Sensible Money: 5 ways to deal with your $$$


Those of you who know me personally have been waiting for me to put this post up?

“Susan, you work in finance. Why don’t you make your blog about personal finances?”  I’ll tell you why.

  1. I am not a financial advisor to individuals, and I have no certifications, like a CFP.  I work with large institutional clients who are supposed to be sophisticated investors.
  2. I don’t physically manage anyone else’s money, but my own.  I am not sure I even do that all that well.
  3. This world is crazy volatile and I think it is extremely difficult to recommend anything with certainty.

However, I like money.  I want to keep what I have and get some more.  But I don’t need it dominate my life.  So I streamlined all the advice I’ve ever received and cobbled it together with my 34 years of life experience to bring you these 5 sensible ways to deal with your $$$$:

  1. Don’t let anyone tell you what to do with your money.   Take suggestions and advice.  Do not take direction.  Just remember, to use a Bush-ism, you’re the decider and even if you’re paying someone for advice you’re still the one to blame if things don’t work out.  And if someone else is managing your money, make sure you know what you’re paying.  Is it an upfront management fee?  If so, how much is it?
  2. Do hunt for sneaky and costly habitsI used to think the easy saving tips, like “bring your lunch to work” or “skip the daily latte” were insignificant.  Could saving $5/day for something I otherwise really enjoyed really make a meaningful difference?  Depending on your goals, it may.  If you actually spend $4/day on a fancy coffee during the week, then, yes, you will save $20/week and $1000/year.
  3. Do listen to your grandma or any other person who was born during the Depression.  This generation focused on needs, not wants and had the responsibility of caring for multiple generations at once.  Usually, they had a lot of mouths to feed and had to learn to stretch a buck.  My grandmother has found a way to be both sensible and generous with her money.  If you don’t have your own octogenarian to talk to, send me a note.  I’ll have Grandma Clara get back to you.
  4. Do whatever it takes to sleep well at night.  This idea really goes beyond just money because worrying only creates internal action (stress) rather than external action (solving problems).  Are you losing sleep because of your debt?  Then refinance, consolidate or try to pay it down.  Are you losing sleep because you’re not getting as much as you want?  Then scale your expectations.  You need food, shelter and to care for your family.  You don’t need expensive meals out, McMansions and ridiculous vacations.  Are you worried about retirement?  Then go back to point #2 and look for money-sucking habits to break.
  5. Do treat your money like your best employee.  Make sure your money is working hard for you.  Don’t be a micromanager or an overbearing boss, though.  If you stand right behind it and watch every little thing it does it’s not going to perform as expected.  When you invest your money, it’s tempting to watch the price of your stock move daily or even hourly.  You’ll go crazy doing this.  If you’re investing it for the day and the day only, by all means, watch it like a hawk.  However, you’re likely investing for the longer term.  So just check in quarterly.  It will keep you from letting your emotions take over.

So, I know the next question is – “How do you deal with your money?”

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Like my life, I have moments of success and a lot of average moments, but I think over the long run it will yield above-average results.  So here’s how I stack up against the 5 tips from above:

  1. Don’t let anyone tell you what to do with your money. I work in finance and am heavily influenced by others’ opinions.  After Lehman failed, everyone got really dark and started shorting the market.  I hopped in on that and made good money, but it was risky.  I am not sure I understood exactly how the ETFs that allow shorting worked (ie SKF, SDS).  I also got greedy and lost some…A year ago, it was the gold trade that everyone was doing.  I’m on the fence with gold….probably pulling the trigger soon, though.  I don’t invest in managed funds and prefer to pick my own stocks and other investments.
  2. Do hunt for sneaky and costly habits.  I recently started bringing my lunch mainly because the lunch options around my new office stink.  However, I noticed that a) I tend to bring smaller portions and healthier options than what I would buy and b) I’m saving at least $5 day.  I used to pay about $10/day for some big salad, now I spend $10/week on fresh vegetables, make my salad at home and top it with leftover grilled meat from last night’s dinner.  There’s always room for improvement here.  It seems like every bill is stuffed with add-on features I should reevaluate (ie cable, cell phone).
  3. Do listen to your grandma or any other person who was born during the Depression.  I’m a saver – thanks to my father, who was born during the Depression.  He had me investing my babysitting money into CDs at the age of 14.  It was a great habit to get into and I kept it up throughout my life and feel really good about what I have saved for retirement so far.
  4. Do whatever it takes to sleep well at night.  This is, by far, my biggest weakness.  I am prone to the “what-if loop”.

    What if my husband loses his job?
    What if our son needs a private school education?
    What if something happens to my mother or his father?
    What if I get pregnant with quadruplets?
    What if I had invested had not invested in  solar panel stocks?

    Any computer programmer will tell you that the only way out of a loop is to write an exit statement….so I let myself ride the loop for a bit, then I write an exit statement that takes me back to the present.

    For me, sleeping well comes down to minimizing debt and having ample liquidity.  The only debt we have is our mortgage, and we have at least enough cash to cover 6 months of expenses.  Could we use some of that to take some super nice vacations?  Yes, but it wouldn’t be worth it because then I’d be sleepless in a $400/night hotel room instead of my own bed.

  5. Don’t peek. I’m okay on this.  I don’t want to have to peek a lot, so I really like high-dividend stocks like Duke Energy and AT&T because they are less volatile and have performed well recently.  Traditional investment advice would have me invested more in growth stocks because I’m young, but I’m a bit of a chicken.  I get emotional with the volatility of growth stocks, so I save those for the retirement fund where I don’t trade as frequently.
I try to take the sensible approach to life’s problems and have found the above 5 points are simple enough to use on a regular basis.   However, it doesn’t cover all scenarios and circumstances.  Please share your thoughts, questions and insight!

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