Thursday, August 3, 2017

Back to Basics--Again!

Every once in a while, it is good to get back to the basics. Finding our way to financial freedom is important. The rules of the game are simple, but nobody other than a late-night infomercial huckster babbling about real estate millions on an obscure cable station is going to tell you it will be easy.

Here is the money equation. This equation and a little bit of grade school arithmetic are all the head knowledge you need to get started.

Money In = Money Stored + Money Spent

There are only two ways to move Money Stored in a positive direction; earn more money or spend less of the money you earn.

There are no silver bullets. Most big lottery winners end up in bankruptcy court and few family fortunes last past the second generation after their creation.

First on your to-do list. Stay out of debt. Starting your adult life with a large negative balance in the Money Stored column is a recipe for a lifetime of debt slavery. Carrying $100,000 in student loans for a degree with a starting salary of $35,000 a year will steal at least two decades out of your life. In essence, you have a mortgage without a house. That first car loan will become a monthly car payment for the rest of a middle-class American’s life. Don’t bite the hook. Pay cash. Drive that clunker until you can afford something better. If you are making that car payment to yourself instead of the bank, you will be amazed at how soon the day will come when you can pay cash for new or at least low mileage, late model cars. Credit cards? That’s easy. Never, ever carry a balance. Never, ever pay a late fee.

If you are unfortunate enough to find yourself in debt, pay off your debts as rapidly as possible. Pay off the debt with the highest interest rate first and the debt with the lowest interest rate last. This is called the Debt Avalanche. It works. Or, pay off the debt starting with the smallest account and then work your way to up to the largest balance, probably your mortgage, last. This is called the Debt Snowball. It works.

Start an emergency fund in a bank or a money market fund. The goal here is six months cash reserve (six months take home, both salaries). It will take some time to reach this goal. Don’t beat yourselves up about this but keep putting a little something aside every month. If you have less than $1,000 in your emergency fund, consider that an emergency.

Live on a budget. We have never had a budget except the one in my head. That worked pretty well for us, because I was born with a third generation fear of debt in a family that boasted that we could squeeze a nickel so hard that the buffalo would bellow. If you are having problems making it to the end of the month, don’t mess around. Sit down with your spouse on the first day of every month and negotiate a zero-based formal budget. Then live on it. Forms and instructions are free on the Internet.

No secrets. If you or your spouse spend more than the cost of a CD or a paperback book on something, decide on that expense together, as a couple. There are exceptions. My wife does not want to know about the power bill, tires on her car, or specialized tools she does not understand. Set your own rules and limits for your own marriage and stick to them. Having a pink and blue account for husband and wife to spend without explanation will help avoid arguments, but what goes into those accounts is a part of the monthly negotiation process.

When you have a little extra cash beyond the six months fund or maybe even as a part of the six months fund, begin to experiment on a small basis with stocks, bonds, mutual funds, or even real estate.

Start thinking about retirement when you are young. Take advantage of anything offered by your employer. 401(k) matching money will give you an instantaneous 100% tax deferred return on your investment. How can you beat that? This was not a problem or an issue 50 years ago. If you are under 40, your retirement picture is positively scary. This is likely to be a very low priority with so many other demands at this time in your life but don’t forget retirement is sitting out there if you are lucky enough to live that long.

Investment isn’t rocket science. The key is to keep doing it; month after month, year after year, here a little and there a little until you are free. If you don’t want to think or learn, all you need to know is four words Vanguard Target-Date Funds. These funds will automatically provide you with an age appropriate mix of stocks and bonds at a minimal cost. As you learn, don’t be afraid to start buying a mix of conservative dividend paying stocks. Look up Dividend Aristocrats on Google for some ideas.

Don’t forget. Give something to God without expectation of return. It is good for your heart.

That’s all folks. No matter where you are in the process, there is something you can do to improve your situation.
Don’t wait. Start today.

