the end of the 30 days of tracking, review your spending notes. You will notice certain habits. Maybe you’ll be surprised by how much you spent on cycling gear, those wine bottles you had to try, or the expensive yoga clothing.  And that may or may not be bad. If one of your values is to spend time cycling, wine tasting with friends, or doing yoga, at least part of that spending aligns with your values. If you find it is all of the above though, chances are you are overspending. 

What’s Next?

First, make a connection between your spending and your income. Categorize your entries by essential and discretionary. A discretionary expense is something you could do without, or that is more expensive than necessary. Be careful what you determine as necessary, cable or frappuccinos aren’t (what is a frappuccino, anyway?).  How large are your essential and discretionary expenses as a fraction of your income? If you find you have a lot of discretionary expenses, there is good news: you have room to improve!

Review the values we have worked on here. Does your spending align with your values? If not you have to consider whether to change your habits or your goals and values. There is no right or wrong answer, and now you have the information to make the change. It may be OK to spend on wine if time with friends is one of your values and you like to share your passion for wine with them. You may just have to consider how this value ranks with others in your life.

Just do it

There are two main reasons why you may want to avoid my challenge. One is that you already know where your money is going. You think you got it under control. I hate to break it to you, but you don’t. When it comes to spending, there is our spending self, great at rationalizing all our spending, and then there is the truth.  We don’t know the truth unless we see it in front of us. So I challenge you to take our challenge. The second reason may be that you are not sure you really want to know. But this exercise isn’t about making us feel bad. There is no judgment. It’s really simply about observing our behavior. The behavior may reveal something about our values, and can help us prioritize our goals going forward. So it is just as much about finding what matters to us than it is about changing behavior. 

Start our 30 days awareness challenge today! Then read our post 30 days from now to learn what to do next!

Until next time!

Massi De Santis is an Austin, TX fee-only financial planner.  DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives.  As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

The Best Time Is Now!

The Best Time Is Now! | White Clock | DESMO Wealth Advisors, LLC

Mailchimp says the best time to build a marketing mailing list is when you first get your business idea. But if you didn’t do it then, the second best time is now!  When you think about it, the same goes for many other things. The best time to join a gym is when you first get the idea. The second best time is now. The best time to start studying for a test is when you start the course. The second best time is now. You get the idea.

Last week we talked about retirement planning. The best time to start savings is when you get your first paycheck. But what if that’s not you? What if you rarely thought about 401k decisions and your retirement plan? Or maybe your retirement plan is OK, but you have been putting off something else important, like planning for your children’s education, reviewing your insurance needs and coverage, your student loans, you name it.

Don’t Get Discouraged

If you feel this way, know that you are in good company. Most of us feel the same for one reason or another. With limited time on our hands, we simply tend to prioritize things that give us instant gratification or solve an immediate problem over things that may be more important but don’t affect us right now, like retirement or estate planning.  One reason we may put something off is that we perceive it as overwhelming. Financial planning can certainly feel that way. If you are a family with young children, you probably have to think about your career plans, insurance needs, mortgage payments, your children’s education, your retirement plan, and basic estate planning on top of everything else that affects you right now. Where do you even start? 

Another reason we put off planning is that we may hear advice that we believe is unattainable.  For example, you may have heard that to retire comfortably you need to replace 80% of pre-retirement income, or that you need to accumulate 25 times the retirement income you want in retirement. Say you make $100,000 now. These rules of thumb mean you need to generate income of $80,000 a year throughout retirement, which you can do if you accumulate $2,000,000 by the time you retire.  Many of us don’t even want to go through these calculations for fear of what we may find.

Start today!

Whatever the reason why you have been putting off important plans, don’t get discouraged and take some action today. First, you get a hug from us at DESMO. Like us on facebook and we’ll like you back.  You got this. Then, forget about rules of thumbs or the idea that planning is painful and overwhelming. Here are two simple ways you can go about this today:

  1. You focus on making a few, high impact actions, starting today;
  2. You hire a certified financial planner or CFP®. 

Let’s discuss (2) first, as it’s the simpler option. Many good planners make it really easy to schedule a consultation from their website. They usually have a button that works like this.  I suggest you look for a CFP® professional because they adhere to a higher set of ethical standards for clients, and are trained in comprehensive financial planning, the only way to have a truly personal plan.  Look for someone that you can connect with. Hiring an advisor is like hiring a personal trainer to help you reach your fitness goals. Besides being the expert, the advisor acts as the ‘workout buddy’ you need to accomplish your life goals. 

There may be two types of deterrents to working with an advisor. One is cost and two is having enough money to invest. You may think: how can I add this cost if I am already behind with my savings? Keep in mind you are not simply paying for a plan or a service. You are paying for a better outcome. If the outcome you can achieve after paying the cost is better than what you can achieve on your own, the cost is worth it. Some advisors may require a minimum of investable assets, like $300,000 or $500,000 to invest with them. That’s typically because they charge you for managing your money, and include financial planning as a free service. Usually you get what you pay for, so seek fee-only financial planners that charge for the financial planning service and don’t have a minimum requirement. At DESMO, we believe everyone deserves a personal plan and so we have no minimums. 

