Broker Check

11 Financial Habits More Important than Investment Returns

1. Savings Habit

This may seem obvious or go without saying but it is likely one of the most under appreciated aspects of creating Financial Security and Prosperity. Developing a critical savings mass is important, especially in the early years. The Miracle of Compounding interest really does not reveal itself for many years down the road. The faster you can build that critical mass, the faster you can experience the fruits of meaningful passive income.

Action Items

  • Is it automated? In my experience the easiest and fastest way to increase your savings is to automate it. The technology we have today gives us opportunities for savings that our ancestors could have only dreamed of. In my experience, the more you can take the decision making out of savings, the better you will do.
  • Is it regularly visited? There are many Financial Advisors and Financial Planners who would be happy to examine your savings habits on a regular basis. Although you may have the discipline to do this on your own, my experience in working with clients for many years is that they benefit from having another human regularly check in with them to give them additional opportunities to save.
  • Is it purposeful? Saving without a focus or purpose is kind of like driving a car with no place to go. Your motivation and satisfaction can be greater when paired with purpose.

2. Taking Action Early

I learned a long time ago that that thinking will only get you so far. Those of us who tend to be deep thinkers can appreciate this. The ability to think is one of the greatest traits to have, but only when this is eventually paired with action. When you hear a good idea, don’t say someday, take action now! As George Patton famously said, “A good plan, violently executed now, is better than a perfect plan next week." People with the greatest intelligence often are also the greatest procrastinators. When you can see all the variables and potential issues down the road, it can be paralyzing.

Small actions today, can spawn greater action tomorrow.

Action Items

Sit quietly and listen to your inner thoughts. Ask yourself the question, what is the one thing I am resisting/avoiding the most. Once you have identified that, quantify the smallest action you can take, and then complete that action. Watch what happens. If you are like most of us, that small action will breed further action. Before you know it, that which you were resisting is completed. The interesting thing about our brains is that the things we resist the most are exactly the things that need to be done immediately to move us forward in our lives.

3. Definitiveness of Purpose

Life goes by in the blink of an eye, no one will get out of this life alive, we are all in line, we just don’t know where we are in line. When a person lives with purpose and aligns their actions with their purpose magical things can happen. 

Is the movement of your money aligned with that which you value?

Action Item

Most of us are using a credit or debit card today or have some other mechanism for tracking our spending. Look at the most recent month that ended. Evaluate each transaction and simply ask yourself, “Was this a mandatory purchase or expense, and if it was not mandatory, did it create meaningful satisfaction for me?” If the answer is no, reallocate that expenditure in the future toward something meaningful, or save it with a purpose.

4. Transfer of Risk When Possible

If the alternative would be devastating and there is an option to transfer that risk, do it. Peace of mind is worth a lot. We have health risks, accident risks, life risks, property risks etc. Simply existing in this world is risky business.

Action Item

Ask yourself the question or speak with a Financial Advisor who can help you answer the questions ofIf this particular thing happened, would it be financially devastating? If it would be devastating, can this risk be transferred completely or partially? If it can be transferred, is the cost of transferring it reasonable relative to the risk of the occurrence without any protection. Or in other words can you self insure and if so, would you want to?

5. Tax Positioning

The current CARES Act just added trillions to our current deficit, our unfunded liabilities are over 100 Trillion Dollars, we are in one of the lowest tax environments we have ever experienced in history. Why are so many Americans deferring taxes to 59.5 years of age and beyond? Every tax situation should be evaluated individually but making yourself aware of tax-free alternatives can be beneficial. Great gains can be wiped away with poor tax planning.

Action Item

Speak to your Financial Advisor to gain exposure to financial tools that can be accessed tax-free in the future. There are a limited amount of opportunities for creating future tax-free income, but knowing them could be very valuable.

6. Don’t Lose Your Money

When it comes to investing, Warren Buffet has famously said,

“Rule No. 1: Never lose money.
Rule No. 2: Never forget rule No. 1”.

I have always taught my clients that the losses will always hurt you more than the gains will help you. It really comes down to simple Math.

Example: If you have $100,000 and you lose 50%, you now have $50,000. You now have to do a 100% return just to get your money back! Protecting your hard earned money is extremely important. It is appealing to get involved in “get rich quick” type opportunities, but often, these types of things have a very sad ending.