Saturday, July 8, 2017

Twelve

After throwing out my lower back—Again!—last February, I decided to supplement walking with weight machines and a Yoga class for a more balanced exercise program. In the months since, I have discovered that of the eight weight machines that I was instructed to use, two of them just plain don’t like me. Most of the machines tolerate my presence without many comments. One of them likes me so much that I am looking forward to maxing out the contraption. I suspect there is more than a little ego in this dream, but dreams are the first step on the road to reality.

This past Monday, I was waiting for a young body builder to finish his reps on the Triceps Press machine, one of the two machines that have it in for me. When he finished, I asked him why he was using the seatbelt. He replied that since he could press more than his body weight, the seat belt prevented him from lifting his body off the machine. I laughed, replying that certainly wasn’t my problem.

After this brief conversation, I set up the machine for my lifts. I thought I pegged the weights at eleven. I have been stuck at eleven for so long, I forget the last time I was able to increase the weight on this machine. I noticed I was having a difficult time performing this exercise in a correct manner, but I managed to complete the required ten repetitions, although some of them shouldn’t have been counted as complete and proper. Then I noticed that I had the machine pinned at twelve. Suddenly, instead of wondering why I was having more trouble than usual, I was surprised that I was able to do any reps at that weight. Just for grins, after finishing my circuit, I returned to try the Triceps Press machine at twelve a second time to see what would happen. I managed to perform eight more substandard lifts.

On my next visit to the gym, I returned the setting to eleven, but this time I was able to complete fourteen acceptable repetitions, enough to increase the setting to twelve. Yesterday, I managed a ten count at the highest setting, a personal record.

A Yoga master once observed, “For a committed man, there is no such thing as failure.” For me, the commitment to finding financial freedom seemed a fairly natural extension of the values I had internalized from my parents and later from those around me whom I respected. While paying off my mortgage, I maintained a spread sheet that calculated the amount of money I was saving every time I made an extra payment to principal. During the stretch run to retirement, I tracked the increase in my account balances until 2008. Then I made additional efforts to pour more money into my declining accounts. Ultimately, I achieved my goal.

I wasn’t raised to value physical exercise. In fact, if there was any risk involved in an activity, I was ordered to avoid it. Now, at age 66, I am discovering that the same methods that worked for me in saving and investing for long term goals are working in the area of physical fitness. I keep track of my weekly mileage (in my head) and my activities with the weigh machines (on paper). The numbers are increasing slowly on two of the machines and rapidly on one of the machines, but they are increasing on all of the machines.

Yes, you can hit a hard stop in your checkbook or in the gym. A few days ago, I spoke with a man of my age. I learned he was there rehabilitating from knee replacement surgery. Talk about a hard stop, but for the committed man there is no such thing as failure. Losing your job or suffering a major health problem without insurance certainly are examples of hard stops, but even after such disasters, I have seen men get up off the ground and try even harder to find their way to financial freedom.

Keep trying, maybe someday, even though you don’t believe it is possible, you might discover you can lift a twelve.

Sunday, July 2, 2017

K.I.S.S.

This morning I scanned a stock report I receive every two months. I didn’t spend a lot of time reading it, as it is long and says very little that would cause me to change my behavior in any substantive way. During the last two years, the time I have been on their email list, I can summarize twenty four reports, each coincidently of 24 pages with one sentence. Everything is overvalued but some sectors are more overvalued than others.

Mark Twain famously observed, “OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February.”

There is always some reason not to invest in the market unless the Shiller Price Earnings Ratio is at or near a historic low. Barring massive actions by the world’s central banks, as has happened over the last decade, one of these opportunities will appear every twelve years or so. It pleases us to call such events recessions or depressions.

Repeat after me, “I can’t predict the future.”

I can look at facts, such as the growth of debt in the private and public sector, and make the reasonable assumption that this will not end well, but I can’t say with certainty when or how it will end. Puerto Rico just went bankrupt. In the next few days, Illinois may become the first state to see its credit rating lowered to junk bond status. What happens when the world’s markets lose confidence in the Federal Reserve Bank, the European Central Bank, or the People’s Bank of China?

As I read a report that simultaneously said yes and no to every possible option, I was reminded that investing is really pretty simple if you have made a contract with yourself.

