I recently read that the National Park Service was issuing a quicksand warning for a recreation area in Arizona and Utah.
My experience with quicksand was watching Gilligan and Mr. Howell get caught waist-deep in the stuff in a “Gilligan’s Island” episode. But there are many things that old television shows can teach us about what to avoid and what to seek in our financial planning.
Quicksand’s lack of buoyancy is similar to trying to catch the bottom on stocks that are falling. There is a difference between building a position in investments at various prices if your research indicates the fundamentals are solid and you think a sell-off has been exaggerated vs. buying companies simply because they are down. This is especially true with speculative investments without earnings histories. They might turn out to be fine, but it can be difficult to understand the real risk of companies that went higher because they have an interesting story. This could lead your investment to sinking so much that recovery is not likely.
No one suffers more misfortune than Wile E. Coyote as he falls off cliffs, gets anvils dropped on his head and has numerous packages explode in his face in his vain attempt to catch the Road Runner. We are often chasing things in our financial lives that we might never catch. But what is far worse for our clients is them catching things only to realize they are not enough. So the chase goes on.
Clients have tried to fix challenging family situations by buying cabins or organizing trips, only to have them blow up in their face. Having money can alleviate problems, but it can also cause them. Just as Wile E. Coyote’s massive magnets could not draw in the Road Runner, the stuff we do to impress others (who are likely not watching anyway) soon loses its force. Using money for status is natural, but it is also ephemeral.
Lassie is a good example of what can work in financial planning. Whether Lassie was rescuing animals or protecting people, you could always count on her. Good planning creates a baseline for you so that no matter what life throws at you, you know you will be OK.
There are many aspects to this. Insurance properly used is a good example. Term life insurance protects your loved ones until you have built up enough assets where you no longer need it. Disability insurance protects your income. Setting deductibles on your homeowner’s policies for what you can absorb can help you manage premiums as you enhance your coverage. Health Savings Accounts are the only investments that are tax-deductible and tax-free on withdrawal if used for qualifying medical expenses.
But try to be objective with what you buy. For example, long-term care policies today are not as good and are more expensive than they were many years ago. You might be able to instead self-insure these costs. Using life insurance as a long-term savings vehicle is not as effective as taking that extra money and dollar-cost averaging monthly into the markets. In other words, don’t have a whole litter do the job that Lassie can handle.
The best example of financial planning done well is MacGyver. MacGyver hacks items he finds around him to escape from impossible situations. For many of us, money seems overwhelming. We feel like we have to get everything right in order to get anything right, and that causes us to ignore what we need to be doing or creates anxiety about mistakes. While “Saturday Night Live’s” take on MacGyver shows that not every strategy works, sound financial decisions will not blow up.
So how can you MacGyver your planning by what is around you? First, take an assessment of where you are. Look at what you earn, what you spend, what you owe and what you have. Don’t pass judgment on what you have done, rather make a decision around what you want more of, less of and none of. Then develop tools that will help you get there. For example, if you have problems with compulsive spending, go completely to cash rather than using credit.
Turn off QVC and turn on TV Land.
Related: Want or Validation? How Understanding Your True Motivation Transforms Financial Decisions