Action Item

Evaluate all your assets, investments and income and identify which of these are guaranteed. There is a chance you will be taking on significantly more risk than you realize.

7. Liquidity

Life is happening now, who said every opportunity will happen after age 59 ½? Qualified retirement plans like 401(k)’s have become a popular way to save for our futures. Although there are some exceptions to this, by far, this money is meant to be accessed after the age of 59 1/2. I support the idea of saving for our retirement but many of the greatest opportunities we will be presented with will reveal themselves well before retirement. I have sadly watched many clients pass on great opportunities because they lack liquidity. They may have substantial balances within their qualified retirement plans, but with few exceptions, cannot access this money without significant taxes and penalties. Knowledge is power, cash is power, the two together can do great things for you.

Action Item

Take a look at every dollar of savings, investments and assets you have. Then quantify, how much money you could access within 2-3 business days without penalty or taxes. You may be disappointed with what you discover.

8. Removal of Emotion From Decision Making

Emotion is rooted in a story you are telling yourself. Whenever you are emotional you know you are in a story.If you cannot distinguish your story from actual facts, you will be at the mercy of your story which is often wrong. This is a very difficult thing for most people to distinguish. It is very easy to collapse your story with what actually is happening and believe that this edited version is the actual facts. In my experience, it takes years of practice to develop the habit and skill set of distinguishing your story from what actually happened.

Action Item

Establish a professional relationship or reach out to an existing friend who can impartially be a sounding board to help you distinguish your stories and biases from the actual facts.

9. Positioning of Assets

Investing is like a game of chess, sometimes it appears that you are losing and you actually are winning. Sometimes you appear to be winning and it is about to be checkmate…not in your favor. Returns on paper are not realized until you take an action. If it is only on paper, it can be gone in an instant. Can we agree that any amount of return would be worthless if it all went away when you actually needed the money and none of it was realized to you? No one created the textbook to say that every time you need money, the markets will be completely aligned, at their highest point, waiting for you to take your distribution. In fact, if you are like many, the time you actually need the money is the exact time where accessing it would be detrimental.

Action Item

Sit down with a Financial Advisor or use an online tool to determine how your Investment Portfolio aligns with your risk tolerance, goals, and timeline for achieving those goals.

10. Health

Health is your wealth! Ask someone who is really struggling with their health how much they care about the return on their investment portfolio. It is easy to take this for granted when bodies are working well but the minute something goes wrong, you instantly appreciate what you once had. Many of us say we understand this (including myself) but do we pay as much attention to our health as we do our money?

Action Item

Choose one form of exercise and commit to doing it for 1 minute a day. You may laugh or even get angry reading it, but just try it. If you struggle with getting enough exercise, simply choose one form and commit to doing it once per day. Do me the favor of reaching out to me when this changes your life. In my experience, it is all about the habit and creating that neural pathway in your brain. Once that pathway is set, you can “drive” as much cargo down that path as you like. Watch how 1 minute turns into 5 minutes turns into 10 minutes etc. Don’t be an overachiever, just start with a commitment of 1 minute.

11. Self-Development (Earning Potential)

I say to all of my clients that the best investment you can make will be that which you make in yourself. We live in an age of information, almost any knowledge you can desire can be had by punching a few keystrokes, striking a few buttons on your phone, tapping your kindle or even going to the library. I am certainly an advocate for College and the College Experience, but in my own experience and observation of others, college doesn’t necessarily teach you how to make money. Mastering the money game is a unique set of skills. I have come across many brilliant individuals who have no money. I am not insinuating that life is all about money, but I will say that it is a tool that can help facilitate your best life.

Action Item

Choose a book, purchase an online course, or attend a seminar. Choose something that you are interested in. Don’t worry about how or if it will make you any money, read it or attend it and observe how your life begins to transform

Client Centered

If you would like to have some help navigating through everything I have identified, reach  out and let’s have a conversation. If you like my style or appreciate my perspective, reach out and schedule a meeting. If you think I might be able to help you create your financial security and prosperity, what are you waiting for? Refer to number 2!

Meet The Author

Managing Partner of Thoroughbred Advisors Conor Boyd

Conor Boyd

Founder and General Agent

Conor Boyd is the Founder of Thoroughbred Advisors, and General Agent of National Life Group. With over 2 decades of experience, his vision extends beyond professional success; it's deeply rooted in community impact and the...

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