Simple Truths About Money

The Fear of Missing Out: Why FOMO Often Leads to Poor Investment Decisions

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FOMO

By now, you’ve probably heard the buzz around SpaceX, OpenAI, and Anthropic. These are companies shaping the future, and the message is hard to miss: you don’t want to sit this one out. That sense of urgency has a name. It’s FOMO, and it’s one of the most common reasons investors make decisions they later regret.

The latest wave is simply the latest example. Fear of missing out has influenced investor behavior for as long as markets have existed, and learning to recognize it is one of the most valuable things you can do for your long-term financial health.

Why FOMO Hits So Hard

FOMO is a deeply human response to uncertainty and social pressure. When an investment opportunity dominates headlines, your brain perceives two threats at once: the fear of missing out on gains and the discomfort of watching others profit while you sit on the sidelines. Both feelings push you toward action, even when patience would serve you better.

It doesn’t help that we’re surrounded by stories of people who got in early on Amazon, Apple, or Bitcoin and earned life-changing returns. What we rarely hear are the far more common stories of people who bought at the peak, endured painful losses, and either sold at the wrong time or waited years just to break even.

Social media and financial news often make matters worse. Consider a recent New York Times headline: “About 20 New Billionaires Could Be Minted by 3 Mega-I.P.O.s.” It’s easy to see how investors can get swept up in the hype.

These platforms are designed to amplify excitement, and emotionally charged financial content tends to generate far more engagement than advice that encourages patience. In reality, widespread enthusiasm is often a sign that an opportunity is maturing, not that it’s just beginning.

The Real Cost of Emotional Investing

A recent MarketWise survey of 1,000 American retail investors found that while only 20% described themselves as emotional investors, 48% admitted to making a FOMO-driven investment in the past 12 months, buying a stock, ETF, or crypto at an all-time high. A full 42% of those investors said they lost money as a result, with an average loss of $1,606.

Meanwhile, research by Barber and Odean found that the most active traders, often driven by FOMO and overconfidence, underperformed passive investors by 6.5% annually on average. That’s not a small gap. Compounded over decades, that difference can mean the difference between a comfortable retirement and a stressful one.

The core problem is timing. FOMO tends to peak exactly when prices are highest, after a big run-up, when the story feels most compelling and the momentum seems unstoppable. However, also tends to be when the risk-to-reward ratio is at its worst. By the time something feels obvious, the market has already priced it in.

Why You’re Better Off Waiting Until FOMO Fades

FOMO doesn’t always look the same. Sometimes it’s chasing a hot IPO. Sometimes it’s piling into a sector after a huge run, convinced the momentum will continue. Other times, it’s buying after a sharp price surge or making a large bet on whatever theme dominates the headlines.

What these situations share is the same underlying dynamic: the decision is driven by what the market has already done, not by a thoughtful assessment of what it might do next. You’re reacting to the past and mistaking it for a signal about the future.

High-profile IPOs are a particularly common FOMO trap because the excitement is so visible and the story so compelling. When a company goes public, institutional investors such as venture capital firms, private equity funds, and asset managers are often the only investors positioned to benefit from the initial price “pop.” By the time most retail investors can buy shares, much of that gain has already been captured.

In fact, investors fortunate enough to buy at the offer price have historically enjoyed substantial first-day gains, often averaging 15% to 22%. Yet for the typical retail investor buying at the market open, first-day returns have averaged just 1.3%.

Research also shows that IPOs frequently underperform the broader market, such as the S&P 500, over the following two-and-a-half to three years as early enthusiasm fades. In other words, you’re often better off waiting until the opportunity feels far less exciting.

Questions Worth Asking When You Feel the Pull of FOMO

If you’re experiencing FOMO, there’s a good chance emotion is driving the decision. Before investing, take a step back and ask yourself a few important questions:

  • Why do I want to buy this? Is it based on research, or because everyone is talking about it?
  • Does this fit my financial goals and timeline, or am I straying from my plan?
  • Does the current valuation leave room for meaningful future returns?
  • How much of my portfolio would this represent, and am I comfortable with that level of risk?
  • What’s my plan if the investment falls 30% in the first year?

These aren’t complicated questions, but they can help reveal whether you’re making a thoughtful decision or reacting to excitement. And if it feels like you don’t have time to ask them, that’s often the clearest sign that you should pause before acting.

A Long-Term Perspective Changes Everything

The most successful long-term investors understand that they don’t need to catch every opportunity. They simply need to avoid the mistakes that can set them back.