In my case, it would look something like this:

1)The Prime Directive If I don’t understand it, I am not going to buy it.

2) I will maintain a roughly 50%/50% balance between equities and high quality income producing assets (this 50% includes about 10% in highly liquid positions like money market funds), through good times and bad.

3) I believe that dividends will create about ½ of the growth produced by my stock portfolio. Therefore, “Why should I buy this if it doesn’t pay a dividend?” is a serious question. Also, “Is this dividend sustainable?” becomes an important issue.

4) I don’t sell individual bonds or bond funds, unless I need to rebalance my portfolio. I will ride them to maturity and then reinvest as appropriate.

5) I will have a clear reason for making any investment, since this action will make me an owner of this company. The factors involved could include the size of the moat around the company’s business model, quality of management, record of increasing dividends, or a big story. I recently took a somewhat speculative (for me) position in Zimmer Biomet. I thought it an attractively priced opportunity to get into the business of selling artificial joints to aging Baby Boomers. That would be an example of a big story.

Those are the most important clauses in my contract with myself. This has worked out pretty well for me, but these guidelines are certainly not the only possible rules for investment. Your age, your net worth, your fixed expenses and income, your personality, level of risk tolerance, and the amount of time you are willing to spend performing research will all contribute to the final contract you sign with yourself.

Keep It Simple Stupid is always good advice.

Treat your contract with yourself as seriously as you would any legal document that requires your signature.

Start investing today, because there will be a tomorrow, if not for you, there will be a tomorrow for someone you love.

Friday, June 16, 2017

Excuses Excuses Excuses

Occasionally on my morning walks, I cross paths with an English lady out walking her dog. We enjoy chatting with one another about various random topics, so if we are heading in the same direction, we walk together for a few minutes. On this particular morning, she was quizzing me about the semester I spent in the United Kingdom as an undergraduate. I answered all her questions and told her my stories, reliving one of the more enjoyable experiences of my youth.

Then she asked a follow up question, “Do you think you will ever go back to England?”

My answer was a bit complex, but honest. My wife and I do want to return to the United Kingdom and the Republic of Ireland, but planning such an adventure seems a bit more complex than it did 45 years ago. I don’t really enjoy driving all that much anymore. I would be up for a high end package tour offering a bus to carry me from a three or four star hotel to castles, cathedrals, or concerts and back again, but my wife doesn’t enjoy living on a schedule. She rather sleep, eat, and tour when and where the spirit moves her.

Then I had one of those moments of realization. I told my walking companion, “When we are young our excuse is, “I don’t have enough money.” When we are middle aged we say, “I don’t have the time.” When we are old, we tell ourselves that, “I don’t have the health or the energy to live out my dreams.” She was in total agreement with my observation.

Writing this post is hard as it is causing me to relive a variety of failures, disappointments, and regrets. Take a trivial example. I always want to ride a motorcycle. While my parents had control of my life, this was absolutely forbidden with an irrational level of hysteria. Well, to be fair, I was an only child and my father lost a friend in a motorcycle accident. When I was first out on my own, I didn’t have enough discretionary income to buy a motorcycle. A couple of years later, taking on the responsibilities of marriage certainly did not increase my financial flexibility. There was a point in time when I could easily afford to buy a late model used motorcycle, but I really didn’t have the time or an opportunity to learn this kind of skill. I was working full time, going to night school, attending church, practicing Tai Chi, and I was still married. It didn’t happen. Now at age 66, I question my vision, reflexes, and what my injured lower back might think about a motorcycle saddle. Now all I have is a regret, not a serious regret, but when I watch my neighbors riding off on Sunday mornings on their Harleys and their Hondas, I sigh.

There are times when it is better to listen to your dreams instead of your excuses. Balancing duty and obligations to others with your dreams of self actualization isn’t always easy, but then who ever said becoming an adult would be easy.

Even when you do it right, it won’t be perfect, but don’t fail to give life your best shot.

