For many years – watching the savings grow, and cash stockpile – was never a good reason to look into investing. A paltry 7% return, with a side of risk <ARTICLE ON RISK OF INVESTING> was not a great match vs putting away hundreds of thousands of dollars into the bank account years after year. Let’s focus on making more money today!
Still the anguish grew larger and larger – watching a stockpile of ‘cash’ accumulate in the bank account with low to no interest rates being paid out! Financial firms charging astronomical percentages was not a path to great wealth either – as we know the fees alone will keep you from achieving your goals <talk about high fees of financial advisors>.
There was also a strong mindset / ego component to building a business that generated and has thrown large sums of profit for years.
Generating millions in profits permitted some version of frivolous spending! Decisions were made quick and effortlessly – because no matter what you spent – you were almost guaranteed to replenish all the funds again next month. Nothing you do can touch adding 100K into your bank account every 2 weeks. Even though logic still prevailed – as long as you wanted it, it can be framed to make sense to spend today, and worry about it tomorrow. Wants turned into needs!
Flip the script a year later. The business is sold – and the business income drops to zero overnight.
Now you have all the time in the world to analyze ‘what to do with the money’. You can seek advice from fee based financial advisors. You can ponder and read up on real estate. You can choose to invest in start up businesses.
You have all day to evaluate risk-reward ratios of equities investments. You have time to study history, and back-test many of the investing strategies and paths you come up with!
The problem becomes is that none of this is a sure bet. You can make the perfect play – for years and years to come and then still a day will come when on paper your net worth will plummet by 20, 30 or 40 percent! With all this comes an uninspiring attitude and feeling towards spending.
You start evaluating your budget, and really start to focus in on what is actually adding to your quality of life. Was it that latest AMG that you were getting joy from, or knowing that you have a cup of the best made coffee on earth waiting for you in the mornings? Is it knowing you have enough to take your family on trips twice a year or wearing and adding an additional rolex to your collection?
When a steady paycheck stops coming in, even with a sizeable investment portfolio that’s been growing – wholly changes your attitude on spending and focuses your attention on purchases and the subsequent quality of life you get out of them.
When you are making millions – managing money seemed like a confusing and convoluted field. There were no sure bets, and everyone was just looking to sell you ‘something’ , to help part with your money!
Your investments now need to stand the test of time, and last for many decades – after all – you did not work this hard to lose it all in a few years!
After learning, reading, debating and backtesting – it now seems more manageable. Is it the perfect plan? Absolutely not – but it’s better than no plan <insert current investment plan article>. But this comes with the hurdles and thought patterns of not making a consistent frivolous paycheck, and ‘what’ you can be spending based on that.