Hi everyone and welcome back to Melissa Making Cents!
This week I am celebrating my 15th anniversary of working with Fetterman Investments, Inc.! It’s so hard to believe that the time has flown by so quickly. I remember walking through the glass doors on my first day. I was very nervous about starting my new job, and afraid that I wouldn’t be able to work in an industry I knew nothing about.
Fifteen years ago I was given a chance. Early on, I have proved to myself and to my company that I could handle the job I was given, and since then I have reached greater heights than I could have imagined.
What I didn’t know was that somewhere along the way I would truly fall in love with my new career as a financial planner, and find myself dedicated to this wonderful profession in which I would get the opportunity to help so many people. I’m lucky enough that each day I come into the office, I get to talk to clients that I consider to be more like family and friends.
My favorite conversations have been those that I have connected with clients on a personal level. For example, it’s been interesting to hear about diverse hobbies. I have learned everything from making homemade apple cider, to golf trips in lava fields, to gemology, and all the way to global adventure trekking. I even managed to pick up some wonderful cooking tips along the way!
In addition to these light things, I've also had the honor of holding hands through good times and bad. I’ve watched the economic seasons change, and held my breath as we all weathered the storms of a few pretty awful days in the market. Through college planning, wealth management, and financial coaching, I've helped empower clients to make smarter financial decisions for their future.
Today I want to talk about eight of the biggest life lessons I have learned in the last fifteen years of being a financial planner. These are life lessons that have served me well both personally and as a financial planner. I know everyone can benefit from them. (Contact me to say congrats!)
Life Lesson #1 - Markets go up and markets go down
This was perhaps the hardest lesson for me to learn, and it's something that even I need reminding of from time to tome.s. I remember the first time I was watching my trading screen when we had a bad day. I remember feeling helpless that the market was down 150 points, and anxious for our clients. I expressed my concern to Rick, the founder of Fetterman Investments, Inc., and like any good boss and mentor "he said, “Don’t Worry"”. He explained that markets have good days and bad days. He said that it was important not to make knee jerk reactions on bad days. Rick then explained to me that, what we really want to see is that our clients financial trajectory is increasing over the long time horizon. Things are going to move up and down short term, but over the long run there should be an increase.
Time after time I have listened to clients ask about trying to time the market. “The Truth about Timing”, is an article written on November 5, 2001 by Jacqueline Doherty for Barron’s. (Find a PDF copy of the article here The Truth About Timing). She provides a very interesting look at the attempt to time the markets, and the two schools of thought regarding staying in or getting out. The article investigates the annual returns from 1966 through 2001, and goes so far as to separate annual returns from the returns excluding both the best and worst five market days of each year. It’s incredibly hard to argue that it is a benefit to miss the worst five days of the market in any given year. But.. missing the 5 best days will not do your pocketbook any favors! The research in her article goes on to explain, “anyone who put a buck in the market in 1966 and held it thru October 29(2001), would have $11.71 (a 1,071% gain), while those who were in the market for all but the best five days would have had just 15 cents (an 85% loss). But those who were in for all but the five worst days would have $987.12 (an amazing 98,612% rise aided by the power of compound interest.)" So what does all that mean? It means if you can tell me exactly when the worst market days are going to happen, then it will save us all a lot of anxiety. For most people it’s going to be more luck than actual timing. Because of this, it's best to just ride the market out and not try to time things.
Years later, when the markets started to sink in 2008, Rick and I would have the exact same conversation about good and bad markets. It seems we forget the bad times easily when the markets are going good for so long. To paraphrase Sir Isaac Newton, “What goes up must come down”. Investing also follows the laws of gravity.
Life Lesson #2 - Be realistic with yourself and set healthy expectations
I have tried to make this a key theme in all the blog posts I have written. But still, it is good to have a little reminder every now and then that we all need to be realistic with ourselves and our expectations. Time after time I have had conversations with clients where they say they are unhappy with the growth of their accounts. I generally take this as an opportunity to to help them understand better how markets work and how they should see their performance. It seems they hear friends talking about how much their advisor has made for them in the last year, and they wonder why their account has not increased more in dollars. Upon review, their accounts have increased the along with the market. Despite this though, they are unhappy that it didn’t equate to a higher dollar amount. They made the mistake of comparing their performance to someone at a different level. Although the percentage increases may have been comparable, because the absolute increases weren't, they thought their accounts had performed worse. It was an apples to oranges comparison.