Missing an exciting IPO or a hot sector run is rarely as costly as it feels in the moment. What undermines long-term wealth building is taking on too much risk at the wrong time, selling in a panic during downturns, and allowing short-term noise to derail a disciplined strategy.

If you find yourself caught up in the excitement around a particular investment, slow down. Revisit your financial plan. Talk with a trusted advisor. Ask yourself whether you’d still be interested if nobody else was talking about it.

The best opportunities aren’t necessarily the ones that feel most urgent. They’re the ones that fit your goals, your timeline, and your portfolio, regardless of what’s making headlines.

Explore our free resources for helpful tips, tools, and educational content to support your financial journey.

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Emotional Investing: Mastering Your Mindset in Turbulent Times

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Emotional Investing

When markets are volatile—as they have been recently—it’s easy to let emotions take the wheel. Fear, uncertainty, and the urge to “do something” can quickly override even the most carefully laid plans and lead to emotional investing.

This isn’t a sign of inexperience; even seasoned investors fall into the trap of reacting emotionally when the headlines feel overwhelming. The truth is, we’re wired to seek control in uncertain situations, and that often means making moves that feel productive in the moment but hurt us in the long run.

Fortunately, when we understand the emotional biases behind our decisions and put thoughtful systems in place, we can create a buffer between our instincts and our actions—making it easier to stay grounded and focused, even in turbulent times.

Why We Make Emotional Investment Decisions

Our brains weren’t designed for long-term investing—they were designed for short-term survival. From an evolutionary perspective, when we sense danger, it’s our limbic system—the emotional center of the brain—that takes over. This system is responsible for quick, instinctive reactions like fight or flight.

In moments of market turmoil, it can easily overpower the more rational prefrontal cortex, which governs logic and long-term planning. The result is a tug-of-war between emotion and reason, often leading to cognitive biases that derail sound decision-making.

Common examples of these biases include:

  • Loss aversion makes the pain of losing feel twice as intense as the pleasure of an equivalent gain, according to Nobel laureates Daniel Kahneman and Amos Tversky—prompting rash decisions to avoid further loss.
  • Recency bias causes us to fixate on the latest downturn, assuming it will continue.
  • Confirmation bias leads us to favor headlines that reinforce our fears.
  • Herd mentality drives us to follow the crowd, even when the data says otherwise.

Recognizing these patterns is the first step toward developing a more disciplined, resilient investment strategy.

The Cost of Emotional Investing

Different market environments can stir up different emotional traps—each one capable of leading investors off course.

In bull markets, rising prices and media buzz often fuel FOMO (fear of missing out), pushing investors to chase hot stocks or take on too much risk. Overconfidence can creep in, too, leading many to forget that markets don’t rise forever. We’ve seen this pattern before: during the tech boom of the late ’90s, the housing bubble before 2007, and more recently, with the surge in bitcoin.

In bear markets, it’s the opposite. Fear and uncertainty take hold. Panic selling becomes common as investors try to “cut their losses,” often locking in declines that might have been temporary. The 2008 financial crisis was a clear example of how emotions can drive poor decisions.

The impact of these choices is real. According to Dalbar, from 1994 to 2023, the average equity investor earned an annualized return of 8.01%, while the S&P 500 returned 10.15%—a gap largely explained by mistimed buying and selling.

Morningstar also found that over the 10 years ending December 31, 2023, the average fund investor underperformed their actual investments by 1.1% per year. Put simply: it’s not just what you invest in that matters—it’s how you behave.

Staying disciplined and keeping emotions in check isn’t always easy, but it’s one of the most important things you can do to stay on track toward your long-term goals.

Practical Strategies to Avoid Emotional Investing

Emotions are a natural part of investing, but they don’t have to drive your decisions. With the right systems in place, you can reduce emotional interference and stay aligned with your long-term goals.

Here are four strategies that can help you stay the course when your emotions take hold:

#1: Create a Detailed Investment Policy Statement (IPS)

Before putting any money to work, it’s important to build a written plan that clearly defines your goals, risk tolerance, target asset allocation, and the circumstances under which you might make changes. This kind of structure—often called an Investment Policy Statement (IPS)—acts as your financial compass, keeping you grounded when markets become unpredictable.

Instead of reacting to headlines or short-term swings, you can revisit your IPS to stay focused on the strategy you thoughtfully set in place.

#2: Automate Contributions and Rebalancing

The fewer decisions you need to make, the better. Automating your monthly contributions takes the guesswork out of when to invest and builds consistency across all market environments.

