So far this year, 2020 has carried with it some of the economic issues we were talking about last year with new ones taking shape. In some cases, rather rapidly. Tensions in the Middle East, the US-China trade deal phase 1, Brexit with formal withdrawal from the EU, and most recently fears about the novel coronavirus (known as COVID-19) are impacting economic growth. Clearly these worries are not unfounded and news and statistics released over the last few days are troubling.
As investors looking forward in 2020, what can or should we do about these maelstrom of both negative and sometimes positive newsfeeds? In this environment, it is easy to panic, to run to low yielding cash, to stop paying premiums on well thought through savings schemes or to cash out altogether. Perhaps we should do less than we think we should, probably less than feels right.
News flow, particularly around geopolitics and capital markets can be confusing, especially when it comes to investing. We might think we need to have a thorough 2020 investment plan detailing where to put all of our money, and check on our investments every-day to make sure everything keeps going up and be ready to sell the moment things start to turn.
This really is not the case.
The reality is there is so much in ‘the economy’ - what is going on in the world around us - that we don’t have control over. But successful investing in 2020 and in-fact during any calendar year is about controlling the controllables, those facets of investing we do actually have power over. While we can’t control what equity markets do, what a president tweets or a central banks monetary policy – we can control our own personal response to those events. To paraphrase Victor Frankl ‘we can reflect and respond, rather than react.’ Market volatility and political strife may be outside of our control but patience, consistency and a long-term view are very much within our control.
It’s hard to miss the rising prevalence of the term ‘mindfulness’ in daily life. Part of a range of techniques being adopted to help combat the rush and crush of modern day living
Mindfulness is simply defined as focusing on the present.
How could financial mindfulness work if financial planning tends to be about focusing on future, long term goals? How can financial mindfulness help us ‘control those controllables?’ In essence what we can control is the financial decision in front of us, for example, do I stick to my savings plan or stop it. Do I spend my annual bonus or do I put it away? We can decide at that moment if it makes more sense to save or spend. Do I really need this? Should I make this expenditure right now or wait?
I recently read a book, called ‘The Next Millionaire Next Door’ which sets out six core behaviours that predict future wealth creation. Some of them we arguably possess and others are worthy reminders:
Demonstration of leadership and collaboration in financial management, investments and household management
Financial behaviours associated with consistent saving, dedicated commitment to lower spending and rigorous adherence to a budget.
Demonstration of the ability to focus on detailed tasks through completion without becoming distracted.
Acceptance of the role of actions, abilities, and experiences in financial outcomes. Belief that luck plays a small part in achievement.
Spending and saving behaviours that reflect immunity to social pressure to purchase the latest in consumer and/or luxury goods, clothing and cars.
Behaviours related to goal-setting, planning, and anticipating future needs.
The future trajectory of the market may be unknown in 2020 and beyond, but our ability to manage our lifestyle and resolve towards our goals and be ready for life remains a ‘financial silver bullet’ available to truly effective investors.
That's not to say that we should just worry about the here and now and not about our future. We can be mindful while creating a financial plan for upcoming goals. Financial goal setting requires us to focus on how we need to behave today to have what we will need in the future. Armed with this knowledge, we can ask ourselves ‘what steps could I take today, in 2020, to get greater control over my future financial goals?’.
Doing so will improve the likelihood of reaching those financial goals and may even provide a little money peace of mind, in the right here and now.
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