I didn’t have the time to go back to engineering school, so I made time. I dropped out of the workforce for the better part of three years. We had savings. My wife had a job. After the dean saw that I was a serious student, he saw to it that I had a partial scholarship and later, a work study grant. I never had to borrow a dime. While earning my MS in night school, my employer paid for everything but the books. It seems that if you are heading in the right direction, the universe will sometimes decide to help you along.

The universe never helped me buy a motorcycle or teach me how to ride, but then I never made the commitment to learn even at the cost of a collision with a Buick. I wasn’t raised to take physical risks. I was also raised to worship at the altar of higher education. Maybe it was never meant to be, but then the results of my life, given my programming, seem, at least somewhat predictable.

Be honest with yourself. What excuses are stopping you from taking the next step towards a better life? Can you find a way to maintain your personal integrity, fulfilling your oaths and obligations to others, while stepping out into a future that could be better than anything you could even imagine?

Take a baby step toward your dream. See if the universe answers. Do it today.

Thursday, June 15, 2017

A Little Ditty About Expectation and Reality

Happiness has been defined as the ratio of reality divided by your expectations. If life turns out better than you expected, you are happier than if your life proved to be a disappointment.

Consider: If a young man grows up in some sinkhole of rural poverty where none of his relatives ever held a permanent full time job, his expectations and those of his family would be pretty low. If this individual opens and operates a successful motorcycle repair and customizing shop in a nearby city, not only would he be excited by his success, but his family would likely consider him a jewel. If a young man who was the son of a famous New York City heart surgeon, dropped out of high school to learn how to paint skulls on motorcycle fuel tanks, his mother would most likely require years of psychiatric counseling and he certainly wouldn’t be welcome at family events.

It’s tricky this interplay between expectation and reality. If we set our expectations too low, it is pretty much a certainty we will never achieve all that we could become. If we have unrealistic expectations, we are setting ourselves up for unhappiness and disappointment. Although this is a personal finance blog, this problem appears in every aspect of life.

People who believe they can never get ahead of the repo-man are likely to remain in poverty, because they will be unwilling to take actions necessary to break out of the debt trap. The problem is complicated by not only their expectations, but the expectations of their friends and family.

I suspect that one of the reasons that 78% of all professional football players are bankrupt or in financial distress within two years of retirement is a deep seated unconscious belief that they can’t become rich or they don’t deserve to be rich. The average NFL player earns $1.9 million a year. If this player has a five year career about $10 million might pass through his hands. If he could manage to hold onto $5 million, an unimaginative group of index funds could assure his family of a $200,000 a year income for decades if not in perpetuity! While that salary won’t put you in the 1%, it will put you in the top 5%, not too shabby, especially in an area of the country with a low cost of living.

We all seem to have some spot in our lives where we limit our own ability to succeed or enjoy happiness by self limiting beliefs, fear of what others will say about us, or simple self sabotage to avoid the effort and risk involved in any attempt at self improvement.

What if I fail?

All too frequently, I hear highly intelligent, sophisticated individuals with two or three college degrees tell me they can’t learn the basics of investing their money. Usually these statements of personal inadequacy are accompanied with rapid negative shakes of the hands and head. “I just can’t think that way.”

Really, not much thought is required. Automatic deposits to a target date fund appropriate for your age will put you so far ahead of most of your peers, that at age 65 you won’t even be able to see them in your rearview mirror.

However if you believe money is evil, your subconscious or even your conscious mind might decide it doesn’t want to bring evil into your life.

If you believe that getting ahead is a form of treason to your family and friends, chances are you won’t go back and get your GED.

What’s holding you back? No matter where we are in life, we can do better in some dimension of what it means to be a self actualized human being. Listen to the words you are telling yourself when you start to dream about something better. If you hear words of discouragement and fear, perhaps there is a problem that can be addressed by a change in your expectations.

Could a little rise in your expectations change your behavior?

Could a change in your behavior change your reality?

