Finance Build your legacy Legacy planning (or estate planning, if you prefer) is an easy thing to procrastinate about: when we’re young, we put it off because it seems so far away, and there are so many other financial matters to deal with first. In our later years, some of us get uncomfortable thinking about our ultimate demise, so we try not to think about it until we have to. But the fact is, building our legacy is actually one significant way to build financial confidence. Giving our money “meaning” is a way for us to feel more in control of our life, and it can give us considerable peace of mind knowing that the people and causes which we care about will be provided for after we’re gone. Assigning a purpose to why we’re investing, figuring out what kind of impact we’d like to make now – and after we’re gone – canmake a powerful contribution to how positive we feel about life, our money and everything else in the universe. Whatever that legacy means to you – a flourishing family, a meaningful impact on a cause, or simply leaving the world a little better than when you came into it – invest the time now to build it. Figure out how you can make a meaningful financial contribution to the ones you love, and identify ways to do that. Identify an organization that’s doing work which matters to you, and make a contribution either with your time or your chequebook. Go write your will. Whatever you need to do, make a plan to get it done. No, crossing all of these “to-dos” off of the list doesn’t give you the same kind of confidence that comes from having a seven-figure portfolio. But what it does give is ultimately a lot more meaningful: imagine the comfort you’ll feel when you know that no matter what happens in the stock market, the economy or the world at large, you’ve done your best to settle your affairs, clean up your messes and take care of your family, your friends and the causes which you care about in a significant way. Surely that’s the best kind of confidence there is, no? Diversify to mitigate risk Regular readers of this column have probably been waiting for this one – it’s a tip that we’ve mentioned many times before, in many different contexts. But it’s worth repeating here: diversification is probably the single most-effective portfolio protection strategy that there is. Something which youmay not have thought about, however, is how diversification can also be a remarkably effective way to boost your financial confidence. Remember the equation that we mentioned at the start of this article: confidence = peace of mind = better decision-making = better performance. You can see how diversification fits into this basic equation. When you have a lot of your wealth riding on a single investment (a large position in a single stock; a privately owned business; an investment property; a Picasso in the attic; whatever), it’s pretty hard to have peace of mind. What happens if that investment suddenly drops in value? What if you got your analysis or calculations wrong? What if unseen events or misfortunes throw your projections off? How can you ever have peace of mind about your financial circumstances when so much is riding on a single, large investment? On the other hand, if you spread your wealth into different assets and different markets, as well as different investment styles or strategies (i.e., growth, value, momentum and so on), you can enjoy greater peace of mind about your overall financial situation. Sure, if you suffer a loss or sudden drop in value, it may well be a hard pill to swallow – it always is. But it won’t be a disaster. When you know that one bad decision or mistake won’t result in blowing up your entire portfolio or destroying your quality of life in retirement, you have peace of mind. And therein lies confidence. 34 | www.snowbirds.org
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