Let's take an account that grew by 20% as an example. The 20% is going to vary in dollar amount depending on how much your account is worth. For example, 20% of $20,000 is $4,000 but 20% of $200,000 is $40,000. It is unrealistic to expect your 20% in growth to be more than someone else’s 20%. Time after time I get... “I don’t understand why it didn’t increase more in value”. It is an unrealistic and unhealthy expectation to assume your account will double in a year. It’s also a little ironic that to some people a 20% return is not enough, yet they feel that making a 20% contribution to their retirement account is outrageous! Bottom line… 20% is 20%.
Investing should be set to your individual needs. If you are in the distribution or annuitization money phase, you are likely not in a position to take on extra risk and by nature your investments will likely be more conservative. This in turn means that your investments may not have performed as well as others in a different financial phase/situation.
Newton’s rule of 72 says that, as an approximation, the amount of time that it will take to for your investment to double is the average return of the investment divided into seventy two. For example, if you had an average return of six percent, the it would take around twelve years for your investment to double (72/6 = 12). I will point out that this is only a good estimate. It doesn’t account for good market years, nor does it account for awful years like 2008 when the market was down nearly 40%. (Read more about the Rule of 72 here!)
Being realistic with your expectations goes far beyond your money. It transcends many topics in life. Career goals, weight loss, relationships, and finances are just some of the categories in which we really need to be realistic. This also means that we should work towards not comparing ourselves to others!
Life Lesson #3 - Stop comparing yourself to others, you are unique
I’ve seen some pretty awful financial mistakes when people try to compare themselves to others. You really don’t need to keep up with the Joneses. There is no law that says that everyone must be in the exact same place at the exact same point in their lives. It’s alright to be behind others. It’s ok to stay single, or have children later in life. Do what makes YOU happy!
Truth be told, we all end up in the same place. We all have a finite number of days on Earth, and I will strongly suggest you make the best of them. If there is something you would like, then set a goal and make it happen. But.. make sure you are doing it for the right reasons, and not solely because someone else did it or has it.
I will also remind you that appearances are not always what they seem to be. A person that drives a nice expensive car, wears the nicest clothes, and always appears to be perfect, may not have it so great at home. Just because they look a certain way, doesn’t mean they are truly happy.
Life Lesson #4 - A little gratitude goes along way to make your future bright
Be grateful for what you have and be happy knowing you are free to be yourself. This definitely goes along with not comparing yourself with others. There is something to be said for being grateful for the things we have in our lives. Someone once asked me why I race in various triathlons and running races. My answer is simply because I can. I’m grateful for my body and the amazing things it will let me accomplish. I also try to honor individuals that are physically unable because of various ailments.
As an example, this morning I woke up for a long training run and struggled to get out of my warm bed. Starting the run was even a struggle, because sometimes the thought of a workout is exhausting. About 3 miles in I had to stop to take in the beautiful sunrise and the amazing reflections on White Rock Lake. In that one moment, the entire morning struggle was worthwhile. I was so grateful for being able to witness the beauty of nature. In that moment I thought of my Grandmother, and how she loved to see the sunrise.
There is something about gratitude that mentally changes people. Recently I had the privilege of seeing Shawn Achor, known as the “Happiness Guru”, deliver a wonderful talk on the research he had done on happiness. He says “Happiness can be a choice if we apply daily habit change”. He goes on to talk about his work with a school district in the suburb of Schaumburg Illinois. For the 2016-2017 school year Achor hosted a Happiness Summit that presented “Happiness” workshops to all the staff that focused on positive psychology. Since implementation, the district went from the 74th percentile of academic achievement in Illinois to the 95th percentile. “They are in the top 2 percent of schools now nationwide. And SD54 is not an outlier. The work we did for the poorest school districts in Iowa over a five-year period, graduation rates rose to 91 percent, attendance to 95 percent. For the first time, kids are coming back from the rich counties to attend school in the poorest county in Iowa. Their literacy rates have the greatest percentage increase of any school in Iowa.” In a U.S. News and World Report article by David Levine, entitled "How Positive Psychology Can Improve Student success, from January of 2019, Achor credits “The Happiness Advantage”, “ with significantly raising memory, attention, productive energy, social connection, trust, intelligence, creativity, and shields against depression and anxiety.”