Wednesday, June 7, 2017

The Rehab Song

“They tried to make me go to rehab,
I said, no, no, no.”
Amy Winehouse,

I consider Amy Winehouse the greatest female jazz singer of her generation, a talent that deserves to be mentioned in the same breath with the likes of Ella Fitzgerald and Billie Holiday. If Amy went to rehab, the world would be richer happier place, but I don’t want to talk about that kind of rehab.

First, let’s talk about physical and occupational rehab. It is painful, difficult and unfair. Having observed our parents growing old, I have noted that both physical and occupational rehab therapists tend to be young, strong, and healthy, yet they are allowed to torture helpless old people. Does that seem fair? My mother-in-law didn’t think so. Once, while complaining about the sadist who was making her life miserable, I introduced her to Amy’s rehab song. My mother-in-law loved it and sang it every time the doctors sent her from the hospital to the rehab facility. But when the doctor prescribes physical and occupational therapy, someone has to ask the question, “Do I want to spend the rest of my life in a wheelchair or do I want to be able to walk?”

Over the years, I have noticed a frequent criticism leveled against personal finance authors falls under the category that I would describe as the, “Easy for you to say,” critique. Yes, even humble writers of anonymous personal finance blogs have probably reached financial freedom or are well on their way to that goal. Some of the celebrities in the field are rich by any standard. Dave Ramsey has a net worth of $55 million. Suze Orman rings the bell at $35 million. Is it fair for these people to tell the poor they have to do a better job living on a budget? But when Dave Ramsey offers a listener a free pass to attend one of his classes, someone has to ask the question, “Do I want to spend the rest of my life in the projects, or do I want to at least try to find financial freedom?”

In retirement, I am making an attempt to lose weight, become stronger, and live a healthier lifestyle. It isn’t easy. I am 66 years old and still overweight after four years of walking on an almost daily basis. I still have a heart arrhythmia and arthritis in both my knees. I also have an old back injury that I have discovered limits me to walking 5 days a week, max. In the past when I reached a wall in some kind of physical activity, I quit. This time, I consulted with a health science professor who suggested a change in direction. He still wants me to walk, but I have added working out on weight machines three times a week and attending a Yoga for old people class once a week. He also recommended swimming, but my first attempts were halted by water that I couldn’t get out of my ears. I purchased some ear plugs and a bottle of Instant Ear Dry, but they remain unused.

I realized that for the first time, I was applying the same kind of strategy to physical fitness that I instinctively used in a different kind of fiscal therapy and occupation therapy, rehab that involves money. When I discovered we were spending more than we were earning, we changed our fiscal behavior. When I decided I wanted to earn more money, I went back to school—twice. Finally, when it was apparent that I wasn’t going any higher in my choose profession, I started learning about investments. Every time I hit the wall, I changed directions. I didn’t give up.

Driving a 1966 VW bug without air conditioning in Washington D.C. summers for eight years wasn’t any fun, but it did allow me to pay off a 30 year mortgage in 9.5 years. I haven’t lost any weight since I started pumping iron four months ago. I don’t think I look any better, but I can see the numbers are going up, both the amount I am lifting and the total number of lifts per practice session.

If you are in need of fiscal or occupational therapy, go to the library or the Internet, find a professional who will suggest an exercise program for your bank account. Don’t expect it to be easy or fun. It will likely be painful. It will likely take some time before you start seeing any results. But if you persist in doing the right thing, your situation will improve.

You’re already in fiscal pain, at least make that pain meaningful.

Just one more set of ten lifts of that monthly budget!

Do you think that insurance companies would pay for physical therapy or occupational therapy if it didn’t work?

Wednesday, May 31, 2017

Please, Don't Do That!

Rich Duprey of the Motley Fool is concerned that you might lose all your money in the stock market. That is possible, but unlikely unless you make a series of really bad mistakes. I thought it might be worthwhile to reflect upon and expand on the scope of his article.

