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A few years ago I accompanied a very accomplished UK physician to testify before a legislative committee in Frankfort. At the meeting, a state senator asked a convoluted – and mostly off-topic – question. After several minutes of awkward back and forth, the physician finally said, “I’m sorry, sir, but I don’t know the answer to your question. I’m just a lowly surgeon.” Lesson: Even very smart people don’t automatically know everything.

Intuitively, we realize we don’t know everything. So, sometimes I think our minds assume there is a system in place to protect us when we don’t have expertise in a specialty. Think about flying: We don’t know if the plane is mechanically safe or the weather is appropriate to take off. But, the airline and air traffic control do have the information and expertise to make those decisions for us. There is a system in place to keep us safe.

Maybe that’s why some people assume our employers select the right mix of investments within our 403(b)s and 401(k)s that are appropriate for our unique circumstances. If we don’t have the knowledge and expertise, there must be a system that takes care of us, right? Right? No, not really.

When I was a freshman in High School I wanted to invest in the stock market. I, of course, had no idea what that really meant or how to do it, but it seemed interesting to me. My parents, who at the time equated the stock market to something akin to three-card monte in Times Square, told me I could invest when I had saved $1,000 from my paper route. If I had invested my hard-earned $1k into the “stock market” as measured by the S&P 500 then (1979), it would have grown to $77,217 as of the end of this October. And, get this, if I had added just $500 each year to that initial $1,000 investment, the total would now be $400,446. Holy compound earnings, Batman!

Last week I wrote about the excuses people sometimes have for not preparing for their financial futures. This week, let’s talk about the opposite – what inspires people to overcome the excuses and engage a professional to guide them toward their financial goals? No matter the trigger, people are looking to simplify their lives and for peace of mind. So, it is important to find a financial planning professional who has worked with people in circumstances similar to yours. Below are some of the issues our clients have faced that prompted them to seek our help:

Despite the fact David Letterman now looks like Santa Claus and sounds like Oprah, his Top 10 lists live on. Here are my Top 9 reasons – I don’t believe in extra if it’s not needed - why people procrastinate about planning for their financial futures. I’m sometimes asked who our strongest competition is and I always answer, “People’s own inertia.” Meaning, it can take energy to start anything new. But, it can be more nuanced than that. Here’s what I’ve seen:

It’s been said that investing in the stock market is like riding up an escalator while playing with a yo-yo: just because the yo-yo goes up and down doesn’t prevent it from eventually reaching the next level. But, what if we could get to that next level a little faster by shortening the yo-yo’s string?

F. Scott Fitzgerald said, “The rich…they are different from you and me.” Recent research published by the National Bureau of Economic Research (NBER) proves he was right, albeit not in the way he believed. Their study found that investors with larger holdings earned relatively lower peak returns, but they earned them consistently, with less up and down. In other words, they take less risk and know that winning in down markets is more important than winning in up markets. Let’s take a look at why this is the case and some guidance on how to accomplish it:

Back in the late 1960’s the Stanford psychologist, Walter Mischel, studied delayed gratification by placing a marshmallow before a child and offering them a choice: eat the marshmallow now or, if they wait a few minutes, get 2 marshmallows later. The original study found that children who were able to wait longer for their reward tended to have better life outcomes – educational attainment, better health statistics, etc. Suffer now, enjoy later. As a side note, although I am definitely a saver by nature, I wouldn’t wait 2 seconds to eat something chocolate placed before me.  

There is a common narrative that savers will eventually reap great rewards by delaying gratification, but only after suffering first. In financial terms, one can eat their marshmallow only when they retire or reach financial freedom, but must drool until then.

There is, of course, a different way to view saving and accumulating wealth. I recently came across an advertisement from 1969 by the First Federal Savings and Loan Association of St. Petersburg. Florida, not Russia. I think it captures quite well the satisfaction and peace of mind one can enjoy NOW by saving and accumulating wealth. (I haven’t edited it, so replace their use of “man” with “person” in your mind while reading)