When It Comes to Money, Your Gut Is Your Best Guide

[RonBoyd]

When It Comes to Money, Your Gut Is Your Best Guide

... no one knows where the market is headed. No one can tell you exactly what financial moves to make. And no one knows where they are going to be 40 years from now.

Here is what you can do: Make your best guess and muddle through life the best you can.

The reality is that most of us don't even know where we will be six months from now. We don't know what our utility bills will be in the future, let alone when we are going to retire or when we are going to die. So the natural human reaction is to say, aw, just forget it. But that's not a good choice either.

A great quote (always been one of my guiding principles):

I use what I call the 72-hour Test. Once I found myself with a stack of unread books on my desk, and I thought: 'What if I just waited 72 hours between when I thought I had to absolutely have a book, and when I actually purchased it?' The surprising reality is that after 72 hours, whatever it is, you usually discover you don't need it anymore.

The book: The One-Page Financial Plan: A Simple Way to Be Smart About Your Money: Carl Richards: 9781591847557: Amazon.com: Books

 

[Walt34]

I use what I call the 72-hour Test. Once I found myself with a stack of unread books on my desk, and I thought: 'What if I just waited 72 hours between when I thought I had to absolutely have a book, and when I actually purchased it?' The surprising reality is that after 72 hours, whatever it is, you usually discover you don't need it anymore.

I learned that early on too, and it has saved me many times from buyer's regret.

 

[slaternuthink]

Uh-oh, my gut tells me that interest rates are too low, and stocks & real estate too high.

 

[ejman]

No, NO, NO. If there is one thing this forum has thought me is that one must agonize and truly suffer over endless discussions and learned arguments- should one take SS at 62 or 66 or 70? should one pay off the mortgage or not?, should I convert to Roth? should I limit my income to take advantage of Obamacare? Should I invest for dividends or for total return? What should my AA be? What about gold? Oh no! what if Rewahoo's asteroid makes an appearance? Now I have to start worrying about my gut too. When will this ever end?

 

[Walt34]

No, NO, NO. If there is one thing this forum has thought me is that one must agonize and truly suffer over endless discussions and learned arguments- should one take SS at 62 or 66 or 70? should one pay off the mortgage or not?, should I convert to Roth? should I limit my income to take advantage of Obamacare? Should I invest for dividends or for total return? What should my AA be? What about gold? Oh no! what if Rewahoo's asteroid makes an appearance? Now I have to start worrying about my gut too. When will this ever end?

You left out earthquakes, tornadoes, alien invasion, and zombie attack.

 

[meierlde]

You left out earthquakes, tornadoes, alien invasion, and zombie attack.

And meteor strikes, VEI 8 volcanic eruptions such as Yellowstone, Long Valley, Ca, and Toba etc, Ebola or similar diseases becoming transmissible thru the air, the sun getting hotter and the oceans boiling (will happen but in 5 billion or so years, I don't think many of us need to worry about it)

 

[calmloki]

and kinda unkind bringing up Rewahoo's asteroid.

 

[aja8888]

View attachment 21378

You left out earthquakes, tornadoes, alien invasion, and zombie attack.

And the big asteroid...

 

[travelover]

I'm not so sure about following your gut. A lot of people's guts said "SELL!" at the bottom in 2009.

 

[Hermit]

The late DW suggested we institute a 72 hour rule for anything that cost over $500 shortly after a friend and his DW showed up on a fancy new motorcycle for our annual ride. The next day I came home with our own fancy new (to us) motorcycle for the annual ride! The rule was instituted and it served us well over the years. (Sure am glad we got that motorcycle prior to the new rule!)

 

[Gumby]

and kinda unkind bringing up Rewahoo's asteroid.

A little Preparation A will clear that right up.

 

[dallas27]

My gut may be right(pending lifelong proof), but statistics show the vast majority of guts are dead wrong.


Sent from my iPhone using Early Retirement Forum

 

[donheff]

I'm not so sure about following your gut. A lot of people's guts said "SELL!" at the bottom in 2009.

