Written by: Matt Wenborn
In my profession, I am extremely fortunate. I have the ability to provide financial wisdom to those who seek it, and my clients reciprocate by sharing lifelong wisdom that has been gained throughout their lives.
I feel that more often than not, I walk away from client meetings much wiser due to the stories that have been shared with me.
Without names or dates I would like to share my clients common top 5 regrets about finance in the hopes that whoever is reading this, can learn from generations that have preceded them. The below have been compiled from real life personal stories, involving real emotion.
“Compound interest is the 8th wonder of the world… who understands it, earns it, who doesn’t… pays it” – Albert Einstein
Compound interest works, the problem is, it just takes a really long time.
Many regrets that my clients have had is they would wait until their 50’s to start an investment strategy geared toward their retirements. At this point, some clients have found they must speed up the savings process to get to their desired amount.
Example:
3 individuals start saving $1,000/month and continue this over the course of 10 years. Each of them wants to retire by the age of 55.
Sarah starts saving at the age of 20 and stops by age 30.
Rebecca gets a later start, saving at the age of 30 and stopping at age 40.
Ashley starts even later, waiting to save until the age of 40 and stopping at the age of 50.
Since they all save the same $1,000/month over 10 years, they contribute $120,000. However, by retirement at 55 years old, they have vastly different portfolio values. If we assume annual interest of 7%pa, compounded annually and a portfolio value of $0 at the start of investing, the results are shown below.
By the age of 55:
Sarah has acquired just under $1 million saved.
Rebecca has just under $500,000 saved.
Ashley has just under $250,000 for saved.
For those reading this article in their 20’s or 30’s, or whose loved ones are in their 20’s and 30’s – my advice is start saving now. Yes, it may be hard with young families and potentially 1 income, however even if you are moving forward slowly, you are moving forward, and your future self will thank you.
Keeping up with the jones isn’t just a catchphrase, it can be a way of life, or even an addiction.
Many of my clients have shared with me their regret in attempting to trying to keep up with their neighbor, work colleagues, friends or family when it comes to material possessions or home upgrades.
Everyone has their own life story with their own race to run. Many regrets have stemmed from a deviation of my clients’ core values in the pursuit of a larger home with a greater mortgage, or a boat or expensive car. The material possessions may seem fun at first, but once the sugar high of the purchase wears off, they were left with a bill that lingered longer than anticipated due to Regret #1 – and the perils of compound interest in reverse.
Many clients regret not being honest with their significant other with regards to finance. Many times in meetings, a husband or wife would turn to the other and say, "…you never told me you wanted to do that…"
Overcommunicate. Overcommunicating can be annoying, however, with all aspects in life, from friends to family, a lack of communication is normally the route of many unresolved conflicts. With regards to finance, this is no different. Many of my clients regretted not staying true to their values in times of pressure such as decision making around large-scale purchases, or around goals, ambitions and how work (income), ties in with those.
Ask good and sometimes difficult questions to yourself and your loved ones and you will get meaningful answers.
This is one of the most heart-breaking regrets as you listen as an adviser as you can see how many issues could have been avoided.
…I brought shares in company X at $32 and now they are $1…
…I transferred everything to cash in 2009…
…I thought leverage was such a good idea because all my friends were doing this and…
…at one point, I went all in on this winery and…
…my friend made all this money in crypto currency so I…
These aren’t funny stories; they are gut wrenching. This is real people, with real money. Real money meant real sacrificed time. Real time away from loved ones. Real time at the office or the worksite instead of at home or at dinner with friends. Real moments lost.
Investment philosophy is such an integral part of any investment implementation strategy. Without restrictions and parameters, research and due diligence, mandates and risk mitigation and many other factors, investing can soon quickly turn into speculation at best, gambling at worst.
Many client regrets stemmed in a self-actualization that successful investment implementation is similar to any other profession. You wouldn’t self-medicate, self-represent in the court of law or build your own home. Investment implementation and advice is of that same nature. Yes, you don’t have as many stories to share around the BBQ with friends, however, see Regret #2.
Many people enjoy their work and many people that I have met do not ever wish to give up work. Some see work as a part of their social fabric, or a purpose. Some however see work as a means to an end and wish that end couldn’t come fast enough. This regret is not with regards to those who enjoy their work, it is with regards to the perceived financial requirement to work.
Many clients have seen me in their later years, with the hope that if they worked 1, or even 2 more years they would be financially sound for their retirements. In consultation with these clients throughout the planning process, it comes to fruition that not only could they retire today, but some could also have retired years ago.
Some beautiful people I have known have worked their entire lives for a moment in time that doesn’t come. Health or tragic circumstances have stood in their way of realizing the work and sacrifice and the regret has been… "I wish we could have spent more time together earlier…" or, "I wish we could have gone on that trip we always talked about…"
My mentor, a retired financial adviser once told me… many people are too busy working and do not allocate enough time to looking after their money… By obtaining a second set of eyes on your financial circumstances, combined with a recalibration of the purpose upon why you are sacrificing leisure for work is a wise allotment of time.
In all instances not having a plan, conducted via a professional is my clients top regret and can alleviate many of the regrets above.
My hope is that you may gain something from these real-world scenarios. It must be emphasised; we are not perfect. Even I at times am guilty of the above, however we are only truly worse off from these experiences if we do not learn from them, and even better, share them with those that we love.
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