In addition to setting up automatic deposits into your retirement accounts, consider directing fixed amounts to your emergency fund and other investment accounts. This kind of automation keeps your financial plan in motion—even on the days when your emotions might try to pull you off course.

#3: Lean Into Dollar-Cost Averaging (Especially in Volatile Markets)

Dollar-cost averaging—consistently investing a fixed amount at regular intervals—can help take the emotion out of investing by shifting your focus from short-term market swings to long-term growth. It’s especially effective during periods of volatility, when the urge to pause or make impulsive moves can be strongest.

A recent study from Vanguard found that this strategy not only helps reduce the risk of mistiming the market, but often leads to a lower average cost per share over time.

#4: Work With a Financial Advisor as an Emotional Buffer

Sometimes, the smartest investment move is choosing not to act—and that’s where a trusted advisor can make all the difference. A skilled financial advisor serves as a steady buffer between your emotions and your money, guiding decisions based on strategy and data rather than fear or impulse.

We provide perspective during turbulent times, help you stay aligned with your long-term goals, and offer the accountability and clarity you might need to navigate uncertainty with confidence.

Manage Your Emotions and Invest with Confidence

Emotional investing is one of the most common—and costly—mistakes investors make. But with the right strategies in place, it becomes easier to block out short-term noise and stay committed to your long-term goals.

Remember, mastering your mindset isn’t a one-time event—it’s a lifelong practice that deepens with experience. Having the support of a trusted financial advisor can make that journey more intentional, especially during periods of uncertainty.

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Why Procrastinating on Finances is a Bad Idea

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Procrastinating on Finances

Let’s face it—money is hard. Few people relish the thought of sitting down to deal with their finances. It ranks right up there with dental visits, pap smears, and mammograms. Unlike healthcare, however, there’s no friendly reminder postcard urging you to get it done. It’s easy to procrastinate, and before you know it, years have passed without any financial planning.

Could things still work out despite the neglect? Sure, it’s possible. But chances are, something will go wrong, or you’ll miss opportunities to optimize your finances. And what does “optimizing your finances” mean? Let’s break it down.

1. Review Your Investments

Take a good look at your investments at least once a year. Are you overexposed to stocks? Underexposed? Stocks are the engines that drive long-term returns—just look at the S&P 500’s historical 10% average annual return over the past 20 years.

But too much of a good thing can backfire. If you’re too heavily invested in stocks, a market downturn might tempt you to panic and sell, locking in losses. Bear markets (defined as a 20% or greater drop from recent highs) are inevitable. The key is staying invested for the long haul to benefit from eventual recoveries.

2. Be Tax-Smart

No one enjoys watching 25–30% of their paycheck disappear into taxes. While taxes fund essential services, there are perfectly legal ways to reduce your tax burden. Here are a few strategies:

  • Donate appreciated shares to a donor-advised fund to align your charitable giving with tax savings.
  • Open a Health Savings Account (HSA) with a high-deductible health plan to deduct contributions directly from your income.
  • Boost your Roth savings with strategies like a Backdoor Roth or Roth Conversion.
  • Max out contributions to your 401(k), 403(b), or other retirement plans.
  • Engage in tax-loss harvesting to offset gains and reduce taxable income.

3. Define Your Goals

Set your short-, medium-, and long-term goals—and write them down. Studies consistently show that writing down goals increases the likelihood of achieving them.

For example, one of my big goals is to own a home in Sonoma County—ideally in Sebastopol or Healdsburg—within the next five years. Having this goal in writing makes it more tangible and actionable.

4. Plan for Retirement

Think about when you want to retire—or when you’d like to leave your current job to pursue something more meaningful. This kind of transition requires thoughtful planning, clear goals, and detailed number crunching. The earlier you start, the better positioned you’ll be to make it a reality.

Why Start Now?

Every one of these actions underscores why procrastination is a financial mistake. Planning gives you a clear picture of where you’re headed and what you need to do to get there.

January is a natural time for fresh starts, so why not begin today? Whether it’s reviewing your investments, setting goals, or planning for retirement, even small steps can make a big difference. Take action now—your future self will thank you.

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Building Community: An Antidote for Mindless Spending

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Building Community

In the hustle and bustle of urban life, it’s easy to fall into the trap of mindless spending – buying things we don’t need in search of fulfillment. But what if the key to a more fulfilling life lies not in the latest purchase but in the community around us? In this blog article, we’ll explore the positive effect building community can have on your physical, emotional, and financial well-being.

