Diet and exercise, that’s what my doctor tells me after my annual physical exam:
Every. Single. Time.
When I press her on this, she offers a deeper insight – something like “portion control.” Seriously? Who would have thought? It sounds incredibly straightforward. But is it really that easy to put into practice? It may be simple, but is this simple to implement? Well…that’s a whole different ball game.
I would very generously say I am inconsistent with my diet and exercise at best. Way too many empty pizza boxes pile up in my office during the first quarter of the year. On the flip side, my exercise routine gets a major boost in the summer – especially when I can hop on my bike. No doubt about it.
No different than your annual physical, your financial planning should not be too complicated. “Pay yourself first” or “live beneath your means.” Have you heard these before? I suspect so. Probably many times. Again, these are easy to understand, perhaps not so easy to implement. So what forces could be working against you with your financial planning?
The Media
Oh boy…do they make a big deal about EVERYTHING! The nightly news will say how the Dow Jones Industrial Average (“Dow”) dropped 150 points in one day. The next day they say how the market soared 115 points. And this just goes on and on. Many successful investors (mostly) ignore the media or take in very small, bit-sized chunks. Design your own system that filters out most of this “noise.” If you are getting too much media consumption, put it on a diet.
Turn off the radio, don’t turn on CNBC and cancel that magazine subscription.
Many long-term successful investors are generally looking at the macro trends not the day-to-day fluctuations. For example, what has worked in the bond market the past 30 years may not work over the next 30. Declining interest rates the past 30 years have had the wind at the back of bonds.
Things shifted considerably when the Federal Reserve Bank began significantly increasing interest rates beginning in the second quarter of 2022. Fast forward about a year and then the regulators shut down Silicon Valley Bank. While a few other banks were also shut down, we were fortunate this did not spread across the entire banking system.
Your Emotions
Ah yes, our two good old friends-fear and greed. As you may recall, the markets were falling off a cliff in 2008. Everyone though the world was coming to an end. It didn’t. Fast forward to December 2024 and the Dow breaks 45,000 off a low of 6,547 in 2009. Now the sky is the limit! 1)
Well, maybe not. Warren Buffet, CEO of Berkshire Hathaway, said:
“Be fearful when others are greedy and be greedy when others are fearful.”
Well said. Mr. Buffet appears to have taken his own advice and has a net worth of approximately $139 billion. Mr. Buffet announced he will be retiring as CEO at the end of 2025. Many people get greedy when the Bull Market is in full swing. This is when investors just can’t own enough stocks. Then the Bear Market kicks in and many investors start running for the hills. Fear takes over and everyone is dashing towards the exit signs. This is the exact opposite of what you likely should be doing.
Your Habits
Your habits extend beyond “Diet and Exercise.” Your financial habits have determined where you are today financially. They will also determine where you will be financially in the future.
Are you a saver? If so, congratulations! As a saver, do you also invest? If so, you should be well on your way. I won’t belabor the point about not getting your Grande coffee every morning at Starbucks (or some other daily purchase) . If you didn’t do this for the next 40 years and invested the $5 per day, you would likely be more financially independent. You’ve already heard this before.
Just begin where you are now. You can’t turn the clock back. You should however say, Goodbye to the Jonseses. 3 Practical Steps to Arrive Financially.
One Day at a Time
The question is do you have the financial habits to support your financial goals? For a couple of good books on habits, try reading One Small Step Can Change Your Life by Robert Maurer or The Power of Habit by Charles Duhigg. These can give you some practical steps to address changing your habits. Also, don’t forget, 3 Reasons to Skip the Financial New Years Resolutions This Year.
The popular media (here they are again!) would suggest it takes 21 days to change a habit. My personal experience is it could take 30-60 days depending on the habit. I know…I’m a slow learner. Oh, and just pick one new habit at a time.
Don’t try to quit smoking and drinking, go on a diet or try to start being nice to your mother-in-law all at the same time.
You likely won’t be successful with any of them.
For an example of a financial habit, if you are one of the Average Joe’s currently contributing 10% to your 401(k) plan, just bump it up to 11%. You may not even notice it. There will be obstacles and speed bumps along the way-no question. Expect them and be prepared for them. This will help you get back on track quickly.
Conclusion
Some things in life like “Diet and Exercise” are easy to understand. They possibly are more difficult to implement. Many facets of financial planning are also easy to understand. However it’s in the implementation where the rubber meets the road. We are suggesting a straight-forward, three-prong approach.
First, most folks are better served to reduce their media consumption.
Second, keep and eye on your and everyone else’s emotions. Actively fight following the herd.
Find your own grass to graze on.
Finally, carefully review your financial habits. If you don’t like your current financial habits, pick out one and work on changing it. Then go on to the next one.
If you have any questions or need some help with your “Diet and Exercise”, please call me at (860) 645-1515 or email Thomas.scanlon@raymondjames.com
This is original content written by Manchester, Connecticut Financial Advisor Thomas F. Scanlon, CFP®, CPA.
This was originally posted on November 10, 2022 and has been updated.
- investopida.com – April 25, 2025
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