Opportunity only knocks once. You've heard this old saying many times in your life. I think it’s wrong.
I believe opportunity knocks every day.
Maybe it's a chance to be a little nicer to the people in our lives or the people we meet on the street. Maybe it's the opportunity to be more generous to your favorite charitable cause. Perhaps your opportunity is to learn something new or experience something that can change your outlook and broaden your horizons.
Yes, maybe your opportunity is to save a little more money or make a smart investment or to pay off some debt.
But regardless of what opportunity knocks on your door...seize it!
If you ever take a cruise it will begin something like this. You board the ship. You are excited to begin your vacation. While your luggage is being loaded and you are waiting for all your fellow passengers to arrive, you tour this huge floating hotel, taking in the beautiful blue ocean and the clear skies. You are relaxed and just beginning to enjoy being in the moment when the PA system comes alive with the announcement of the lifeboat drill.
The lifeboat drill isn’t fun. It brings you back to reality and makes you fall into the role of a worker bee, go where you are instructed, learn to put on the life jacket, wait and wait and wait. The crew is bustling too. They are directing traffic, helping with life jackets, answering questions. This is not a vacation, this is work. The lifejackets are hot and uncomfortable and the ship looks too big to sink. It seems like a big waste of time.
The lifeboat drill is required because if something ever goes wrong, it will be too late to get everything organized and everyone to the right spot once you are hundreds of miles from the nearest shore. The lifeboat drill comes at the beginning so you are prepared for the worst and know what you should do. The lifeboat drill can keep you from panicking and can literally save your life.
While things are going well in the investment markets you should have your own lifeboat drill. You should understand where your investments are and what could happen if the waters get rough. You should think about how you should react when the inevitable storm passes through the markets. If you can understand the severity of potential storms and make plans now for what you need to do, you can save yourself from panic and financial ruin when the real thing comes along. You can make plans for putting on your life jacket, and know where your lifeboat station will be. By preparing now when everything is clear skies and smooth seas, you can prevent yourself from making fatal investment mistakes.
It’s common for people to visit the doctor when they are sick. There are those who go whenever something arises, and there are those who avoid the doctor at all costs, often times self-medicating through WebMD or homemade remedies passed down from previous generations.
Just as we should visit a doctor when our health is in jeopardy, we should do the same for our financial health as well. Too often people self-medicate through online articles, trendy budgeting hacks, and even those remedies passed down from family.
When your finances are unhealthy, its best to reach out to a professional for an educated and thorough check up. This is a sure fire way to receive the best financial care available regardless of your ailment.
There is a story making its way around the internet about the supposed waste of high tech cancer drugs each year. A new study published Monday by a research team at New York’s Sloan Kettering Cancer Center, estimates the drugs left over after patients receive a cancer treatment to be worth $3 Billion
The problem with the study is the researchers do not understand the economics of drug pricing. The drug manufacturer doesn't charge by the ounce, they charge by the treatment.
If drugs had permanence and were transferable, like say gold, they would be priced by some measure of unit size. But the drug manufacturer knows that once a treatment is given, the rest is discarded. Hence they price the drug for a treatment and provide enough medication for one treatment regardless of how much is in the vial. The price for many drugs is not a function of manufacturing costs, it is a function of what the market will bear. It may only cost $2.00 per ounce to produce a drug that can be sold for $1,000 per treatment, so if an ounce or two is thrown out now and then, not much economic input is lost. It may even cost the drug manufacturer more to dispense the drug in varying quantities to meet the needs of different individuals.
To know how much is wasted each year you would need to use manufacturing costs, not retail prices. You can be sure that that number is considerably less than $3 Billion and it would probably make us all sick if we really knew how much less it is.
If you live on the east coast, rain is a regular occurrence and the weatherman’s ability to predict the precipitation is infamously fickle. There is a generations long joke about the weatherman getting it wrong.
It seems the stock market works much the same way and analysts are just as woefully unable to predict its movement as the weatherman on your local newscast.
The good thing about this arrangement though is if you can get your mind around the fact that while there will be periods of drought in the stock market, there will also be plenty of rain to fill up your investment buckets. Like the rain it will sometimes come in a slow drizzle and sometime as a deluge, but it will come – whether the weatherman gets it right or not.
One of the most insidious problems I often face with clients is the use or rather misuse of credit cards. Swiping a card doesn’t feel as painful as spending your hard earned paycheck, but it should be. The road to credit card abuse starts like this: “I’ll have the money next month” which turns into “I’ll have the money next month” followed by “I’ll have the money next month”.
Stop it already! You have already spent next month’s entire paycheck and there is no way things will be any different this time.
How can you fix it?
If you’re in a hole stop digging!
Cut up your cards, put your card in a freezer bag, fill it with water, and freeze it so you won’t be able to use the card until you’ve had a cooling off (or a warming up) period.
Use a debit card.
Anything, just please stop!
Reverse mortgages have been around for decades but their popularity remains low. The primary reason seems to be home owner's reluctance to take any chance when it comes to their home. Reverse mortgages are also confusing, complex, and expensive, making them an option of last resort in the minds of homeowners.
A reverse mortgage is like a home equity loan with no payback schedule. Instead of having a mortgage you make payments on you have a mortgage that provides income to you. You can choose to take a lump sum payment, a credit line to draw on, or set up a payout schedule much like an annuity. No payments are due as long as you live in your home, however, interest accrues as you access the funds. Contrary to common perception, the lender doesn't take your home automatically when the loan comes due. Heirs may refinance or sell the home to pay off the balance, life insurance benefits could provide funds to pay off the balance, or the
heirs could just use cash to repay the balance if they want to keep the property. If the house is worth less than the amount due, you or your heirs will only owe the lender what the house can sell for.
Reverse mortgages are expensive. You can expect to pay 6% to 8% of your homes’ value at the time of loan origination to cover HUD insuring the mortgage, closing costs, and lender fees. Fees are usually rolled into the mortgage so you do not see an out of pocket expense, but it does increase you borrowing costs and decrease the money available for you to access.
While a reverse mortgage can be a real help to some, they are tricky so proceed with caution.
When choosing investments all of us sometime fall into the "halo" effect trap. Apple has been strong so let's get some of that. Netflix is a big winner I'll take some of that too. We see recent performance in the financial press and have a FOMO moment.
But that is not the way to investing nirvana. Sure it is okay to take a moonshot once in a while with a small portion of your portfolio invested in a company you really believe in, but just like salt on your potato, too much will make it inedible.
The way to building a portfolio for the long run is to embrace that markets are unpredictable and to select a large diversified basket of securities. Maybe this is the year of small caps or maybe it is foreign markets that will rule. Perhaps this year natural resources will be the big winner or maybe it's time for tech to breakout. I don't know and you don't know. So the only sane approach is to own some of everything. True, we will only own a small piece of this years Hero, but we will only own a small portion of this years Goat too.
What you focus on and measure matters.
If you focus on the daily swings in the markets and your investments it will lead you to become overly active in your investments. If you focus on reaching your long term goals it will lead you to doing the things that take you closer to those goals every day.
Guess which focus is healthier for you?