The Urban Isolation Phenomenon

Living in a city, especially as a single woman, often comes with a sense of isolation. Despite living among thousands or even millions of people, the connections can feel superficial.

Indeed, loneliness is becoming increasingly common among adult Americans. According to research from Cigna and Morning Consult, 58% of U.S. adults consider themselves to be lonely.

Some of us fill this void with material possessions, a temporary fix to a more profound need for connection. Unfortunately, when left unchecked, emotional spending can lead to buyer’s remorse, clutter, and even financial strain.

The Transformative Power of Building Community

The good news is there’s a transformative power in building a community. In fact, research indicates that the stronger our sense of belonging, the better our mental health and overall well-being.  

This isn’t just about knowing your neighbors’ names or attending the occasional block party. It’s about creating a network of support and shared experiences that enrich our lives in ways shopping never can.

It begins with the simple things: a smile to a neighbor or a stranger you pass on the street, a hello to the barista who makes your morning coffee. These small interactions can make us braver and bolder in connecting with people.

Participating in local initiatives, such as Habitat for Humanity’s Women Build events, can also foster a sense of belonging. These activities unite women from diverse backgrounds to work on meaningful projects, creating a bond through shared goals and achievements​​.

Moreover, volunteering for causes dear to your heart can open doors to new friendships and connections. It’s a way of giving back that enriches the community and your life.

Finding Your Tribe

Taking cues from small towns, where community ties tend to be more robust, we can bring a similar sense of closeness into our urban lives by frequenting shops, cafes, and service providers in a favorite neighborhood. The more often you see and recognize people, the more they will recognize you, encouraging interaction and a sense of community.

To find your local tribe, explore where your interests align with others, whether through local clubs, online platforms, or community centers. Be it a book club, a yoga class, or a gardening or dining group, these are places where you can find like-minded individuals and potential friends.

For example, I discovered Jill Daniel’s Happy Women Dinners when looking for more community. Jill plans lunches and dinners, usually with a female book author as the featured speaker. If you’re curious, the best place to find more details about these events is by visiting Jill’s Instagram account.

Boost Your Financial Well-Being by Building Community

Building a community isn’t just an antidote to the loneliness of urban living; it’s a powerful response to the culture of mindless spending. In turning towards each other, we find what we’ve been searching for – connection, belonging, and a sense of purpose and fulfillment that no shopping spree can provide.

As you build these connections, something remarkable happens. The urge to fill the void with material possessions diminishes. You’ll likely find joy in experiences, shared moments, and a supportive community’s richness rather than shopping and spending. This, in turn, sets the stage for a brighter future, benefiting your mental and physical health, as well as your financial well-being.

For more personal finance tips and strategies for improving your overall well-being, please visit our free resources page.

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Navigating Uncertainty: October Market Review and Outlook

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October Market Review

In this October market review and outlook, we provide a summary of recent events in the economy and financial markets and offer insights into what this may mean for investors moving forward.

For the last year, forecasters have been predicting an economic downturn in the United States as the Federal Reserve (Fed) strives to control inflation by raising interest rates. Historically, the Fed has had difficulty achieving an economic “soft landing”—that is, taming inflation without causing a damaging recession—when raising rates.

However, more than a year into the Fed’s rate hike cycle, the U.S. economy remains resilient. In fact, the first estimate of third-quarter GDP growth came in at an annual rate of 4.9%, its fastest pace since 2021.

Meanwhile, financial markets have taken a hit in recent months. Both the S&P 500 and Nasdaq dropped more than 10% from their July highs in October, placing both indexes in correction territory. The bond market has also struggled recently as interest rates climb higher.

As we near year-end, many investors are concerned about what a potential recession and ongoing market volatility may mean for their money. Here’s a recap of what’s happened lately and what that may mean for investors heading into 2024.

The Economy Remains Resilient

Since March 2022, the Fed has hiked interest rates 11 times, raising the federal funds rate from near-zero to a target range of 5.25% to 5.5%. However, the Fed has held rates steady since July 2023 in light of moderating inflation and a remarkably resilient labor market.

According to the latest reading of the personal consumption expenditures price index, the Fed’s preferred measure of inflation, core inflation is now 3.7% year over year. While this is significantly lower than its peak reading in June 2022, it’s still a far cry from the Fed’s 2% annual target.

