“Control the Things You Can” was written by Tedd Oyler, a member of the Alliance of Cambridge Advisors who practices in Saugatuck, Michigan. This article was originally published as the second part of a series on how to do a financial check-up.
The lament of the powerless goes something like this: “It doesn’t matter how hard I work–the bills just keep piling up; the stock market and the cost of living are killing me; the politicians are ruining everything.” You may have had these, or similar, thoughts before. This is sad, for it is unnecessary to feel like you have no control over your financial future.
Our information culture offers a range of financial data and “advice,” ostensibly to help you take control of your financial life. Perhaps you listen to daily (or even hourly) market reports.
Perhaps you are concerned that the Fed is changing interest rates.
Perhaps you care about the pundits’ predictions as to what the economy will do over the next quarter, or year, as if what they think matters. Perhaps you even read books on investing, and there are certainly enough of those. If we take seriously the notion that we can do something about our financial health, and if we acknowledge that money is but a tool that we can learn to master, then we are ready to look at what things we CAN control in our financial lives.
In his book Why Smart People Do Stupid Things With Money:
Overcoming Financial Dysfunction, financial planning guru Bert Whitehead offers this self-test, intended to determine how much you are in control of your own financial life. Which of the following do you think will most impact your financial future?
1. Interest rates–OR–Taxes
2. The specific investments you choose–OR–The diversification of your investments
3. Inflation–OR–Being a wise shopper
4. Technology–OR–How much you earn
5. The political climate–OR–The stability of your relationships
6. Globalization–OR–The house that you purchase
7. The rate of return on your investments–OR–How much you save in permanent savings
If you selected any of the first choices, then you are not yet in control of your financial health because the correct answer in each instance is the second choice.
Why would this be? Simply put, because it is the matters you can control–not external factors–that most assure your financial health. What can you do about interest rates or globalization anyway? Nothing at all.
However, you CAN do something about how much you pay in taxes, how wisely you shop, and how much you save for retirement. If you tend to those matters you can influence, then you will acquire financial peace of mind.
Focusing on external factors that you cannot control leads you to feeling powerless. Yet these factors will affect you, just as they affect everyone, but why not structure your financial life so that they simply affect you less dramatically?
So what can you do? If you take control of how much you pay in taxes (any financial planner who does not help you save on taxes is cheating you), and if you save from every dollar you make, and if you purchase your home wisely, and if you work hard to maintain the best relationship possible with your family, and if you invest your savings in a properly diversified manner, then you will always know that you have done precisely what you can do to assure financial health.
This signifies that you are living within your means, that you are insulated against market swings, and that you have a firm understanding of what is truly important. All of this is much, much more important than what interest rates are doing.