Smart financial decisions in a stressful market

25 May, 2017

Making smart financial decisions is a crucial part of retirement planning. But nonfinancial qualities such as courage also play an important role.

Making smart financial decisions is a crucial part of retirement planning. But nonfinancial qualities such as courage also play an important role.

Why? Well, although we think of our financial choices as being purely rational, the truth is that any number of personality traits can influence our judgment – and the decisions we make –  especially in today’s fast-moving, stressful markets.

Below, I’ve outlined four key nonfinancial qualities that can affect the financial aspects of your retirement planning. If you cultivate these qualities so they become an integral part of your planning – a backdrop of sorts for all your financial decisions – I think you’ll find that you can significantly improve your retirement prospects.

1. Courage

I’m not referring to the courage that soldier’s display in war or the bravery firemen and policemen exhibit on a daily basis. I’m talking about the courage to make a commitment to your future.

And that does require a certain type of courage, or optimism, if you prefer. After all, saving for retirement requires you to give up something definite today for an uncertain payoff in the future.

In the case of a retiree, it means being prudent about drawing down your nest egg so you’ll have money left should you live into your 90’s or beyond.

So, fundamentally, retirement planning requires a leap of faith — the confidence that saving or carefully managing withdrawals will benefit you in the future.

Taking that leap of faith always requires courage, but even more so when the outlook for the markets and the economy can shift so suddenly.

2. Perseverance

Retirement planning is a long road with many detours and obstacles – job layoffs, unanticipated expenses, market meltdowns – that can undermine your initial commitment and derail your plans. So even after you’ve made a decision to prepare for retirement, the vagaries of life can test your courage to keep that plan on track.

That’s where perseverance comes in. When you’re looking for any excuse to reduce or eliminate your RSP contribution so you can buy a flashier car or when you’re thinking of following that cable TV pundit’s recommendation to go all-in in on a hot tech stock instead of sticking to a diversified portfolio of mutual funds or stocks, bonds, etc, you need to find the resolve to stay the course and resist the temptation to abandon your well-thought-out plan.

3. Resourcefulness
Sometimes sticking to a plan isn’t enough. You’ve got to find creative ways to improve it.

So, for example, if despite your efforts, your nest egg isn’t growing at an acceptable pace, you can consider ways to boost your savings – RSP and/or TFSA. If your employer’s pension plan allows increased payroll deductions for a Group Retirement Plan, seize it. If not, you can open an automatic investment plan with a financial advisor and have funds automatically transferred from your chequing account to your investment account each month.

If you’re already retired and feeling a budget pinch, you can explore options like trading down, relocating to a lower-cost area or tapping your home equity through a reverse mortgage.

And, retired or not, you may be able to squeeze some more return from your retirement savings by investing in an immediate annuity. The point is that if you’re willing to be imaginative and resourceful, there’s almost always a way to fine-tune your plan and improve it. 

4. Humility

In these days of swaggering CEO’s and uber-wealthy TV pontificators, acting in a humble way may seem like an invitation to be taken advantage of. But I’m not talking about becoming a wallflower. I’m talking about humility in the sense of knowing your limitations when creating a retirement plan and according proper respect for the things you don’t control.

One example is investing for retirement. When the stock market is doing well – as it has over the past number of years – people tend to attribute the lofty returns to their own investing skills. In reality, they’ve just been riding a rising market.

And when the market’s been faring poorly, many people react by moving a big chunk of their assets into cash, as if they know that the bad times will continue, which, of course, they don’t.

So whether it’s investing or any other aspect of retirement planning, don’t fall into the trap of thinking you know more than you do. Even the most assiduous savers and savvy investors are subject to forces beyond their control. Having the humility to recognize that fact – and then build some leeway into your planning so you can bounce back if things don’t go as expected – will increase your chances of having a secure and comfortable retirement.

As always, please do not hesitate to communicate with the writer if you would like additional information on this topic. 

 

Joel Attis

joel@attiscorp.com

Joel Attis is a Senior Financial Advisor with AttisCorp Wealth Management and IPC Investment Corporation. Comments or questions may be submitted to Joel at joel@attiscorp.com, or he may be reached at 855-1155.

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