Finance Belief #14: most of the time, focus most of your effort on what you can mostly control. If you’ve gotten this far into this article, chances are that you pay at least passing attention to economic indicators and investment news. Millionaires do, too. But they also believe that most economic information (inflation predictions, interest rate trends, tax policy, GDP reports, short-term market moves, etc.) is impossible to predict and ultimately outside of their control. So, they put the majority of their financial focus on what they can control: their long-term financial plan, their asset allocation, the amount that they save and spend, writing their estate plan and so on. It’s not that big-picture macroeconomic events don’t matter – it’s just that trying to predict them is a guessing game, one that ultimately takes time away from other aspects of their finances which have a more direct impact on their wealth and well-being. Belief #15: debt is like fire: a very useful tool that demands respect. Successful investors often have a more balanced relationship with debt than is typical of Canadians of more modest means. They don’t see it as a bugaboo or monster to avoid at all costs. Nor do they see it as something which they can pile up and blissfully ignore. Rather, they see it as a powerful tool, one that can amplify their wealth-building efforts when used properly. When used to purchase assets that appreciate in value, debt can be indispensable – think about a mortgage on a primary residence or an investment property, for example, or a loan taken out to fund a business expansion, or one taken to invest in stocks or bonds. At the same time, they believe that much like fire, if debt isn’t managed and monitored, it can quickly grow to consume everything around it. Belief #16: you need to do the work. Talk to millionaires about their investments and you’ll get the impression that they spend a lot of time thinking about them. Partly it’s because they enjoy it, and partly it’s because they know that when it comes to making sound financial decisions, there is no substitute for doing the work. For some, that means digging into operating numbers, analyzing prices and deals and poring over reports and opinions. For others, it means hiring professional asset managers, advisors, accountants and other professionals who can do the work for them. Either way, millionaires understand that if you’re not willing to roll up your sleeves, get out the pencil and spend some time thinking about and analyzing opportunities in whatever avenue you choose (business, real estate, stocks and bonds, all of the above), it will be very, very hard to be a millionaire one day. Belief #17: don’t leave messes behind. Millionaires understand that the best legacy that we can leave to our families is one in which there is no mess: no guesswork, no complications, no legal hassles and no in-fighting among heirs. No, that’s not always possible for every family and millionaires certainly understand that. But that’s what they aim for, by taking the time and the effort to write their wills, declare their powers of attorney, select appropriate executors and communicate their estate intentions to their heirs well in advance of their eventual passing. They view this work not as an expensive chore or some sort of psychological hardship, but as the last and arguably most important element of a lifetime of fiscal responsibility, and a tangible example of the legacy that they wish to leave behind. Belief #13: humility builds wealth. Overconfidence destroys it. There are technically a lot of ways to lose money. But nearly all of them are connected in some way to one overarching error: overconfidence, the belief that you’re smarter, more skillful, know more or have more innate financial talent than the great mass of investors whom we call “the market.” Millionaires know that this is nothing more than good old-fashioned hubris. Sure, many of them are confident in what they know about a given asset or investment. But the best of them always understand that there’s always a contrary opinion, a different assessment or an opposite point of view regarding any given investment. And even if they ultimately don’t share that contrary opinion or differing point of view, they’re humble enough to respect it, listen to it and evaluate their own opinions against it. Throughout their investment lives, they make a point of staying humble and understanding the limits of their own financial knowledge. And, while they are confident in their own investment talents, they realize that when it comes to building wealth, there is always something at which they can get better, or about which they can know more. We should all do the same. 30 | www.snowbirds.org
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