Most would agree, there are basic – or foundational – truths which tend to guide our life path. These characteristics/traits/habits, when adhered to, have provided human nature with a direction. Some may call this an “inner compass.” However, when gone astray – we tend to find ourselves in some form of a dilemma.
In our financial lives, there is the same set of truths. We call these, “Principles of Long-Term Wealth.” At face value, these seem overly simplistic, however as the world continues to become a much noisier environment – they have proven to be evermore challenging. And like the life–path, when gone astray, one may wake up to regret that they have blown up the long-term financial plan for their family, which may never recover.
You may be asking, what are these Principles of Long-Term Wealth? Mindset, Patience and Discipline. And yes, I dedicated a full section in my book “Unpack Your Financial Baggage” to these principles. However, we felt an injection of these may be appropriate – now that we have been experiencing a thirteen (13) month pullback in the overall markets from its peak.
In this little essay, we will spare you the time of reading all three at once – as we are aware of the average attention span of Human Nature. In addition, add the topic of finance and it becomes a session in navel gazing. In as much, we will revisit each principle over the next three months – our hopes of providing that injection of financial vitamin “C” is to battle the onslaught of the financial media sewage that dumps into your mobile devices - daily.
We begin with Mindset. To us, mindset is an outlook on life. Simply stated: It is a fear of the future or faith in the future. Over the past twenty-seven (27) years I have been advising (coaching) the behavior of client families – this principle, more than any other has been the dominant determinant of the success or failure of one’s family’s long-term, multi-generational wealth.
Why? It is the belief system that directs the decisions. And those decisions dictate the actions.
As I had mentioned in my book (is it strange to quote oneself?):
“If a person wakes up every day in constant fear that at any moment the-world-as-they-know-it is on the brink of collapse (world events, politics, interest rates, war, or business cycle…blah, blah, blah). No matter how impeccable their plan or investments have been crafted to their unique lifelong dreams and desires – they will blow it up. The ever-pulling fear, reinforced by the media’s need to manifest a crisis, will be too strong to resist.”
Honestly, it is a difficult task to prove that mindset is a dominant determinant, as this is a temperamental quality. Although one person believes it to be true when it comes to successful investing – his quote is as follows: “Temperament is more important than IQ.” -Warren Buffett.
In addition, a mindset of fear does not square with history. All the world’s progress – as we have all been witness – shows nothing other than our advancement in about every aspect of life. For example, you can click the link to my blog where I wrote in depth about this topic: click here to read: Pessimism - It Just Sounds Smarter.
We will leave you with this, which many have heard before in 2007-2009 (although nowhere near the level of issues or drop in the markets), “I don’t know when it will end. I don’t know where it will end. But when it does, like all others we’ve coached you through in the past – it’s highly probable that you won’t see these prices in your lifetime again.” Why? Because this is how it works. It’s how it has always worked…through the seven (7) Bear Markets and four (4) Recessions since my introduction into this industry.
