Created: August 26, 2020
Modified: September 8, 2022

Replacing Fear with Confidence in Your Financial Plan

The Dangers You Can Face When It Comes to Your Money

Today I want to talk to you about some of the dangers that you face when it comes to your money. I think most of you will be surprised to know the biggest danger that you face. To set this up, let’s talk about what goes on in the world and how you approach your money.

For most people money is a tool. Not for everybody though. Unfortunately, some people are obsessed with money and it’s everything to them. On the other hand, certainly for the wealthy, money is a tool to get to an end. I wrote about this in my book, The Wealthy Think Differently. They structure their money in such a way that it provides an income so they can meet all their goals. Then, they realize, well, there are some dangers out there when it comes to money. One of the dangers is the stock market.

How The Stock Market Behaves

The stock market is like a roller coaster ride. To the side, you can see my interesting drawing of a roller coaster, where there are ups and downs. There are people in that car on the roller coaster heading down too.

The problem with the stock market is we don’t know where the top is and where the bottom is. Anybody that tells you they absolutely know; I would suggest you do not listen to them. In my opinion, they’re either ignorant or they’re lying. Most of us, we don’t know where either is. If we get it right once in our life, that’s pretty amazing. When this happens, people think they’re really smart, so they keep trying to do it over and over again. You know what? They don’t end up getting it right more than once and they hurt themselves. The biggest danger to their money is their own behavior.

Understanding the Ups & Downs of the Stock Market

What do they do when the market’s going up and they feel like they’re missing out? They tend to put money into the market and get more aggressive in their 401(k). People tend to look at those funds that did the best recently and put all their money into those funds in their 401(k).

When the market starts going down, they panic and get out. They should know not to get out as the market starts to go down, but what happens is over time, it’s like a pounding again and again. The market is like being continuously hit by a wave in the ocean. So, for most people, they sell at the bottom. I hope you are not deluded enough to think that you are not subject to those emotions because everybody is, even professional investors.

Most people are worried about missing out, so they tend to buy when the stock market is up and then panic and sell when the market is down.

What is a Successful Retirement?

For most people, a successful retirement, or if they’re getting ready to retire, is removing fear from their financial plan. Johnson Brunetti wants to help you do that. How we do that is individual to your situation. It’s also based a lot on your personality and history with money. That’s why a good financial planner will dig in and find out about those things.

The key to a good financial plan is removing fear and creating confidence in what lies ahead. You have to be able to stick with the plan. There are a lot of financial advisors that are so caught up in academia, the analytical part of the financial plan, that they forget everyone is a human being. Everyone has fears, dreams, family issues, etc. The human part of us is what causes us to do the wrong thing at the wrong time.

3 Basic Parts of a Financial Plan:

  1. Income Analysis
  2. Risk Analysis
  3. A Simple Financial Plan

Income Analysis: You need to have an income analysis. Where is your income going to come from in the future? If you’re retired now, where’s it coming from? If you’re going to retire, let’s say, in the next three or five years, where is your future income going to come from when your paycheck stops? People may have pensions or Social Security, which are fairly close to guaranteed.

Risk Analysis: Other people might not have that and need to drive the income out of their own investments. At that point, you need to know where are your investments and how much risk are you taking. Most people have to have some exposure to the market to keep up with inflation.

A Simple Financial Plan: Maybe one of the most important things I’m going to say today is that your plan needs to be simple. If your plan is not simple, it’s very hard to stick with it. If you’re married or have a significant other, chances are you think differently about money. One person may want it complicated and the other needs it simple. You’ve got to start with simple. The complication for the person that’s very detailed, can come behind the scene.

Don’t Be a Danger To Yourself Financially

This has been a quick talk on your biggest danger to yourself; your behavior when things go up and down. Most people want to remove the fear and gain confidence in what lies ahead and there are three basic components that you need to be successful. I hope you enjoyed this and please use the resources available to you on our website.

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