4 New Year’s resolutions that will improve your clients' fiscal health
By Dave Scranton
Every year, I like to advise my own clients to make some resolutions aimed at maintaining or improving their fiscal health. Here are four I am recommending for 2013.
At this time every year, millions of Americans focus on New Year’s resolutions. Consistently, polls show that the most popular resolutions involve two things: losing weight and exercising. In other words, when people take stock of their lives in the course of passing from one year to the next, the thing they think most about is their health. That makes sense, of course, because, as the saying goes, your health is everything.
Personally, I am a strong advocate of regular exercise and a healthy diet, but I also believe that optimum good health overall requires a strong measure of fiscal good health. Consider that in study after study, a link between physical and mental health has been clearly demonstrated — especially where stress is concerned. At the end of the day, stress can undermine all your best efforts toward good health and has been identified as a contributing factor in everything from hives to heart disease.
And what, statistically, is the leading cause of stress for most people? Well, just Google “top causes of stress” and you’ll quickly see that one item dominates all others: finances. So, while most people would agree that money isn’t everything, there’s no question that having a measure of security where your money is concerned can eliminate, or significantly reduce, the negative impact of stress on your overall health.
With that in mind, every year, I like to advise my own clients to make some resolutions aimed at maintaining or improving their fiscal health. Here are four I am recommending for 2013:
1. Stay educated about what’s really going on with the markets and the economy — With so much uncertainty in today’s markets and so many pressing economic issues to keep track of (the federal deficit, the fiscal cliff, tax law changes, Social Security, etc.), it’s important to know what all of it may mean for your own portfolio and financial objectives. Headlines and hype (whether reporting good news or bad) can be misleading when not kept in proper perspective. A qualified financial expert with good credentials and a proven track record can help provide that perspective. Personally, I believe so strongly in the importance of investor education that I not only pen a monthly newsletter for clients, I regularly host educational workshops and adult education classes on timely financial issues.
2. Brush up on your financial history — When I talk about keeping hype and headlines in perspective, I’m talking largely about historical perspective. The fact is, today’s scary economic headlines are, in many ways, typical of the kind of volatility that has marked, to some extent, every long-term secular bear market cycle since 1899, and even before that. History shows that secular bear cycles generally unfold over 20- to 25-year periods, during which any number of global factors can contribute to major market fluctuations, ultimately resulting in zero-net market growth. There are also at least three major market drops during a long-term secular bear cycle, and our current cycle, which began in 2000, has experienced only two such drops so far. Knowing history is important because once you understand how repeatable historic market cycles tend to be, it will help you keep today’s headlines in proper perspective, enabling you to make better decisions. 3. Demand fiscal accountability from your leaders — I have said before that I wouldn’t personally object to paying more in taxes if Congress were made legally obligated to deliver a balanced federal budget every year. We’re a long way from that right now, of course, with a budget so ridiculously in the red that we, as a nation, are essentially bankrupt. As voters and tax payers, it’s important that we continue to demand real fiscal responsibility from our government and to reject “caffeine fixes” like the three quantitative easing measures the Fed has instituted since 2010 to try to artificially stimulate the economy. Based on the overall poor results of those measures, it seems evident that Americans have learned a thing or two about fiscal responsibility in their personal budgets, and can no longer be tricked by low interest rates into spending money they don’t have. Let’s continue to insist that our so-called leaders learn that same lesson.
4. Vow to educate one person a month about how to achieve fiscal good health — Study after study has shown that doing good for others is actually good for you. So, when taking steps to improve your own fiscal health, include regular efforts to also improve the fiscal health of people you know and care about. It could be as simple as making a commitment to invite someone to an educational workshop. It could mean striking up a conversation with one person each month about market history, and opening their eyes to how repeatable – and in many ways, predictable – long-term market cycles are. Or, you could simply loan or recommend to one new person each month an informative book about stock market history. The fact is, even many people who think they’re pretty savvy and informed about investing and the markets know little or nothing about long-term secular cycles.