Benchmarking Financial Success

Happy New Year! We are starting the year out by giving you a ton of great advice. The theme of this show is to stick to what works.  We are not going to try to re-invent the wheel, but rather explore what creates success and benchmark it. This week Brian and Bo cover some great financial concepts to implement in the New Year.

The Big Give

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Deferred-gratification– Is being able to cut consumption today, so that there is more to consume in the future.  This concept works hand-in-hand with forced scarcity and dollar cost averaging.

Understanding fear and greed– It is hard to remember that investors should try to buy low and sell high. The problem arises in knowing what is low, and better yet what is high. Do not get too greedy, especially when markets are up. We see it far too often when investors are buying at the top, and selling at the bottom, inadvertently breaking the golden rule of investing. If you insist on trying to be a market timer, we love the quote from Warren Buffett, “Be fearful when others are greedy, and be greedy when others are fearful.” You need to have a plan of action that fits your investing personality and stick to it, do not allow greed to push you off track.

Dollar Cost Averaging- Is a great tool to utilize to help stabilize some of the volatility that comes with investing. Making this process systematic is a great way to stick to your investment plan. The theory is that in the long-term this steady stream into the market will help minimize the short-term fluctuations while providing consistent access to investing.

Cost to fun Ratio- This is how Brian measures the amount of enjoyment or satisfaction he receives for the price he pays (buffets are at the top of his list). You have to ask yourself, do you get enough enjoyment from an activity to make spending the money worth it? If you are spending your money on a new gadget or social event make sure that it is well worth it, and that you can look back and be happy that you spent the money. This is a very easy concept to comprehend, and we find that it helps you keep your eye on what benefit you are receiving for the items and services that you purchase.

Forced scarcity- Is creating such a high-level of savings that it forces you to feel a little broke all of the time. It does not mean that you are broke, just that you have normalized living with less than you can afford so that one day you can be truly financially independent.  

Financial clutter- Have a cohesive plan so that your portfolio is as efficient as possible. Being good at investing is hard work; make sure you know what the plan is for your financial independence, stick to it and tune out all of the outside influences.

Be careful of financial noise– This goes back to having a plan and sticking to it. Make sure you are not chasing the hot-dot or the next big stock. Know what you own and why you own it, and make sure that it fits well into your financial game-plan.

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