Thursday, December 1 2022

“‘Jerry’, my 65-year-old father, blames himself for failing to get out of the stock market months ago when it was so high. He is obsessed with the idea of ​​making money and is now consumed by regret and guilt. He’s always been impulsive, not wanting to miss a hot stock, and now I fear he’s vulnerable to making the wrong call to recoup what he lost. Dad becomes a stranger to the family. We’ve told him for years to work with a financial advisor, but he’s a know-it-all.

“Do you know of anything he can read that might help him feel less angry with himself about his decisions and encourage him to work with a financial advisor? Thank you, “Liz”.

I certainly do. The Power of Regret: How Looking Back Moves Us Forward by New York Times bestselling author Daniel Pink (published this year), and Your total wealth: The heart and soul of financial literacy by Lyle Sussman and David A. Dubofsky (published last year).

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When I say the word regret, what comes to mind?

Think about some of the things you regretted and how things might have been different today if what had happened then doesn’t. Or, if instead of doing Something, you held back.

Was it that person you so wanted to meet, something – a feeling – came over you that maybe it’s this one? But you didn’t take that step forward, you didn’t say “Hi,” and instead you went on with your life, wondering, still wondering what could have been?

Pink made it clear in an interview with me that understanding what we regret can open doors to a brighter and more secure future, especially in a confused financial world.

It outlines four categories of regrets that are universal – people all over the world have these same regrets that apply especially to financial planning.

  • The Foundation regrets. They are failures to be responsible, conscientious, careful, and they leave you thinking, “If only I had done the job. Many regrets related to finance and health fall into this category.
  • Audacity regrets (inaction). These include missed opportunities, such as applying to medical school, starting a business, “chasing” true love. They leave us thinking, “If only I had taken this chance.”
  • Moral regrets. These leave you wondering, “If only I had done the right thing.”
  • Login regret. These regrets arise when we neglect the people who matter to us: “If only I had reached out.

How Being Aware of Our Regrets Helps Us

“Our regrets are a great source of information and part of who we are,” says Pink. “They can be useful when, for example, business leaders say to their teams, ‘Here’s what I regret about where we are and what we need to discuss.’ This candor earns that person’s respect and positive change for the organization. »

Avoiding financial regrets in the first place

If, when Jerry was about 25 or 30, someone had given him a copy of Your total wealth: The heart and soul of financial literacyand he had taken the authors’ advice to heart, I wouldn’t have this story to write.

But, of course, it didn’t come out until early 2021.

A theme runs through the book that applies to so many people obsessed with seeing their wallets go up in value. Sussman tells us, “It’s a simple truth; you can minimize financial regret and guilt by understanding the cost of an obsessive focus on monetary wealth.

Dubofsky adds, “If you are consumed by money and greed, you lose family, self-esteem, happiness. These things often become unintended consequences of acquiring financial wealth.

Suffering from FOMO

Sussman sees Jerry as the poster child for FOMO. “Liz describes her father as someone with an almost pathological illness. fear of missing out – it’s FOMO,” Sussman says. “When the stock market was going up, acting on advice he had combined with his own FOMO issues, he was making money.

“Now Jerry is at great risk of jumping on the bandwagon of certain stocks that are supposed to help investors recoup their losses. He admits to suffering from financial regrets, which is someone who says, ‘J should have done something with my money that I didn’t, and as a result, I’m missing out on something I should have had.”

“He is in an extremely dangerous situation.”

How a financial advisor can help you

“Financial advisors help us deal with uncertainty, and the best advisors are skilled in finance and psychology, helping their clients achieve financial stability. That’s what a good financial plan does,” Dubofsky points out. “A growing group of advisors are in the ‘protection business’ and focus on clients who are vulnerable to scam. They build firewalls between a client’s portfolio and their poor investment decisions. The goal is to ensure that the portfolio does not run out.

A prescription for better sleep

The authors suggest these steps for families to take during scary financial times:

  • If adult children are financially savvy, they should be aware of what mom and dad are doing.
  • Increase your due diligence. FOMO is very powerful and invites you to take financial risks that will break your heart and your wallet.
  • Have a long term perspective.
  • Remember that this country has survived many calamities in its more than 200 years of existence.
  • Keep in mind that businesses will always figure out how to make money.
  • If you have a long-term horizon before you retire — 20 years or more — don’t sell right away and even consider buying.
  • Be careful if you have a five-year horizon. Buying now might be more problematic.

Especially now, these two books are relevant, practical and very useful. Plus, each one is a great read!

Dennis Beaver practices law in Bakersfield, California, and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or emailed to [email protected] (opens in a new tab) And don’t forget to visit dennisbeaver.com (opens in a new tab).

This article was written by and presents the views of our contributing advisor, not Kiplinger’s editorial staff. You can check advisor records with the SEC (opens in a new tab) or with FINRA (opens in a new tab).

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