by Catherine Novak, based on the MoneyMinding 12 Simple Steps by Tracy Piercy, CFP
A career magician named Tony Eng lived in my town of Victoria BC all his life, until he passed away earlier this year. When he died, it was major local news, because so many local families had been entertained and bedazzled by magic tricks, especially his sleight of hand. Tony could perform standing right in front of you and play tricks with handkerchiefs and cards with such dexterity that even though you were right there, you had no idea how he “put one over” on you. And you loved that he tricked you, because he did it with such warmth and love of his craft
Of course, not all trickery is so warm and fuzzy, especially when it involves your money. Now, this isn’t an article about con artists and other charlatans who are deliberately out to separate you from your money against your will. Plenty of articles have been written about those criminals; many consumer organizations, securities commissions and other regulatory organizations have information on how to protect yourself against theft, fraud and shady deals.
The fact is, we can be tricked by people and circumstances that bear no ill will at all towards us. We can be tricked by the nightly news, by a hot tip from our brother-in-law, or even by our own financial statements… if we’re not maintaining the right focus. Trickery happens when your attention is shifted away from the real focus and onto something else that’s eye-catching and flashy. You may think you have your eye on what’s important – in fact, you’re just looking at the carefully-shuffled deck, or the shiny object. And when your attention is diverted in this fashion, you miss what’s important. You’re duped, and the joke is on you.
The biggest “tricks” when it comes to money are the ones we play on ourselves, when we let ourselves get pulled off-track by undue focus on individual factors that don’t take into account our personal “big picture”. Two of these factors are rates of return and advisor fees. These can form a piece of the picture when we are making financial decisions, but to focus only on these “numbers” is to ignore vital information like your investment philosophy, the quality of your investment and when you need to turn that money into income.
What does it matter if your advisor fees are 2.5 percent when they pay for expertise that would have cost you more time and money to learn on your own? Why should you lose sleep at night in an investment more volatile than you can stomach just to chase a higher rate of return? Perhaps you can reach your goal with a lower rate of return delivered more consistently.
When it comes to money, your focus should always be on your personal, specific goals. Do you know how much money you will need to live life the way you want to? Do you have a plan to make that money come in each month, now or in the future? If so, make that plan come to life. Getting distracted by scary news about the financial markets won’t help. Spending too much time fussing over management expense ratios is counterproductive. Exhausting yourself searching through newspapers and driving across town to save two bucks with a coupon probably won’t help either.
Now is the time to sit down with a trusted advisor, with your spouse, even just with your list of priorities and ask “What am I doing to secure my income on a monthly basis?” You may decide to reshuffle some priorities. You may find that your portfolio needs rebalancing. You might not take your brother-in-law up on that tip -but then again, you might if it contributes toward your monthly income goals! At least this way, your eyes are open and you are looking at something solid and unchanging.
