Do I need a course correction?

Steve Merrell |

The quality of our thinking has a huge impact on the decisions we make. And the decisions we make, even the small ones, heavily influence the results we ultimately achieve. I see this all the time in financial planning. People who think clearly about their financial lives and consistently follow correct principles build more wealth than those who wing it. Small, correct decisions made every day pay huge dividends over time.

One of my goals when I do a financial plan is to help people learn to follow correct financial principles. The financial planning process helps people clarify their thinking and make necessary course corrections. Here three questions you can ask yourself to check your thinking on some very important financial principles.


1) What am I doing to become more self-reliant?

Self-reliance means you can take care of yourself without relying on someone else’s resources. It means independence. To the degree that you are dependent on parents or a government agency or some other third party you are lacking in self-reliance.

A self-reliant person lives within her means and saves for the future knowing that life is what happens while you are making other plans. A self-reliant person gets the proper education for his chosen field and keeps current with his education as the years roll by.  A self-reliant person builds her network and actively develops her career options.

There are two major savings goals every self-reliant person has. The first is retirement; the second is a rainy-day fund. All other savings goals are discretionary depending on the lifestyle the self-reliant individual is trying to achieve.


2) What do I expect from my investments?

There are two kinds of people in the markets: prospectors and farmers. Prospectors see the market as a place to seek their fortune. They stake claims here and there hoping to stumble onto a motherlode. They hear tales of other people getting rich and wonder when it will happen for them. Unfortunately, it usually doesn’t and most prospectors go bust.

Farmers, on the other hand, see the market as fertile soil. They carefully sow their investments, nurture them over time and eventually reap a bountiful harvest. Some years the harvest is less bountiful than others, but, over time, their disciplined efforts produce satisfying results.

Years ago, when I was a new bond trader, a guy name Charlie Jones was assigned to show me the ropes. One day he asked whether I thought it was better to be lucky or smart. I said it was better to be smart, but he assured me it was much better to be lucky. I understand what he was trying to tell me, but I have learned over the last 35 years that skill and knowledge create their own “luck” over time. I have decided that it is much better to be a farmer.


3) In what ways do I let emotions drive my financial decisions?

We can get ourselves into serious trouble when we engage in emotional reasoning. Emotional reasoning is when you take your feelings as evidence that something is true. For example, in a financial context, a person may feel that they need to drive an expensive car—one that projects a certain image--when, really, any reliable vehicle would suffice. In my experience, most people who overspend rationalize their decisions through appeals to emotional reasoning.

Catastrophic thinking is a related problem. We engage in catastrophic thinking when we carry our fears to their logical extremes. Catastrophic thinking is often why some people sell good investments during market downturns.


As you think about these questions, you may discover opportunities to make some helpful changes in your financial life. If you do, take the time to record your impressions so you can refer to them later. You may find that a good financial planner can help you follow through on your impressions. Making needed course corrections will help you live with greater confidence in your financial future.



Steven C. Merrell  MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., an independent wealth management firm in Monterey.   He welcomes questions you may have concerning investments, taxes, retirement, or estate planning.  Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to