When I am trying to find a good topic on which to write, I tend to gravitate to things like “lessons learned” or “lessons I wish I learned” or “lessons people should learn.” For some reason the lessons my wife, Lori, and I taught our children popped into my mind, and I started thinking about whether or not these lessons could be applied to planning and investing. Whether or not there truly are parallels, I won’t debate with you. However, I did come up with some thoughts that might approach the concept of parallels and might benefit someone along the way as well. If you don’t agree with the lessons we shared with our children, please don’t tell me because they are grown and out of the house already.
1. Your decisions should be based on your character and not on your circumstances
- We tried to work with our kids on the quality of their character. You should understand what the appropriate decision is before you are in that emotional situation. You won’t always make the right decision, but you stand a better chance of not making a devastating one.
- What about buying or selling a stock because it is rising or falling in value. Or what about making an investment decision because of a great and passionate sales pitch? Are you prepared for these types of events?
- Like the emotions of a young man or woman in a situation where they might try that drug for the first time, or might take that relationship to an inappropriate level, the emotions created by fear or greed related to a stock or other investment should not be the impetus for making a decision. Plan ahead knowing you are going to be in a situation like this at some point in your future.
2. Don’t make decisions that will close doors
- Similar to Lesson 1, we are talking about the magnitude of the consequences of a decision. When our children were young, we wanted to help them learn to make good decisions, and we would let them make many, of course while protecting from a distance. The idea here is to consider the ramifications of the decisions you could make, and be certain that the decision you make won’t close the door to an opportunity you may desire in the future.
- Likewise in making a financial decision, don’t make a decision that could close a door to opportunity to a successful future. Investing your entire 401k into your company stock is one possible example. Ask the former employees of Enron or GM if they think this a good idea.
- We all have decisions to make. Some big and some small. Just understand the potential consequences, and the magnitude of those consequences, before you make that decision.
3. We are predisposed to certain addictive behaviors
- Take that first drink, that first drug, that first hand in poker and you may have taken your first step toward addition. Some people can smoke cigarette after cigarette and then quit at will. For others, that first dose of nicotine can be the start of years of a habit they wish they hadn’t acquired. Know where you are predisposed and stay away.
- I think that greed and fear can be considered addictive behaviors. Some love the rush they feel when buying a stock on a tip that it will be a big winner. They develop a need for that rush. And this behavior can lead to financial disaster. On the other hand, we may have trained ourselves to be fearful of just about everything, and because of that fear, we can’t make a decision and can’t take decisive action.
- Know your behavioral weaknesses and build restraints. Have a plan that you can fall back on when those addictive feelings hit. Build boundaries around yourself and your finances for when temptation strikes.
- Too many times in life we allow the word “try” to creep in. When we use the word “try,” we are giving ourselves permission to fail. “I tried to get up and get to school on time; I tried to do well on my math test.” What we practice; what we train for; is ultimately what we become good at and where we succeed; either for our good or to our detriment.
- When we try to select successful investments and try to have a successful retirement, we are accepting the idea of failure. If we train for success in these areas, we take the necessary steps of educating ourselves and of soliciting the help of others. These steps help us move closer to those successes we desire.
- As Yoda in Star Wars said, “Try Not. Or Do Not. There is No Try.”
- Bad things happen. It may be from a bad decision, or it may be from something beyond your control. As humans, we hate to fail and we hate for bad things to befall us. We can let those bad things eat at us if we allow it. We taught the children that yes, bad things happen. But in the end we will get through it. And when we are through it, we can talk about it and even laugh about most. Since we know we are going to be okay, just understand that this is going to be a good story one day, and we are going to be better for having gone through it.
- As investors, we can make bad decisions; whether it is the investment itself, whether it is the advice we took from someone, or whether we didn’t start planning and saving as early in life as we should have. The bad decisions and the consequences remain, but we are more knowledgeable and more experienced now. We’ve made it to today, and what happened is a good story that someone needs to hear.
- Life happens. Sometimes we make circumstances better and sometimes we make circumstances worse. But we are still here and what happened makes us more interesting, and makes for a good story.
- You are not going to have engraved on your tombstone that you wish you had worked more, or that you wish you had two more cars and a boat. Your regrets will most likely fall into the category of not spending enough time with your family and friends or letting them know how much you care about them. Money is nice to have, but not at the expense of the truly more important things.
- A financial strategy is great because money in retirement is nice to have. But don’t get so engrossed in making money that you don’t spend time with your kids, grandkids, spouse, and friends. You aren’t just creating a memory for yourself, but a lasting memory for them as well.
- Spend time with those you care about most.
- We hate to see our children make bad decisions and then pay the consequences. Of course, we have to allow that to happen at times for their own good. However, we will do everything we can to prevent a catastrophic bad decision. We often do this by telling them stories from our own experiences. Lori was excellent at telling the kids to think through what will happen with this decision or that decision. Chuck often tells Lori how he hears her voice in his head when he is weighing his options.
- When it comes to finances, there are many decisions that can be made. How in the world do you know what to do? Well maybe it is a good idea to ask someone who has been there before. Bad financial decisions can certainly be catastrophic and definitely warrant another’s opinion.
- It is never a bad idea to learn from someone else’s experiences.
- Do you know anyone that argues for the sake of arguing? Someone who has to be right and will go to great lengths to prove just how right he or she is and how wrong you are? No one in those conversations comes out a winner. Life is too short to live feeling badly all the time. Wouldn’t you rather be happy than be right? And you may in fact be right, but why insist on the need to argue away someone else’s “facts.”
- Siblings sometimes get into arguments about their parents things when parents are no longer in the picture, especially when parents don’t share their wishes in clear and unambiguous language. And if you think about it, for the most part, the arguments are about “stuff.” And how important is stuff when comparing it to family unity. Dad may have actually wanted me to have it, but you want it so badly, please go ahead and take it. (You can be happy instead of right, and the family unity protected.)
- Don’t worry about being right all the time. That can be painful to everyone. Choose to be happy!
- All too often in our society, people like to be the victim. They are not at fault for whatever unfortunate event occurred. Someone or something else prevented my success. Don’t fall into that trap. Things do happen that you are not responsible for, but how you react to those circumstances, you are.
- When it comes to planning or your investments, don’t be a victim. Learn and understand what you are doing and what you are purchasing. Things may not work out as hoped, but you took responsibility for the ultimate veto power in the decision. Now you can move on to the next strategy or decision more knowledgeable.
- We will ultimately be happier, and have a better chance at a successful life, if we take responsibility for ourselves, our actions, and our decisions. A Harley Davidson ad said, “When writing the story of your life, don’t let anyone else hold the pen.” Makes sense to me.
- What we practice, we become good at. If we think negative thoughts and repeat them, we become good at it. Unfortunately that tends to make us skew our view of life in a negative way, and we can’t help but be in a bad mood most of the time. Hanging out with negative people only makes this tendency worse.
- How about the news? Not just the negative happenings of day to day events, but the “catastrophic prophecies” of the financial “experts?” You can’t help but start feeling, thinking, and talking negatively if surrounding yourself in this type of atmosphere.
- Life is short. Life should be filled with good things. You don’t have the time or the desire to invite negativity into your world. Negative stuff happens. Deal with it. Don’t dwell on it. Move on to better things.
Of course there are more lessons we shared with our children, but you are probably tired just going through these ten. Maybe another time.
As our son, Chuck, put it this way, in jest, when sharing his thoughts on his and his sister’s upbringing; “we turned out all right despite our unfortunate circumstances.” Yes they did, and Lori and I couldn’t be prouder of them.