He starts with day trading, a really bad idea. Anything that provides its victim with a random periodic reward is a surefire setup to waste time and/or money until it is all gone. Casino slot machines are programmed using data from psychological experiments to keep you sitting there for hours until you are broke. You give me a dollar. I give you 90 cents; repeat process until all your dollars are gone. Facebook wastes your time using the same principle. You post something, then you check back 100 times over the next seven or eight hours hoping that someone likes or even loves your post. Facebook has only one product, you. Their goal is to keep your eyes on the page long enough that you will be tempted to click on an advertisement or a page from one of their real customers who are paying them money to study you and then to trap you.

There is a way to become a trader. It isn’t for me, but there are people who do a very good job making a living using the statistical science called technical analysis. If you have ice water flowing through your veins, the mind of a computer, and a heart of stone, this might be your game. Think about poker. It is a game of skill. Even a master can’t win without the cards, but I’m sure you have noticed the same faces have a habit of reappearing around the final table come championship time. One of my young former coworkers is a very skilled poker player. He understands statistics and probability. He has studied the game and maintained a journal detailing every game he plays. He records what he did, why he did it, and the results. Trading stocks or betting on cards based on your intuition or emotions of the moment is a very bad idea.

Next Duprey mentions penny stocks, one of those schemes that are so idiotic I forget that they even exist. Penny stocks are shares in worthless little companies. Think about it. If the market values shares in a company’s stock at 5 cents, more than likely there is a reason. These shares go up and down very quickly. After all, a 5 cent move could double your money—or leave you broke. Most of these wild little stories return to their true value—zero. Even established stocks with a wild story, like a Canadian gold mining stock I purchased before the price of gold went on a rampage, have a habit of falling back to earth with a thud. After a wild ride, I lost money, but it was a real company so I didn’t lose all that much money.

While I don’t believe in the efficient market hypothesis as proposed by Modern Portfolio Theory is correct at any and every moment in time, it is certainly true over time. Consider, the market had a pretty high opinion of Enron, until the facts came out. Then the market changed its mind. However, once the market gets the facts, it will become pretty efficient, pretty quickly, pricing those facts into the selling price of the stock. Do you think you are in possession of some secret insider information that people like Carl Icon or Warren Buffett can’t ferret out using an army of research assistants with Harvard MBA degrees? Good luck with that.

Finally, the author denounces margin. Yes, borrowing money to bet on the stock market can make a lot of money in a short time, but if the trade goes wrong, the margin call can clean out your account, leaving you with nothing. At least using margin is better than gambling with Tony Soprano’s money. You won’t need to worry about his leg breakers visiting you in the night.

Here are some more thoughts on ways to lose a substantial amount of money in the market that I believe are more common occurrences than the three horribles reviewed by Rich Duprey.

In my experience, everyone is hoping that they can find that one hot tip that will buy them a beachside condo in Maui where they can live happily ever after, soaking in a hot tub in paradise whilst sipping a Mai Tai. If someone you know is privy to that kind of information, why is he living in a mortgaged home and driving a car that carries a note, just like you. If you happen to be a waitress at a high end restaurant on Wall Street, keep your ears open, but don’t expect anyone to share that kind of information with a waitress. If your unemployed bother in law is convinced he has the inside track on the next big thing, thank him for sharing the opportunity, but don’t give any of your money.

A story that I hear way too often concerns the enthusiastic employee who loves his company. Often rapidly growing young companies contribute shares in the company rather than dollars to their employee 401(k) accounts. Over time, these shares can grow until they constitute a very large percentage of the employee’s total net worth. If the unthinkable happens, one bad day can wipe out 15 years of savings. When this happens, layoffs are sure to follow. An employee can lose most of their money and their job in a matter of months. Diversify. Even 10% of your net worth in a single company can prove dangerous.

I love the energy sector and I have made money investing in that kind of company. I have also lost money in that sector when I had too much in gas, oil, coal, regulated utilities and pipelines when the market for commodities went south. Overall I have done well even in bad times, but I need to pay attention to my portfolio. When the price of oil drops, so did the value of shares I hold in an oil exploration company, one of my unhappy stories. The entire nation if not the entire world suffered from an overexposure to technology stocks during the dotcom crash of 2000-2002. I remember one of my coworkers, a successful investor, who helped me when I was first learning about the market, telling me, “This time it is different.” He had way too much invested in NASDAQ companies. If he had 10% or even 20% of his net worth in dotcom companies, he would have been hurt, but his life wouldn’t have been affected all that much. Instead he took a bad beat down. I don’t know if he ever recovered. Don’t put too much money in one sector. Buying shares in Exxon, Chevron, and Royal Dutch Shell does not constitute a diversified portfolio.