Meanwhile, the unemployment rate continues to hold steady at 3.8%, and third-quarter wages and benefits grew 4.3% year over year. Due in part to ongoing labor market strength, consumer spending increased by 4% in the third quarter, propelling GDP to an annual rate of 4.9%.

October Market Review: Financial Markets Continue to Struggle

Despite strong economic performance, the U.S. stock market continued its decline in October, marking three straight months of negative returns. A variety of factors are in part responsible for the recent pullback in performance, including:

  • Soaring Treasury yields. The yield on the 10-year Treasury note approached 5% in October, the highest level since 2007, curbing investors’ appetite for risk and creating headwinds for big tech and other high-growth companies.
  • Tax-loss harvesting. The recent pullback prior to October created more opportunities for tax-loss harvesting, which put additional pressure on the market in October as investors sold underperforming stocks to offset gains. On the bright side, research from Bank of America shows that although tax-advantaged selling typically pressures stocks at year-end, it often sets the stage for a strong rebound in January when traders repurchase.
  • Higher-than-expected GDP growth. Third-quarter GDP grew at a surprising 4.9% annualized rate, quashing hopes that the Fed will lower interest rates in the near term.
  • Ongoing geopolitical tensions. Russia’s war in Ukraine and the Hamas-Israel conflict continue to add to market uncertainty.

The bond market has also seen weakness as interest rates continue their ascent (in general, bond prices fall as interest rates rise, and vice versa). Both 10-year and 30-year Treasury yields increased more than 0.3% in October, causing longer-term bonds to underperform.

Looking Ahead: Underlying Economic Concerns

Although the U.S. economy continues to hum along, concerns of a potential downturn persist. Some of the factors that could contribute to an economic slowdown include:

  • Declining real disposable income and household savings. Personal income adjusted for taxes and inflation fell 1% in the third quarter after rising 3.5% in the second quarter. Furthermore, personal savings as a percentage of real disposable income fell from 5.2% in the second quarter to 3.8% in the third quarter. As consumers eat through their savings, they may not be able to spend at the same rate going forward.
  • Rising long-term interest rates. Long-term interest rates recently saw their highest levels since 2007. For example, 10-year Treasury yields briefly passed 5% in October, while 30-year yields traded north of 5% for most of the month. Higher rates may be problematic for consumer spending and business investment, as well as several business sectors including the housing market.
  • Tighter credit markets. According to a recent survey from the National Federation of Independent Business, more small businesses reported difficulty accessing credit in September compared to the previous month. The inability to secure capital could lead to a pullback in business investment and hiring.

If these concerns come to fruition, financial markets and the economy might falter accordingly. On the other hand, an economic slowdown could alleviate the need for further Fed intervention, paving the way for future interest rate cuts.

What This Means for Investors

Although recent GDP data is encouraging, these growth rates may not be sustainable as underlying economic concerns create pressure for consumers and businesses alike. While a full-blown recession may not be imminent, many economists expect the economy to cool in the coming months.

Meanwhile, the Fed will decide whether future rate hikes are necessary as new data becomes available. Despite holding rates steady since July, another increase is possible before year-end.

For investors, this lack of clarity may mean heightened market volatility in the near term. At the same time, November is historically the best month for the S&P 500. Indeed, strong performance from U.S. equities could help offset recent losses.

Ultimately, we don’t know what the future holds. However, we do know that patience tends to reward long-term investors. Those who maintain a diversified portfolio and stick to their investment plan typically fare better than those who attempt to time the market.

In the meantime, I encourage you to focus on what’s controllable—for instance, your spending habits, savings rates, and investment decisions—and avoid knee-jerk reactions to negative headlines.

If you found this October market review and outlook helpful, head over to our free resources page for more financial planning tips and guidance.

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Simple Truth #3: Contrary to Popular Opinion, You Were NOT Born to Shop

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You Were Not Born to Shop

We originally published this article on February 20, 2010, and it remains one of our most popular blog posts to date. In the spirit of ongoing financial wellness, we thought we’d give it a refresh for 2021 as many of us adjust to new habits—including how we shop.

I’m a financial advisor. But I’m also a normal person just like you. I know how difficult it is to be an American and somehow not feel it’s our duty to shop.

Our economic and social systems are based on capitalism. Consequently, economists watch consumer spending like hawks, and no wonder—it fuels about two-thirds of total economic output in the United States. Talk about pressure!

This also puts a lot of pressure on you, the consumer. If no one buys our goods and services, then what happens to our economy?

