Humility, like gratitude, is not so much a technique as it is a way of life.” – Ed Latimore.
New Year, same tried and true financial plan. While your goals may change, having a steady and reliable plan is crucial all year round.
In our latest video, Generosity Wealth founder, Mike Brady, briefly reviews 2021, and talks about the perils of predictions. Instead of a prediction, he offers you his 3 best to-dos and not to-dos for financial planning in 2022.
On the top of the to-dos:
- Have some humility
- Be disciplined
- Concentrate on what you can control
Watch the complete video to see the additional three not-to-dos that serve as a warning of what to avoid.
2021 saw a positive stock market index and even with rising interest rates negatively impacting bonds, the year still had low volatility. While you may be tempted to hang on the words of pundits prognosticating the year ahead, remember that 2022 is an unknown. However, with these practical tips, you can weather any storm.
Transcript
Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered right here in Boulder, Colorado.
2021 is now behind us and 2022 is here already. Let’s call 2021 what it was which is a great year, low volatile for the stock market indexes. Pretty much anyone that you look at across the board it was positive and many of them in the double digits, the teens all the way into the 20s. We’re talking value, growth, international. You name it, it was a good, relatively low volatile year. One thing that was not good in 2021 was with rising interest rates, bonds. One of the reasons why you have bonds in a portfolio is to dampen the volatility, so nobody ever complains about making money quickly and having high highs, but nobody likes losing money on the downside or having low lows. So, when you combine these two things together – bonds and stocks – you combine them together and instead of having volatility like this, the volatility is a little bit, not as much on the high side unfortunately, but also you don’t have it on the low. So, over multiple years it is, in my opinion, a better way to go and you can live with it without the emotionality that comes with, “I’m a genius, it’s so high” to the “I’m a loser, it’s so low.” It allows you to say with your plan which is really what I think it’s all about.
You’re going to hear a lot of pundits whether it’s on the radio, the TV, maybe even in print media, talk about what they think 2022 is going to bring. Oh, the market is going to be up this or it’s going to be down that. I avoid it. I’ve been doing this for 30 years and those guys are always wrong, but yet everybody always asks about the next year and they always give out their opinion, and nobody knows what the future is. I think that there’s lots of reasons to be concerned about inflation and the economy and things of that nature, but what we’re not going to do, at least not what I’m going to do, is change a long-term plan that I have for clients based on short-term events which I’m going to talk about here in just a little bit.
I want to share with you three pearls of wisdom and then three things not to do. Since this is my year-end video, or beginning of the year video, whichever you want to look at it, these are core values to what I think so I would like to impart them with you.
Number one to do – and I’m going to put them up there on the screen – is have some humility. The world is complex. Every time that I think I know absolutely everything, you can be sure I probably don’t. The duality of life is true. You can be happy and sad at the same time. You can have things happen in the market that don’t fit real nicely into a headline. The markets can be up one week and down the next week and neither of them made sense. Why would there be a flip like that? Up, down, up down. No, people’s pessimism and optimism isn’t changing every day, but if you’re a newspaper reporter you’ve got to figure out how to make it to a nice, cute little headline. Avoid simple answers to complex issues, and in the finance world things are complex.
Number two, be disciplined. Think about how you were successful up to now in your life. Was it being overly emotional? Was it allowing your emotions to dictate your logic? Probably not. It was because you had some discipline. You were methodical, you hopefully had control of your emotions. I’m going to encourage people to always do that and to continue what made you successful up until now.
Number three is concentrate on what you can control. There are lots of things in this world that we can’t control, but things that we can control is how much we save, how much we spend, when we decide to retire. Some of the factors that could derail us from our financial plan whether that is mitigating the financial loss that might be from our inability to work or a loss of our spouse. There’s lots of things that we can focus on to help ensure that we reach our financial goals. But let’s also not spend so much time and most of our effort on the things that we can’t control.
Here are three things that I have found over the last 30 years that are not helpful. The first one is short-term data is dictating your long-term actions. That makes no sense. If you’ve got a long-term plan, don’t let short-term data dictate that. That’s not helpful whatsoever. Just because the last couple of weeks or the last couple of months have been up, it doesn’t mean the next couple are going to be up. Or just because the last couple of weeks or the last couple of months have been negative and everything you read on the news or watch on the TV is negative, that doesn’t mean the next two or three months or the next year is going to be negative. It just doesn’t work that way. So, don’t do that.
The next thing is let your emotions be manipulated by the media. Most emotions are through the TV media, maybe some through radio and a little bit less on the print. Don’t do that. If it bleeds, it leads and that is the same thing with finances. I’ve already talked about being disciplined and controlling your emotions and things of that nature. This is a part of it. This is one of the variables to you being successful is don’t let yourself be manipulated by entertainment people who really just want you to keep tuning in. Don’t be that person.
The third thing is don’t have a feeling. You know what, I just have a feeling the market is going to turn. I know more than the market is really what you’re saying. Don’t be that person. I have yet to see that work out. Stay invested, have your long-term plan and don’t mess with it. Find something that works for you that you can stick with, and then stick with it. Don’t listen to your brother-in-law, don’t listen to the TV guy. Stick with what works for you and not always listen to the other people who are not focused on what your financial success looks like.
That’s it for my pearls of wisdom and also things to avoid. This next year I’m very excited. I’ve got a couple of good charities that I’m giving money to in relation to all the people who are having birthdays this year. Every month this year I’m going to have a lottery where I pull a name out of a hat and I will contribute $250 to the charity of their choice. I’m really excited about that and we have a great birthday package in store for 2022.
That being said, I’m here at all times. I love what I do and I want to do this for another 20 years. I just absolutely love it and it doesn’t even feel like work and as long as I’m physically and mentally capable I’m going to be right here.
Mike Brady, Generosity Wealth Management, 303-747-6455. You have a wonderful day, week, month, year. Bye-bye now.