P.S. Later I learned that, “This time it is different,” are the five most dangerous words an investor can hear. The next time, and there will be a next time, someone speaks those words, run away.

I don’t personally know anyone who got in trouble putting too much money into the market at one time, but systemic risk is real. If you happen to get an inheritance or win the lottery someday, don’t invest it all at one time. It might be October 1929. Most normal people are de facto dollar cost averaging investors, putting a fixed amount or percentage of their income into their 401(k) every month or small regular investments into their taxable accounts over decades. This is safer. It is hard to predict when the business cycle will turn, but be assured bust will follow boom as surely as boom will follow bust.

The most serious and frequent mistake I have seen, is getting out at the bottom. In 2008 I saw way too many highly intelligent successful men sell out at the bottom, locking in their losses—forever. If they had a balanced portfolio containing stocks, bonds, and cash, they could have bought more shares at the bottom in early 2009, a time when a blind monkey with a handful of darts could make money by throwing them at names of companies listed on a dartboard. There is a flipside to this mistake, getting in at the top. That happened in 1999 when the dotcoms and the technology stocks went wild.

I believe that all these mistakes have something in common. They all involve some combination of greed, fear, and delusion. Any time you find yourself riding one of those horses, stop before making a decision. Take a deep breath. Clear your mind. Try to become a dispassionate objective observer of your own life. If you were watching a movie or a TV show how would a wise man or woman proceed?

Keep It Simple Stupid (KISS) is frequently good advice. If you are a doctor earning $315,000 a year, you are in the 1%. Congratulations, you are most likely the smartest woman in the room, but that doesn’t mean you know anything about investments. If you believe you can find a magic shortcut to riches that has never occurred to the rest of the market, you are delusional. Start with target date funds, an age appropriate mix of low cost index funds. If you have spent some time studying the classics and some trustworthy web sites, don’t be afraid to buy small amounts of reasonably safe stocks that have a long track record of paying dividends. From time to time, when the price is right, Warren Buffett buys shares in Coca Cola. He never sells Coke.

KISS is also good advice for the rich and the famous who believe they are bulletproof. Tony Dorsett, Heisman Trophy winner, rookie of the year, frequent all pro and, a hall of fame running back, decided he could play the game of oil futures with the likes of J.R. Ewing. This nefarious TV wheeler dealer was actually a composite of real Texas oilmen. Tony almost went bankrupt.

Greed and fear are sneaky emotions. I have discovered that the poor can become greedier than the rich and that the rich man can become more fearful than the poor man. Don’t believe for a minute that your judgment can’t be clouded by these emotions. They are always there, inside all of us, waiting. I have seen fear cause the rich to live as though they were poor, becoming servants to their money rather than the master of their money. Too often greed fueled by envy lead the poor into actions that will end in prison or death. Look at the list of mistakes enumerated in this article. How many of them involve either fear or greed?

Hear some all purpose advice from King Solomon, the wisest man in the Scriptures.

Proverbs 28:20-22
A faithful man shall abound with blessings: but he that maketh haste to be rich shall not be innocent.

Proverbs 14:31
Whoever oppresses the poor shows contempt for their Maker, but whoever is kind to the needy honors God.

Proverbs 6:6-8
Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler,yet it stores its provisions in summer and gathers its food at harvest.

Proverbs 30:8-9
Remove far from me falsehood and lying; give me neither poverty nor riches; feed me with the food that is needful for me, lest I be full and deny you and say, “Who is the LORD?” or lest I be poor and steal and profane the name of my God.

Proverbs 23:4-5
Do not wear yourself out to get rich; do not trust your own cleverness. Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle.