Things I learned this year
As my second last post of the year, I wanted to share some of the things I learned this year about personal finance and life. It sure has been a crazy year with a lot of learning experiences to be sure.
- Personal finance lessons are life lessons and vice versa. People tend to separate their “money life” from their “non-money life” but they intersect. The lessons you learn in personal finance and the same lessons to be taken in life. For example, I learned this year the virtue of patience. As I wrote yesterday I jumped in early twice in the market- the second time buying BCE after the deal was first announced as potentially being off- when waiting a few more weeks would have made me better off.
- You judge people in bad times and not good times. This is one of my favorite sayings in life but it rang so true this year. I made a comment to my business partner this week that “people have sure gotten dumb the last two months.” A lot of people have done stupid things as the economy worsens but, money comes and goes, character is enduring- and people remember what you did when the times got tough. If you want a real life example, Bear Stearns was the only large institution not to participate in a mini-bailout in the 1990′s when a financial institution went down (the name alludes me right now…). When it was recently in trouble, many on Wall Street were happy to see them in trouble. Karma. Pure karma.
- The tyranny of the “expert” opinion is leading us to ruin. Remember when the experts said oil would hit $200/barrel? Those same experts now say oil will trade for $30/barrel…which, means given the accuracy of their predictions, we’ll see $100/barrel of oil soon enough! As my friend, who works on the trading floor said, most experts have spent their entire lives in glass towers forgetting the human side of finance and don’t really understand how a business runs outside the financial statements. They got us into this mess and we are still listening to them for advice? My financial advisor actually tells me not to listen to stock recommendations his own firm gives! He readily admits the experts’ agenda is to get you to buy something.
- Cash flow sure does ease the pain of declining net worth. I probably took a 20% haircut in my net worth this year but doubled my dividend income. I panic about the former but the latter makes me relax a little. Cash flow, not pure appreciation, is a key to personal investing. Better to be cash flow rich than asset rich without the cash flow.
- The more complicated something is, the more likely it will blow up. I have seen enough business ideas and investment products to last me a life-time (you know people make good money being lice pickers for schools? Who knew!). The ones that work are simple and elegant. Remember this early next year as the industry blitzes us with crazy products to pump up sales.
- There’s a lot of luck involved in personal finance. Sorry, as much as personal finance is portrayed as a science, there’s some dumb luck involved. I sold my position in GE for tax reasons in early spring in the high $20′s before the stock came crashing down. I had no insight into GE. I just needed to sell it.
- …but you also need to work hard. I am not sure if I have ever met anyone in finance, business or life who succeeded on pure talent alone. You have to put in an effort to get the reward.
- Stay positive. I don’t blog about it but I have been witness or part of some large business issues this year and we (we being business partners and associates) have muddled through or solved them because the supervisor in charge has remained positive and remained calm. The same applies in personal finance. Stay positive and don’t let negativity creep over you.
- Problems don’t go away, they just change. In my 20′s, I hated being an employee. So, I started my own business and encountered the issue of trying to do too much with no help. In my 30′s I got help and now supervise employees and the challenges that come with it. In other words, just when you think you solved a problem, it changes to another. You just have to meet them all head on constructively.
- Money has no emotion, only a rate of return. ’nuff said.
- No one takes care of you but yourself. A lot of people want to be spoiled and pampered and feel entitled to it (and who doesn’t want to be) but if you base your happiness on what someone else can give you rather than yourself than you will never be happy. On a more practical level, every business deal that we contracted out to agents with no vested interest in the business blew up. As the ABCP debacle showed earlier this year, every decision made by someone else other than you is advancing someone else’s interest. If you are reading this blog hoping to take control over your financial life, the first decision you have to make is to say to yourself that you will control your own financial destiny and never forget that.
Sorry, lots of lessons. Lots of experience this year for me (a polite way of saying I messed up a lot). Anyone care to share any lessons?