Keeping What You Make
We've all heard stories about lottery winners taking home
prizes of millions of dollars and years later having nothing to show for it.
It
happens with professional athletes, with people who inherit money or get big
packages when they are downsized.
These dramatic situations highlight a common
problem. Some people don't understand
personal finance.
People may obsess
about individual investments and fail to think about the important questions that will
determine whether they can accumulate enough money for retirement or bequests
or their other goals.
People don't understand the logic of the financial
markets and they don't think about what they are trying to accomplish.
They
concentrate on the short term and squander one of the greatest assets any
investor has: time. With time, your money, if pointed in the right direction,
can accomplish wondrous things.
Optimism, too, is in short supply now. After
the Great Recession, most people are pessimistic about their financial futures
and their actions make that pessimism likely to be justified.
With trillions of
dollars earning close to zero interest -- some invested at negative yields --
their investment rewards will indeed by bleak. As it likely will be for people
darting in and out of the market at record speeds.