My Opera
Advice from the finish line
Friday, May 25, 2012 5:04:34 PM
At my age, nearly everyone is a youngster. Somehow, I have made it to life’s finish line in one piece and not much worse for the wear. As I am now qualified to be a coach in this matter of living, here’s a little advice:
In the month of May, four trillion dollars were wiped out from the world’s equity markets. Most ordinary people are fearful of investing in stocks, and rightly so, as nearly every national economy around the world including so-called emerging markets such as Brazil, Russia, Indonesia, and China are in trouble. We all know what is happening in the Eurozone, Great Britain, and the Middle East, and the U.S. financial system is a shell of its former self. Gold has proven to be a poor investment and the prices of other so-called valuable commodities are plunging.
Formerly ‘safe’ investments such as government treasuries, preferred stocks, investment-grade corporate bonds, municipal bonds, and so forth are no longer a safe haven because this is where most folks, out of fear, have shifted their savings and retirement money, creating another potentially devastating ‘bubble’. These investments offer little or no return at present, and are extremely risky as they basically depend on a stable financial system, including solid, well-funded banks and dependable stock brokerages that provide market liquidity.
So, what can you do if you are just starting out on an independent life and looking forward to an enduring marriage with a house, children that can go to a good college and carry on, and the opportunity to retire from working at some point before you die?
The answer is simple to state, but hard to implement: Live off of your cash flows as much as humanly possible, and neither a borrower or a lender be. Stay free of debt, forget instant gratification and instead save for the things you want and need. Have a well-thought out plan for the future. While you can’t put off buying food and clothing, you can put off buying smartphones, fancy cars, designer jeans and shoes, gourmet meals from fine restaurants, rock concerts, and cable TV. None of these things are critical to your well-being and they are like vampires on your financial future prospects.
The thing is, most of these are distractions that make you feel good, feel wanted, or seem to help you be part of the ‘in crowd’. But, at the same time they diminish you as a unique person. They do not strengthen your foundation in life, do not make you closer to your loved ones and children, contribute nothing to your safety or expand your horizons.
Every decision that you make in life must be weighed in the balance. You must always examine the risk/reward ratio of every move you make, from stock market investments to the selection of friends and lovers. The era of free love and something for nothing is over. The choices you make today may well determine if you physically survive for the long term. It is far better to face an uncertain future from a position of strength than blow what you have on good times, good drugs, or gambling. Interpersonal relationships are more important than ‘things’, and anyone you let into your life must be carefully vetted.
It is not enough to be smart or well-educated nowadays. Instead of ‘Buns of steel’ you need to have ‘brains of steel’. Strength of character and the will to prevail in adversity will determine who is a ‘winner’ in life. Depend on no one except yourself, but at the same time cultivate relationships with people that are disposed to help save you if you get in trouble, and be prepared to offer the same kind of assistance in return when needed. And regarding investments, sometimes it is better to sit on the sidelines than play the game. Right now, the least risky investment will be found in dividend paying stock in selected companies that have little debt, growing sales, lots of cash on hand, and products that are best in class. And be prepared to sell them in a heartbeat if conditions change with the company or the market for its products.
In the month of May, four trillion dollars were wiped out from the world’s equity markets. Most ordinary people are fearful of investing in stocks, and rightly so, as nearly every national economy around the world including so-called emerging markets such as Brazil, Russia, Indonesia, and China are in trouble. We all know what is happening in the Eurozone, Great Britain, and the Middle East, and the U.S. financial system is a shell of its former self. Gold has proven to be a poor investment and the prices of other so-called valuable commodities are plunging.
Formerly ‘safe’ investments such as government treasuries, preferred stocks, investment-grade corporate bonds, municipal bonds, and so forth are no longer a safe haven because this is where most folks, out of fear, have shifted their savings and retirement money, creating another potentially devastating ‘bubble’. These investments offer little or no return at present, and are extremely risky as they basically depend on a stable financial system, including solid, well-funded banks and dependable stock brokerages that provide market liquidity.
So, what can you do if you are just starting out on an independent life and looking forward to an enduring marriage with a house, children that can go to a good college and carry on, and the opportunity to retire from working at some point before you die?
The answer is simple to state, but hard to implement: Live off of your cash flows as much as humanly possible, and neither a borrower or a lender be. Stay free of debt, forget instant gratification and instead save for the things you want and need. Have a well-thought out plan for the future. While you can’t put off buying food and clothing, you can put off buying smartphones, fancy cars, designer jeans and shoes, gourmet meals from fine restaurants, rock concerts, and cable TV. None of these things are critical to your well-being and they are like vampires on your financial future prospects.
The thing is, most of these are distractions that make you feel good, feel wanted, or seem to help you be part of the ‘in crowd’. But, at the same time they diminish you as a unique person. They do not strengthen your foundation in life, do not make you closer to your loved ones and children, contribute nothing to your safety or expand your horizons.
Every decision that you make in life must be weighed in the balance. You must always examine the risk/reward ratio of every move you make, from stock market investments to the selection of friends and lovers. The era of free love and something for nothing is over. The choices you make today may well determine if you physically survive for the long term. It is far better to face an uncertain future from a position of strength than blow what you have on good times, good drugs, or gambling. Interpersonal relationships are more important than ‘things’, and anyone you let into your life must be carefully vetted.
It is not enough to be smart or well-educated nowadays. Instead of ‘Buns of steel’ you need to have ‘brains of steel’. Strength of character and the will to prevail in adversity will determine who is a ‘winner’ in life. Depend on no one except yourself, but at the same time cultivate relationships with people that are disposed to help save you if you get in trouble, and be prepared to offer the same kind of assistance in return when needed. And regarding investments, sometimes it is better to sit on the sidelines than play the game. Right now, the least risky investment will be found in dividend paying stock in selected companies that have little debt, growing sales, lots of cash on hand, and products that are best in class. And be prepared to sell them in a heartbeat if conditions change with the company or the market for its products.
