Taking Charge

Taking Charge

Article by Jonathan Clements (HumbelDollar)

There are so many things we can’t control: what our employers decide, what acquaintances say behind our back, how shares, property and interest rates perform. This lack of control can be a source of endless anxiety, while the opposite feeling—autonomy, financially and otherwise—can give a big boost to our happiness.

Many folks have told me that the world feels especially chaotic right now, given the conflicts in Ukraine and Israel, U.S. political polarization, stubbornly elevated inflation, rising interest rates and a lacklustre share market. I understand such handwringing, but I’m not inclined to join in. I’ve spent my entire life hearing that things have never been worse—and yet somehow, they keep getting better.

Want to sleep at night and avoid panicky financial decisions? We need to make our peace with the world’s uncertainty. A lack of control is one of life’s constants and, indeed, it can get worse as we age. As the years sap our physical and mental capabilities, we may increasingly feel like we’re losing control, and any further threat to our independence—such as our family insisting that we stop driving or that we move into an assisted living facility—can trigger fierce resistance.

What to do? Here are five thoughts.

1. Control what we can

Faced with an uncertain world, this is the standard suggestion, and it has the added virtue of being good advice. If we want to be prudent managers of our own money, we should save diligently during our working years, spend judiciously once retired, limit our fixed living costs to perhaps 50% of our income, insure against major financial risks, plan our estate, hold down investment costs, manage our annual tax bill and diversify our portfolio broadly.

All of these steps are largely or entirely within our control. All of this can be achieved by engaging a professional adviser to help prepare and implement a well-documented and detailed financial plan.

To help prove this, Vanguard’s inaugural How Australia Retires study released in 2023 has found a strong correlation between the use of a professional financial adviser and financial confidence.

But when it comes to investing, perhaps the most important step is controlling our reaction to the financial markets’ ups and downs. A measured optimism about the world and the broad financial markets can be an investor’s best friend, allowing us to take the daily turmoil and the scary headlines in stride.

But even if we control what we can, there’s no guarantee of financial success, especially over the short term. Still, the steps mentioned above should stack the odds in our favour, making it likely we’ll grow wealthy over time, while easing much of our financial stress along the way.

2. Anticipate future needs

There’s the stuff we can control today—and then there’s the stuff we’ll want to control tomorrow. We should give serious thought to what those things might be. Should we buy or rent a larger place in a good school district because we anticipate having kids? Should we hold down our living costs now and start building up our wealth, so we have the financial flexibility to change careers in our 50s?

Perhaps the most crucial example: Are we prepared for our later retirement years? Among other steps, that might mean clearing out the basement now, getting financial and health-care powers of attorney, buying a single-story home and getting on the list for a continuing care retirement community.

3. Avoid the illusion of control

Even as we tackle aspects of our financial life that we truly can control, we should be leery of actions that give us a feeling of control but will, if anything, likely end up hurting us. I’m talking about things like trading excessively, following the markets closely, and investing with active investment managers because we imagine they’ll save us from losses during plunging markets. Such steps can make us feel like we have more control over our destiny—but, like shaking the dice vigorously before we throw them, that sense of control is an illusion, and sometimes an expensive one.

4. Accept that we can’t control everything

There are many aspects of our life that are simply beyond our control, and we should try not to let them upset us. I realize this is good advice—that’s extraordinarily difficult to follow. It’s hard not to be bothered by aggressive drivers, plunging markets, unco-operative colleagues and gossipy neighbours, even if we can’t prevent such things. But as I see it, when we allow such things to bother us—or, to use a phrase I’m fond of, “rent space in our head”—all we do is compound our own misery.

5. Take solace in acting wisely

How can we limit the distress caused by both financial misfortune and the misbehaviour of others? Even as we try mightily not to be bothered by things we can’t control, we should strive to always do the right thing, whether we’re dealing with our finances, our social circle, our colleagues or some other dimension of our life.

To be sure, just because we behave well doesn’t mean that things will always work out well. But the knowledge that we’re endeavouring to do our best should bring us comfort, and most of the time it’ll work to our benefit.

JONATHAN CLEMENTS is the founder and editor of HumbleDollar. He’s also the author of a fistful of personal finance books, including My Money Journey and How to Think About Money. Jonathan spent almost 20 years at The Wall Street Journal, where he was the newspaper’s personal finance columnist. Between October 1994 and April 2008, he wrote 1,009 columns for the Journal and for The Wall Street Journal Sunday. He then worked for six years at Citigroup, where he was Director of Financial Education for Citi Personal Wealth Management, before returning to the Journal for an additional 15-month stint as a columnist.

We are here to help

Calibre Private Wealth Advisers provides financial leadership and peace of mind for successful professionals, business owners and their families.

We engage our clients in real conversations around their life and then help them use the money they have to get the best Return on Life

If you have any questions/thoughts in relation to this article or have a need for some advice and would like to discuss your particular situation, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.

The information contained in this article is of a general nature only and may not take into account your particular objectives, financial situation or needs. Accordingly, the information should not be used, relied upon or treated as a substitute for personal financial advice. While all care has been taken in the preparation of this article, no warranty is given in respect of the information provided and accordingly, neither Calibre Private Wealth Advisers, its employees or agents shall be liable for any loss (howsoever arising) with respect to decisions or actions taken as a result of you acting upon such information.