“Honey!” the mother pleads, looking into her adult daughter’s eyes. “I just want you to be happy. Listen to your heart!”
This line (or one like it) shows up in every sappy Hallmark movie I watch with my wife.
I can’t imagine worse advice to give someone—whether in the area of romance, parenting, career advancement, or finances.
Our hearts feel all sorts of things. And while we should acknowledge those strong feelings, we should never govern our lives based on sudden whims.
Emotions just aren’t reliable. They come and go, changing quicker than the weather. Oftentimes they have no correlation with reality! So, in giving in to a momentary but powerful feeling, we can actually be inviting long-term misery!
A case in point:
I was having a conversation with someone about today’s tumultuous financial markets. The stock market is in bear territory. And the bond market (often a reliable balance to stocks) is down as well. This has created real angst for investors.
“I feel like I should just sell my stocks and stick my money in the bank right now,” my friend said with obvious concern in her voice.
I understand my friend’s powerful desire to want to protect her money and safeguard her future. That’s a normal instinct—especially in an era when social media and news outlets inundate us with scary information 24/7. But letting a strong feeling effectively dismantle your financial plan is unwise.
In fact, history suggests such a “feelings-based” financial decision might actually be a major mistake. Sure, you’d avoid any big stock market dips—but you’d also miss out on any bull markets.
During my lifetime the broad stock market (as measured by the S&P 500) has fallen by 25% at least seven times. The average return one year later was a 15% increase. Five years later the average total return was over 80% higher. And the 10-year results were over 200% higher, on average.
Will that happen again? There are no guarantees in financial markets. Markets have a mind of their own. Actually, since a market represents the average opinion of all its participants, you could say a market has a million minds of its own.
Listen to your heart? Just go with your feelings?
Leave that terrible advice to the romance movies.
When it comes to your finances, you need more than a good feeling. You need a wise, fact-based plan.
Here’s what I suggest. Sit down with a financial planner you trust. Find someone who will tell you what you need to hear, not just what you want to hear.
Together, create a plan.
Then put that plan to work. This will involve you doing a lot of things that don’t necessarily “feel’ good. In fact, they might feel uncomfortable.
You’ll have to resist the urge to overspend—and live by a budget. You’ll have to save money when you’d rather be driving a new vehicle…buy insurance when you’d rather go on a fancy cruise…ride out bear markets, when you’d rather sell your stocks at a loss and stash your money in the bank.
But as you put your plan to work and keep at the task, you’ll experience something much deeper and more enduring than a good, short-term feeling. You’ll have the long-term security and satisfaction of seeing a smart plan come to fruition.
If you’d like more help thinking through such issues, I’ve created a comprehensive checklist of pre-retirement questions for people who are 60-something. It’s free if you’d like a copy. Email me at firstname.lastname@example.org, and I’ll send it to you right away.
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