Advertising Only Fuels Your Shopping Habit

The advertising industry is the perfect agent for promoting consumption. According to the ANA, advertising is linked to the bedrock principles that shaped our nation—free speech, competition, and individual choice—and is a driving force in fueling economic activity.

As such, advertisers have one role: to make us want us to consume. Their mission is to make products and services seem as enticing as possible, so we buy them whether we need them or not. Just watch a few episodes of Mad Men to learn the tricks of the trade.

And it’s almost impossible to escape from the influence of advertising unless you live like a hermit. Watch TV, drive down the freeway, listen to the radio, log on to a website, and you’re bombarded with advertising messages. No wonder we feel like we were born to shop!

Only You Are in Control of Your Shopping Habit

The problem is, economists and advertisers aren’t concerned about your personal bottom line. Just like you, they’re concerned about their jobs, their families, their standard of living, and their ability to retire comfortably.

Therefore, you need to adopt a “me vs. them” mentality when it comes to kicking your shopping habit. In other words, before you open your wallet to buy something, stop and think: Do I want “them” to have my money, or do I want “me” to have my money? The person on the other side of the cash register certainly doesn’t know if you can afford the item you are about to purchase—nor do they care.

Think of shopping as a psychological battleground—that’s how advertisers think of it.  Do you want to be the victor or the vanquished? Remember: you were not born to shop!

Don’t Be the Vanquished When It Comes to Your Personal Finances

Feeling vanquished about your personal finances isn’t a good thing.  It probably means you’re in debt, or you’re anxious about your future and feel stuck. Is all the “stuff” worth it? Probably not.

Excess stuff also clutters your environment. Coupled with your excess debt, this can ruin your credit score and your relationships.

Like anything psychological or emotional, it isn’t easy to change. But there are things you can do to take control of your spending. It’s time to denounce popular opinion, admit you were not born to shop, stop spending more than you earn, and live within your means.

First, Balance Your Budget

Using an excel spreadsheet, list all of your expenses categorized as follows:

  • Fixed and necessary expenses. These expenses are the same every month and/or are necessary to keep you housed, clothed, groomed, healthy, fed, and mobile.
  • Other committed expenses. These may include child-related expenses, pet care, fees to professionals, adult education, gym membership, insurance premiums, and debt payments.
  • Discretionary expenses. Includes vacations, dining out, entertainment, hobbies, electronics, gifts, home improvements, furnishings.
  • Auto-savings. Includes your retirement contributions and other savings.

Next, total the subtotals for each category to come up with your total monthly expenses. Then subtract this amount from your total monthly income. The outcome will either be a positive or a negative number.

If it’s a positive number, congratulations. You are living within your means. If you know you’re saving enough for retirement and other financial goals and have no debt to pay off, then you have some discretion as to how you use your money. However, if the outcome is negative, go back and rework your expenses until it comes out even or positive. Once your cash flow is neutral or positive, you now have a working budget.

Hint: You will have the most flexibility to adjust your discretionary spending, but you can also try and negotiate savings with service providers or increase deductibles on insurance policies to save on premiums. In addition, you should try to eliminate any high-interest credit card debt before adding to your discretionary spending account.  

Some Tips for Staying the Course

  1. Print out a copy of your budget. Post it somewhere that is visible to you regularly, so it stays top-of-mind.
  2. Track your spending. Mint.com is a free online tool that tracks all of your expenses, income, and savings. You can enter your budget, and Mint will send you an email any time you overspend on a budget item.
  3. Try the envelope system. Place your budgeted amount for discretionary items like clothing and food in an envelope in cash. When the cash is gone, you can’t spend on those items again until the next month.
  4. Leave your credit cards at home. Become more conscious that the money you spend is from a finite source. Try paying cash or using your ATM card whenever possible.
  5. Walk away. If you’re tempted to buy an item that you don’t really need, leave the store, walk around the block, and think about it. Nine times out of ten you won’t buy the item. Remember: It’s “me vs. them.” Who gets your money?
  6. Reward Yourself. Each month that you stay within budget, reward yourself in some small but significant way. For example, indulge in a nice lunch out, get a pedicure, or order a nice glass of wine with a meal.

Maybe You Were Not Born to Shop, But You Still Want To

After completing the budgeting exercise, you may find it’s impossible to balance your cash flow. Even though you realize you were not born to shop, you don’t want to live frugally, either. If this is the case for you, look at the income side instead. Can you ask for a raise at work? Find a higher-paying job?  Freelance?  Start a small business? Rent a room out? Sell belongings to raise cash?