Now let’s discuss (1). If you are a DIYer and aren’t ready for the help of a planner, focus on making high impact decisions today. First, get financially organized. As we discussed here, financial organization equals awareness. You can use this awareness to set realistic goals and find ways to save more towards them. If your main goal is retirement planning and feel you are behind, save as much as reasonably can, and review your cash flows regularly for ways to increase your savings. Take a look at our guides, and read up more on the subject of planning. A good book to start with is The One Page Financial Plan, by Carl Richards.

Whether you hire a planner or decide to improve your financial wellness by yourself, the best time to act is Today, so don’t wait!

Until next time! 

Massi De Santis is an Austin, TX fee-only financial planner.  DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives.  As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

Once More with Passion: Let’s Get Financially Organized!

Find Your Focus | Tools | DESMO Wealth Advisors, LLC

Why? You may ask. I already have trouble keeping my room or office tidy.  I get it. But trust me, it pays off. You will thank me later. Getting your financial house in order has a number of immediate advantages, nicely organized below.

  1. A catalogue of your most valued possessions. You may find you own more than you thought, or highlight things may be you don’t need to own. This may help you “declutter,” an investment wisdom that helps you align financial possessions to life goals. 
  2. Increased awareness.  What’s the best way to improve your golf swing, or your freestyle stroke if you are a swimmer? Take a video. Seeing is believing. Getting organized lets you see at least two things:
    • Your net worth. This is the sum of everything you own, like your house, your IRA investments, etc. minus what your owe, like your mortgage and other loans. Your net worth can tell you how close you are to achieving your financial goals, like . It’s one of the measures you can use to monitor and celebrate your progress, or to make adjustments if you have a setback.
    • Your statement of cash flows. This is the sum of all your income sources, including wages, rental property income, etc. minus all your expenses. The greater this number the more cash flow you generate that can be used for your long term goals.  
  3. More savings. You never realize how much you can cut spending until you start looking at your spending patterns. If you need to save more towards your goals, dig deeper into your spending patterns. We can all find expenses we could have avoided. Wait, did I really buy that second mountain bike?
  4. Helps you align your behavior about spending and investing to your goals, and give you the best chance to actually achieve them.  It’s simple. Your goals tell you where you want to be. Your financial dashboard tells you where you are. Your statement of cash flow tells you about the path you are taking to get to your goal.  There has to be alignment between these three, or chances are you won’t reach your goals. 

I realize that point two may be a contentious one. Many of us don’t want to see because we are afraid of what we may find. This should not discourage you. First of all, you may actually realize you are more on track than you think.  And if you find that’s not the case, what you see can help you find a solution to your problem. The sooner you act the better.

Key Steps

OK now, If you can’t wait to get started, here are four steps to get financially organized.

  1. Start using a password manager.
  2. Start using a password manager. Yes, this is so important, I thought I should say it twice. I too, thought I could just use one password for everything or write my passwords down in a secret little book. But that’s when all I was doing on line was checking yahoo mail or bidding on ebay. Now we run much of our lives online.  Real cyber security experts suggest the use of password managers like LastPass, Keeper, etc. Beside cyber security, the password manager generates strong passwords so you don’t risk running out of ideas, and it remembers them for you! Plus, you can use it across all your devices. I don’t remember having to reset a password since I started using a password manager, because my app always remembers them! 
  3. Use technology like Mint, RightCapital, Personal Capital or others to link all your accounts. All these can create a net worth statement and will monitor your spending. You can do this in minutes if you have a password manager.
  4. Start paying attention to your spending habits!

This process works best if it is integrated in a comprehensive financial or investment plan. 

So check our website to learn more about how our investing and planning approach can help you achieve your life goals, particularly if you aren’t convinced about financial organization yet!

Until next time.    

Massi De Santis is an Austin, TX fee-only financial planner.  DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives.  As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

Find Your Focus

Find Your Focus | Bike Trail | DESMO Wealth Advisors, LLC

It’s simple, what you focus on determines where you go. Consider the following tips about focus.  Are you a downhill skier? Never look at the tips of your skis. Always look ahead and anticipate your next turn.  Do you ride a mountain bike downhill? Don’t look at your front wheel. Visualize the trajectory ahead of you. You ride a road bike through a set of hairpin turns? Don’t worry about turning the handlebar.  Focus instead on visualizing your trajectory through each hairpin. 

In essence, don’t just look where you are going, focus on where you want to go.  Failing to do this can get you into trouble.  The sitcom Frasier has a perfect example of this process at work in an episode where Frasier learns to ride a bicycle. If you haven’t seen it, I highly recommend you watch it on youtube.  Fraser is afraid of hitting a sycamore on his path. But precisely because he focuses on the sycamore, he panics and keeps crashing into it. When he finally learns to avoid the sycamore, his colleague Julia warns him about a big mailbox, and you can guess what happens next. 

While we may laugh at Fraser’s misadventures, we all know how that feels. When it comes to investing, we are all subject to the same psychology. We tend to focus too much on short term performance, like monthly or quarterly market returns, while our goals may be 10 or more years from now.  The anxiety brought about by this focus on short term performance leads to bad decisions. And we hit the mailbox.

