Carl Richards is a certified financial planner in Park City, Utah. His sketches are archived here on the Bucks blog and on his personal Web site, BehaviorGap.com.
During a meeting I had last week with the incredibly creative design minds at Fahrenheit 212, someone reminded me of the old saying that disappointment is just the difference between our expectations and reality.Given how many people are disappointed with their financial lives at the moment, I got to wondering about how we might adjust our thinking.
Often when I have conversations with people about the “expected” rate of growth in their net worth over time, I get wildly divergent answers.
In 1999, an 8 percent expected investment return was wildly pessimistic. Fast forward just a few years, and it was blindly optimistic.
All this goes to show how hard the expectations game is to play. After all, there is no way to know what the future rate of return will be for any investment plan that includes stocks. What we do know is that it’s better to be safe than sorry. If you’re building your financial plans based on a 10 percent rate of return, what would happen if you “only” get 8 percent or 6 percent, and reality turns out to be dramatically different than your expectations? Surely you will be disappointed.
There’s an entire industry built around the idea that it’s our job as investors to search for and ultimately find the best investment. If we just look hard enough or pay for the latest research, we’ll be able to identify the next hot stock, sector or mutual fund.
In fact, I think it’s fair to say we’ve come to expect that we can find that mythical great investment. But this almost always leads to its own disappointment. The research is pretty clear that it’s far better to simply accept the fact that finding a great investment is improbable. Instead, this may be one place where we should expect to be average.
As for our work, where presumably none of us want to be average, I’ve thought a lot lately about the notion that we should follow our passion and money will follow. Should we really spend years and years trying to find an occupation that we absolutely love? What’s wrong with being content with what we’re doing right now?
My grandfather was a patent attorney. I can’t remember him saying that he was passionate about the work per se, but I do remember him giving me some great advice. If you can find work that you enjoy even 50 percent of the time and that allows you to spend time with your family and serve the community, you’re better off than 90 percent of the population. So I wonder where the line is between finding work that you are passionate about and being content with the current situation.
Ultimately, securing your financial future will probably require some tradeoffs. And it starts with setting realistic goals.
Sure, I want to believe in the version of the American dream that says we should think big, and we can do anything if we just put our minds to it. I’ve always believed in setting big ambitious goals for myself. But I also feel the need to draw a line somewhere between thinking big and being content.
So how have you balanced having big goals and expectations for the future while being content, even happy, with the present?
Article source: http://feeds.nytimes.com/click.phdo?i=a8b0b411c98e3b510ee81a5131ff46d1
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