Explore all avenues. Exercise your capitalist gene by thinking about all the ways you can produce goods and services for profit—for yourself!

Feel Happier While Spending Less

If you want to think differently about the relationship between your spending, your values, and your happiness, download The Happiness Spreadsheet. In addition to giving you a more inspiring approach to budgeting, our free eBook includes a number of resources you can use to get your shopping habit and spending under control.

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12 Simple Steps to Financial Success

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12 Simple Steps to Financial Success

This article was originally published December 29, 2011. In the spirit of ongoing financial wellness, we thought we’d give 12 Simple Steps to Financial Success a refresh for 2021 and repost. Happy new year!

The new year is upon us, and January is always a good time to look towards the future and recommit to past personal finance goals or create new ones. Just in time to round out your new year’s resolutions, here are some simple steps all independent women can take for a more financially successful 2021.

12 Simple Steps to Financial Success This Year:

  1. Develop a habit of saving. It’s never too early or too late to start.
  2. Build a budget that aligns with your values. Think about what makes you happy and then allocate your money accordingly.
  3. Create a financial plan that reflects your most cherished goals. Think of it as a roadmap to happiness.
  4. Invest the maximum amount you can for retirement. You will need more money than you think.
  5. Build and maintain a diversified investment portfolio. Don’t worry about finding the “best” investment.
  6. Review your spending periodically to keep yourself on track. It’s the key to living within your means.
  7. When it comes to investing, avoid the crowd—and tips from well-meaning friends and relatives.
  8. Understand that volatility is a normal occurrence when investing in stocks. Keep a cool head and stick to your plan.
  9. Know what your money is doing. They say ignorance is bliss, but that’s not the case when it comes to your finances.
  10. Insurance protects you from the unexpected. It’s just smart to have the right coverage.
  11. Choose your advisors wisely: Find people you like, trust, and who will listen to you.
  12. Spend on the things and experiences that make you happy. They make life worth living!

Your New Year’s Challenge

Choose one of these 12 simple steps to financial success as your new year’s resolution for your finances and write a short (200–250 word) journal entry describing how you’ll put it into action. Studies show that just writing down your goals increases the likelihood that you’ll achieve them. Then, review your plan routinely throughout the year so your resolution is always front-of-mind.

If you’d like to work on any or all of these steps with a trusted financial partner, please get in touch. We are here to help!  

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Financial Windfalls: How to Manage Sudden Wealth

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Financial Windfall Sudden Wealth
Financial Windfall Sudden Wealth
An inheritance, a big bonus, a surprise payout – expected or unexpected, receiving large sums of money can be stressful. Sudden wealth or a financial windfall can derail even the most prudent people. Some people feel guilty about their good fortune and react by being overly generous or too frugal. Others immediately start spending, erroneously thinking that the money will last forever until it doesn’t. Bottom line: this type of income can be emotionally charged. We have all heard stories about professional athletes, lottery winners, or celebrities who blow through vast amounts of money and even end of bankrupt. But, this can happen to anybody.

Sudden Wealth Syndrome Is Real

This behavior is common and has a name: Sudden Wealth Syndrome – symptoms include heightened stress, guilt, social isolation, mistrust of others, and poor spending habits. Sudden wealth can also cause a person to feel so conflicted that they don’t take any actions at all.

As a financial planner, I have seen people take the following actions soon after receiving a financial windfall:

  • Quit their job before they have a new one lined up.
  • Decide to do a major remodel on their home instead of their previously planned appliance upgrade or fresh paint.
  • Buy family members expensive gifts.
  • Give money to family or friends who are in need.
  • Buy expensive cars (a Tesla instead of a Prius).
  • Take luxurious vacations.
There is nothing wrong with any of the above actions if well thought out and considered within a broader plan. If done impulsively, or to relieve emotional stress, they can create feelings of guilt or remorse that can last longer than the money spent.

Is It Possible To Not Get Caught In The Sudden Wealth Trap?

Yes, here are a few ideas:

Develop Mindfulness. Think deeply about what you want to do with the money to match your values, and make decisions with clarity to use the windfall wisely and well. Talk to your trusted circle – a friend or family member, a therapist, or advisor – before making any large purchases or life-changing decisions.

Try not make any large purchases until you’ve had a chance to make your dream list and pare it down to realistic priorities before you write the checks.

Sudden Wealth Creates Opportunities

Sudden wealth creates opportunities– for security, for pleasure, for doing good – but without careful planning, it can create headaches (and heartaches too). With a plan in place, you can avoid the negatives (regret, remorse, guilt), and embrace the positive outcomes from a financial windfall.