Financial commentators often act like Julia in Fraser’s, they play on our worries. Take the recent talks about renewed market volatility because of trade negotiations. Should we get out of stocks now that prices have dropped? And buy stocks again when the market goes back up? That does not sound like a good recipe for investment returns.  Do we even know the effect that trade negotiations will have for our goals? Unlikely. Acting on this type of beliefs is speculation, not investing. 

The reality is that volatility has been part of the stock market since we have recorded data. And why not? Markets rewards risk taking.

So should we do nothing? For most investors the answer is YES.  If the recent volatility is giving you anxiety, go back to principles. Why do you hold the portfolio that you hold? Go back to your investment policy statement. Are your objectives still current or has something changed? Do your investment guidelines still apply? 

Oh wait, do you know what an investment policy statement is? If not, that’s your real problem.  Many investors hold a hodgepodge of investments based on suggestions from coworkers, relatives, neighbors, or a self-professed financial guru. They never really stopped to seriously think about WHY they hold such an allocation.  Start with why, identify your goals and build a set of investment guidelines around them, taking into account your ability to take risk. Your values, goals, and risk tolerance are the foundations of your investment guidelines, or the investment policy statement. Write it down. If your portfolio is aligned to your investment policy statement, you are directing your focus to what really matters, your long term goals. Short term performance is just part of the process, not necessarily a reason for change.  

Find your focus, start working your own investment guidelines today! Download our guide to investing to learn more about our approach.

Until next time.

Massi De Santis is an Austin, TX fee-only financial planner.  DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives.  As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

Take The Long View

Take The Long View | Riding a Bike | DESMO Wealth Advisors, LLC

Welcome to our blog! In this first post we discuss the key principle of our financial planning and investment philosophy, the ability to take the long view. We choose this ability because it is the single most important skill to investment success.  If you think about it, it is the most important skill to achieving anything in life!

One of my favorite authors is Matthew Kelly.  He writes about many topics, including happiness and life satisfaction, and has written a short book with the title “The Long View.” The book is so good that I always keep copies for my clients.  Kelly describes the long view as a brand of wisdom that takes into account the effect that today’s actions will have not only in the present, but also far into the future, including your long term goals and life pursuits.  This concept resonates with me because in economics, we formalize it and apply it to the study of investment decisions, and at DESMO we put it to practice for our clients. 

We can all learn to take the long view. Every time we evaluate a decision “Do I need that second mountain bike?” or when something happens, “Argh, the guy just passed me and has now slowed down below the speed limit!” Let us pause to think about how it affects our progress towards long term goals, whether financial or otherwise. Putting things into the right perspective will help us make better decisions. 

Patience

One reason why taking the long view is the most important skill to succeed at anything, Kelly explains, is that it contains one of life’s most precious commodities, patience. Taking the long view teaches us to be patient, and I think we can all agree that patience is something we could have more of. Life is made of relationships, and being patient helps you with relationships. Would you rather have a spouse, friend, neighbor, teacher, boss, or running buddy that is patient, or one who isn’t?

The same applies to financial planning and investing, which are long term decisions.  Consider retirement, a key goal for most people. Many decisions we make today will affect our ability to retire comfortably, but we rarely think about it in making any of our daily decisions. We fail to take the long view.  As a result, many people put retirement planning off and undersave for it.

And just as in relationships, patience is crucial to investment success. Most investment mistakes happen when we fail to be patient. For example, research shows that overreaction to short term news causes investors to follow a pattern of buying high and selling low, a bad recipe for investing.  Taking the long view helps put performance into the right perspective. The market volatility of the last few weeks should have little impact for most investors with a 10, 20, or 30 year investment horizon. In fact, it may even benefit them.  

Values, Planning, and Coaching

Taking the long view in our daily lives can be hard, as so much of what we are exposed to pushes us to make rushed decisions.  Financial commentators often lead us to react to events we have very limited control over, and even ones that do not matter to our long term goals. So how can we redirect our focus? Most of us (me included) need two things. A plan based on our own values and priorities, and some level of coaching. 

To succeed, a financial plan has to start by clearly defining why money is important to you, a topic we will discuss often. You have to define your set of values and priorities. These form the WHY of your plan, the key to keep you focused on the long view.

Coaching is essential too. The goals that require planning are the most important in our lives: our kid’s education, our independence, our retirement, our legacy, and [your goal here]. We don’t just want to give it a shot, we want to give it our best shot, and coaching can help us do that. Coaching can help us monitor and celebrate progress, deal with setbacks, and make proper adjustments as life happens.

The best plan won’t help you if you can’t stick with it, and research in behavioral economics shows that key reasons for this are failure to consider personal motivations or values, and lack of coaching.

The benefits of this approach extend beyond investing. Start with your financial plan, and this ability will also help you in other parts of your life, including relationships, your career, and life experiences.

Check our website to learn more about how our investing and planning approach can help you achieve your life goals

Until next time.    

Massi De Santis is an Austin, TX fee-only financial planner.  DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives.  As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.