From personal experience, I am a believer in happiness and gratitude. Finding pleasure in the small things in life has the ability to help change your mind and therefore your journey. It’s amazing how life just seems to fall into place when a person makes the choice to be positive from this day forward.
Life Lesson #5 - An increase in income doesn’t mean you have to increase your spending
Spending and income are frenemies. The love hate relationship is very real! In my experience, most people will automatically start spending more when they receive an increase in their income. I can certainly put myself into this category! Out of college, saving for my future wasn’t all that important. The money habits I had learned growing up said there is always time to save, and now I can spend! With each pay raise came a newer car, shopping trips, and a more expensive place to live. But it never occurred to me that I was setting myself up for an unhealthy financial future.
I have found that the more financially savvy people have learned to pay themselves first. Should any increases in their income come their way, the money goes straight to saving or paying off debt. This may seem like no fun in the short term, while all your friends are traveling and socializing, but becoming financially independent as early as possible will allow you to travel and have more fun without worrying about making sure the bills are covered for the month. Bottom line… do as your elders have told you, and pay yourself first.
Life Lesson #6 - Sometimes you are just not earning enough money
Not everyone has a spending problem. I have worked with individuals that just don’t earn enough income. No matter how much they budget and track every penny, their money never lasts to the end of the month. This is a very tough situation! Underemployment in our society is very real. There are individuals that truly need help, but make too much to qualify for aid. Or, on the flip side earning more income disqualifies them from the desperate help they need for their family to survive. It’s not a matter of people being lazy and not “wanting” to work. It truly is about being caught in our economic system and the unhealthy financial cycle it causes.
In our great country, it's hard to imagine people having to choose between things like medication or heat. I will point you to the older man I worked with that had found a compromise by eating canned cat food so he could afford his air conditioning in the summer. This is one of the biggest reasons I always emphasize having regular money conversations with your family members. Sometimes it’s not a matter of budget, but a matter of the limited amount of income that is available to you and the circumstances that surround your situation.
Life Lesson #7 - Know when to ask for help
Asking for help has been the hardest lesson for me to learn. I'm no longer too proud to admit that I can be very stubborn, and sometimes there are tasks or topics that require assistance. I have learned through the years that asking for help makes a stronger person. Asking for help to better understand your finances is one of the best moves you can make. Money can be very complicated, but having the right person teach you about financial topics can make a huge impact on your life. I live for the "Aha" moments, when I have finally explain a topic that clicks!
If you have a friend or loved one that could use the help, please pass along our contact information!
Life Lesson #8 - Be kind to yourself
My final lesson today is to be kind to yourself. Life isn’t perfect, and there is not a single person on this planet that hasn’t failed at some point in their lives. We all make mistakes, especially with our finances. The most important part is that we learn from our mistakes and grow as individuals. Never be ashamed or sorry for the path you have taken to get to your current point in life. Your journey is what makes you who you are.
Talking about money is hard. There are so many emotions that can bubble up, and for various reasons money has traditionally been taboo. There is no reason you should compare your life to someone else’s and feel insufficient because you are not in the same financial position. Be kind to yourself. Acknowledge your past, and thank it for the role it has played in elevating your future.
Now… to get sentimental for a second. We all have a defining moment in our lives where our circumstances changed. For me it was February 1, 2005 at 7:30 am, when I started working with Rick Fetterman. Words will never be able to express how grateful I am for being given the opportunity to join Fetterman Investments, Inc. and ISC Group. In the last fifteen years I have learned so much about money and developing healthy financial habits. I’m ecstatic I can in turn use my knowledge to truly help people in planning for a healthy financial future. But beyond money, I have personally grown leaps and bounds under the wings of my fantastic mentor. My sincere wish is that everyone could be lucky enough to find a career they love, and a boss that makes going into work on Monday mornings enjoyable.
So… thank you Rick for making the last 15 years so memorable. It has been a true honor to learn from the best, and I can only imagine the next fifteen years will be even better!
Until next time…. This is Melissa Making Cents!
Melissa Anne Cox
CERTIFIED FINANCIAL PLANNER™
College Funding and Student Loan Advisor