Traits of Financial Success You Can Understand
So, once again, I am going to draw a comparison in this week's column. I would like to point out some behaviors and character traits that are common to both successful investors and successful parents (to the extent anyone can measure parenting success).
First, patience. Anyone who has raised kids, or dealt with kids over an extended time frame, knows that patience is critical. Every parent has suffered through that time when your kids are learning to tie their own shoes, taking what seems like an excruciating time to do it themselves. All we want to do is tie the shoes for them so we can get out the door. But by being patient, our children learn how to tie their shoes themselves. They achieve their goal. Well, investors must also learn to be patient. We must learn to give our financial plans and strategies time to work. We do not always see success overnight and so it is important to learn to be patient if we want to achieve long-term financial success.
Perseverance is another common trait. Think about this for a moment. At times, we may see our children's behavior stall, or even move backwards, but we must stick to our guns, stay with our strategy and not cave to an easy decision. For example, when your kid is in the grocery store lying on the floor of the cereal aisle screaming, it might be easiest to buy them those Cocoa Puffs, but that isn't going to give you long-term success. This same dedication to perseverance applies to building wealth. This means not rushing into an impulse purchase or scooping up the first house that we see and like. This means holding onto that car for a few years longer instead of dumping it as soon as the upgrade is on the market. This means putting down the wallet, even when it is really hard to do so.
Another trait that I've learned from my parenting role that I've carried into all facets of my life is forgiveness. And although it is important to be quick to forgive, at the same time, it is important to never forget. As parents, we see our kids make many mistakessome big and some small. And often, it's something we think we have warned them about already (which is the most frustrating). As parents, we need to forgive our children but we should not always forget the mistake, that way we can help our children avoid the same mistake in the future. The same goes for our investments.
Most people felt pain in 2002 and 2008. They made mistakes with their investments and lost a lot of money. Many people wrote off the market altogether and wanted to simply bury their money in the back yard. This is not "forgiving." And what separates the financially successful, from those who flounder, is that successful investors may forgive but refuse to make the same mistake twice. Millions of people had a buy-and-hold strategy in 2002, and again in 2008, and millions of people lost 30, 50, even 60 percent of their savings with that strategy. Yet, millions of people continue with it. The markets evolve. The financial industry evolves. The successful investor must evolve as well. Have you evolved?
As a parent, we also must set goals for our kids. We want to avoid setting unattainable goals but we need to encourage our kids to be the best they can be with the skills they have. Most importantly, we need to encourage them to take the necessary steps to achieve those goals. Financially, we all want to be Bill Gates or Warren Buffett. For most of us, those goals would be considered "unattainable" but it is important that we set goals for ourselves. Ask yourself, what do you want your retirement to look like, and how much do you need to make it so? Committing yourself to these realistic goals, and taking the necessary steps to reach those goals, is critical to financial success.
Neither is easy, parenting or financial planning, but committing yourself to these common underlying traits can be a huge help in both.