Take The Next Step

Essential Sudden Wealth Checklist

Download our free guide to find out what to do if you’re experiencing the symptoms of sudden wealth syndrome, and learn what your next steps should be to adjust to and maintain your newfound wealth.

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The Truth About Diversification

Investment Management, Simple Truths About Money, Women and Money / /
financial planning diversification

financial planning diversification

Most investment advisors  (including me) believe that building and maintaining a diversified portfolio is the most prudent way to invest clients’ money.

Not only do numerous studies of asset class* returns support this, but no matter how smart and experienced the advisor is, it’s near impossible to predict with consistency which asset will outperform in any given time frame. That isn’t to say that it doesn’t take skill and expertise to build a diversified portfolio – it does – many metrics come into play such as growth prospects, valuation metrics, and global economic trends.

* There are four broad assets classes:

  • Stocks or equities
  • Fixed income or bonds
  • Money market or cash equivalents
  • Real estate (represented by REITS)

And, within each asset class are sub-asset classes  (or stock sectors) that allow for greater diversification, for example, with the stock asset class, you will find large U.S. stocks, small U.S. stocks, international stocks, and emerging markets stocks. And, within the fixed income asset class are different types of bonds: short-term, hi-yield, muni, etc.

The reality about diversification is that a truly diversified portfolio will not provide the return of the best performing asset over a given time, nor will it match the performance of the worst performing asset. The return will be somewhere in between. Which is precisely the point – the highs are less high, but the lows are less low making it more likely that an investor will not panic and change strategy at exactly the wrong time.

Remember the calmness in the markets in 2017 when all stock sectors seemed to go only up? And, indeed, the returns were pretty amazing: 37.2% for emerging market stocks, 27.4% for S&P 500 growth stocks, and 24.2% for the MSCI (a global stock index) for example. Now, take a look at the chart below which shows returns year to date through June 15, 2018. You can see that the best performing sector so far this year is the Russell 2000 (an index that represents small-cap U.S. Stocks).

And, the worst performing sector is emerging markets stocks (EM Equity). The S&P 500 (representing large U.S. stocks) is up only 2.3%. I’ll wager that there aren’t too many investment advisors that could have predicted that small-cap stocks would be the best performer so far this year, but I can also almost guarantee the portfolios they manage for their clients have an allocation to small-cap stocks.

A truth about investing is that past performance does not predict future results. A great visual of this phenomenon is shown in Callan’s Periodic Table Of Investment Returns – a chart showing annual returns for key indices from 1998-2017. You can see how random the returns are and how easy it might be to try and chase top performers and then be disappointed.

You can liken diversification to the Tortoise, and the Hare story…as the Tortoise said: “slow and steady wins the race.”

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Stock Market Corrections are Inevitable

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As you open your account statements and see your balance go up month after month you breathe a sigh of relief. But, then your next thought is – can the market keep going up like this? When will it end?

It helps to recognize that every market has pullbacks and that they are a regular part of stock market behavior.

Volatility does not imply the direction of the stock market. Instead, it’s the price we pay for a higher return in the long run.

We are currently in the 9th year of a bull market that started on March 9, 2009. In a few months, it could be the most extended bull market in history. However, it hasn’t all been up, up, up. There have been five corrections (market drops of 10% or more) and many smaller dips since 2009.

Second, it helps to recognize that market corrections are unpredictable. Realizing there will be a pullback doesn’t tell us when or help us maximize returns. If we cash-out today, we are just as likely to miss another year or two of upward movements as we are of sidestepping the next downturn. In result, our long-term financial plan may get derailed.

Third, recognize now that the next unpredictable correction will look obvious in hindsight. The reality is that even the most seasoned of investors can’t accurately predict stock market direction. Why? There are many events that can cause stocks to drop that are unpredictable themselves – from terrorist attacks to civil unrests, to a sudden change in economic policy.

Finally, realize that corrections are healthy for long-term bull markets. As stocks get close to full value or overvalued, it makes sense that prices will fluctuate to a more reasonably priced range. This leaves the door open for buying stocks at better prices and more gain in the future. Sometimes taking no action is the best action.

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Sudden Wealth Checklist

Overwhelmed by sudden wealth?

Don’t navigate sudden wealth alone! Download our free guide, The Essential Sudden Wealth Checklist, and discover how to transform your windfall into lasting prosperity. 

Claim your free digital copy!
Curtis Financial Planning