+1
I didn't follow the link to see if his other points are good but following your gut is what everyone is warned to avoid since many guts panic near the bottoms and only settle down near the tops. That is why the typical investor does so poorly. On the other hand, I suppose once you have educated your self and are able to hang on through volatility it may work to follow your gut if your gut is nagging you that, "we have come down quite a way - maybe that correction is over and I should rebalance back into equities a bit right now at the end of a bad day".

 

[audreyh1]

I agree. When I see people talk about their "gut" or their "feeling" it often seems to be emotional reasoning that means a drastic move to perceived safety (fear) or feeling like it's the time to "go all in" to not "miss the boat" (greed) and it often seems to be a reaction to recent headlines or market trends. In these cases, the "gut" instinct is used to validate some prediction of the near future, which we know is not predictable. I haven't seen this kind of timing work well - usually the opposite.

Bernstein was so horrified by how many of his investors sold out at the bottom of the market in 2009, never to get back in, that he drastically changed his investment advice.

 

[ArkTinkerer]

Quote:
I use what I call the 72-hour Test. Once I found myself with a stack of unread books on my desk, and I thought: 'What if I just waited 72 hours between when I thought I had to absolutely have a book, and when I actually purchased it?' The surprising reality is that after 72 hours, whatever it is, you usually discover you don't need it anymore.

Why wait? I just make a request at the library. If they don't have it I request it via the inter library loan program. So what if it takes a week?

 

[donheff]

Quote:


Why wait? I just make a request at the library. If they don't have it I request it via the inter library loan program. So what if it takes a week?

+1. I average 2-3 books a week from the library. I wouldn't consider waiting to decide if a book is worth investing in. But lots of other stuff - sure wait a while and see if it is still a priority.

 

[petershk]

I agree with Audrey, gut works well for things like avoiding car accidents and keeping your babies from falling down the stairs...But its pretty terrible for long term financial planning where we overvalue the immediate and undervalued the eventual.

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[daylatedollarshort]

Behavioral economic studies show that most people should probably not follow their gut on financial matters. Guts buy overpriced tulips and houses they cannot afford long term.

I didn't see anything in the article that qualified the author to be an expert on money management.

 

[redduck]

No, NO, NO. If there is one thing this forum has thought me is that one must agonize and truly suffer over endless discussions and learned arguments- should one take SS at 62 or 66 or 70? should one pay off the mortgage or not?, should I convert to Roth? should I limit my income to take advantage of Obamacare? Should I invest for dividends or for total return? What should my AA be? What about gold? Oh no! what if Rewahoo's asteroid makes an appearance? Now I have to start worrying about my gut too. When will this ever end?

Oh, not to worry. It will end. Just don't know the exact day.

 

[Taxman59]

Oh, not to worry. It will end. Just don't know the exact day.

Reminds me of the joke: What's the difference between actuaries and the Mob? Actuaries know how many people will die in a year, the Mob knows their names!

 

[Midpack]

The author kinda betrays himself in the linked article in the space of a few sentences. He's just telling people what they want to hear (in red, the same tired approach most self-help books use) and then selling the same approach to planning that most successful retirees have taken thereafter (in blue). Uncertainty yes, guessing not so much...

The giant fantasy of financial planning is that we all know exactly where we will be in 40 years [like most here, I never had any such illusion], so we just need to sit down and plan for it. That gives people a false sense of precision.

The reality is that most of us don't even know where we will be six months from now. We don't know what our utility bills will be in the future, let alone when we are going to retire or when we are going to die. So the natural human reaction is to say, aw, just forget it. But that's not a good choice either.

Q: So what should people do?

A: Call it what it is - guessing. Give yourself permission to let go of all this anxiety, and just make the best guess you can and be committed to the process of guessing.

Q: Your book is called The One-Page Financial Plan. So what's on that one page?

A: On my one-page plan, there is a statement at the top of what's important: For my wife and I, it is to spend time with the family, and to serve in the community. Then there are three goals: To fully fund all retirement accounts, to fully fund our kids' education accounts, and to put money away for a house.

That's it.

 

[Bestwifeever]

The One-Page Financial Plan, the new book by New York Times columnist Carl Richards.

The $24.95 book is 224 pages. This just makes me laugh--why isn't the book just one page?--I think I have uncovered Carl Richards's financial plan.