Taking Financial Inventory for 2009

The following post is from Neal of WealthPilgrim.com. After reading the article, be sure to sign up for free at Wealth Pilgrim to receive more from Neal.

Like you, I take stock of myself this time of the year.  I look back over the last 365 days and consider my accomplishments.  I also think about the challenges I still face. I think about what I could have done differently in 2009 and how to apply those lessons in the coming year and beyond.

This reflection is a really good thing – especially when it comes to finances.

But let’s face it.  For most of us, there is only so much you can to do.

Sure we can learn more about money.  We can earn more, spend less, get rid of more debt and invest better.  But I have to be honest with myself.  I’m going to be working on doing better in these areas for the rest of my life.  Probably, so will you.

So..yes…..taking this “financial inventory” is mission critical for me….but it’s also dangerous and I’ll tell you why.

I don’t know about you, but when I think about my finances, I think about improving things.  I focus on the outcome.  The results.  Control.

But in reality, most results are beyond my control.

Look….in 2008 my business and my income suffered a lot. When I did my financial inventory last year, it wasn’t fun.  Like you, I lost a lot.  Doing my “financial inventory” hurt.  I was in a lot of pain and fear.  Even though I wasn’t responsible for the global financial crisis – it felt like I was.

This year, things look better and I feel better.  Yes, we cut expenses…..but much of the improvement in our financial situation is a result of the economy improving and that’s beyond my control too.

I’m sick of tying my sense of well-being to things I have no control over. I am officially turning in my badge.  That’s it.  I quit.

I’m going to try my hardest to stop taking responsibility for things I have no control over – good or bad.

What I will do is take responsibility for suiting up and showing up – but that’s it.  My inventory is going to consist of a whole new list:

1.  Did I spend in a reasonable and adult manner?  Or did I act in fear and unreasonably?

2.   Did I invest in a similar way?

3.   Did I spend my time wisely?

4.   Did I have fun? What can I do to enjoy the process of earning a living, cutting my spending and investing?

5.   Am I trying to control the outcomes or am I willing to let my best be good enough – regardless of the outcome?

6.   Was I of service to other people?  Did I try to help?

This may seem really basic to you but it’s not for me.  I’m hard-wired to focus on the outcome .  That’s a good quality and it’s helped me a lot.  But that same character attribute is also a character defect when I take it too far and my natural tendency is to do so.

What about you?  What are you going to take inventory of this year? Do you think it’s OK to focus on results?


  1. Even though I wasn’t responsible for the global financial crisis – it felt like I was.

    You were responsible, Neal. I am as sure of this as I am sure that the moon is not made of green cheese.

    It wasn’t just you, of course. Millions of us (including Rob Bennett, to be sure) were responsible. An economy is comprised of people. The economy is us. When the economy fails, it is because we have failed.

    The economy failed because we bid stock prices up to insanely dangerous levels. We all told ourselves a lie in the late 1990s that we could bid stock prices up to three times fair value and never have to pay a price for doing so. That’s obviously not so. We paid for those crazy price increases by borrowing from future returns.

    When you live high on credit card debt, there comes a day of reckoning, does there not? It works the same way with stocks. We are now about halfway through the payback period for believing in the Buy-and-Hold marketing slogans.

    The Stock-Selling Industry is happy to flatter us by promoting marketing slogans suggesting that these things just sort of happen to us for no discernible reason. Just as the credit-card industry is happy to offer additional credit to those who have demonstrated that they have no ability to keep up with their bills. A lot of us have learned that we are better off in the long run tuning out the flattery from the credit-card industry and spending in realistic and common-sense ways. I think we need to get about the business of following the same practice in the investing realm.

    Buy-and-Hold has never worked in the real world. It is not even possible for the rational human mind to imagine a way in which it ever could. When we allow ourselves to be taken in by marketing slogans, we do great harm to our financial futures. I believe that we have a responsibility to acknowledge the great harm we have done to our economic and political system and to begin organizing to offer a counter-voice to the marketing slogans of The Stock-Selling Industry at all of our blogs.

    We are obviously not there today. But I believe that the next crash is going to be the thing that pushes people to the other side. There are many, many people who participate at discussions on frugality blogs on a daily basis and who describe the wonderful things that followed when they began taking responsibility for their finances. Taking responsibility pays off in the investing realm too.

    I have studied this matter in great depth and I can offer personal testimony as well that what I am saying here is so. Avoiding responsibility in investing (following a Buy-and-Hold strategy) is all pain in the long run. Once you make the shift to a Rational investing strategy, you start feeling better and better and better about your financial future. You no longer have to cede power to influences beyond your control. You become the one calling the shots re your money. That’s the way it should be, in my strongly held view.


  2. As always, Neal provides smart, thoughtful advice. I like these goals, and their proximity to each other:

    3. Did I spend my time wisely?

    4. Did I have fun? What can I do to enjoy the process of earning a living, cutting my spending and investing?

    I especially like the second part of number four — saving money is important, of course, but making sure that you enjoy the process is a huge part of the journey.

  3. Rob says,

    “Buy-and-Hold has never worked in the real world.”

    Interesting. So Vanguard’s Wellington and Wellesley Income funds are both failures? As is Bill Schultheis’s Coffeehouse Portfolio?

    Is it your position that one should ONLY invest in the S&P500 and then ONLY by using Rob Bennett’s S&P500 market-timing strategy?

    Are you saying that diversifying among other asset classes; small cap indexes, large cap indexes, value indexes, REIT’s, international equity indexes, etc is unnecessary? Or is it just that you have no scheme to peddle that includes any asset class other than the S&P500?

  4. So Vanguard’s Wellington and Wellesley Income funds are both failures? As is Bill Schultheis’s Coffeehouse Portfolio?

    To the extent that the fund managers follow a Buy-and-Hold strategy (not changing the stock allocation even in response to big price swings), they increase the risk associated with these funds and diminish the long-term return obtained by them. These funds have produced good on-paper results. That’s because stocks offer such wonderful returns. Buy-and-Hold always detracts from one’s return and increases one’s risk. But it does not always do so to a great enough extent to make one’s long-term return a poor one. These funds did well despite Buy-and-Hold, not because of it.

    Is it your position that one should ONLY invest in the S&P500 and then ONLY by using Rob Bennett’s S&P500 market-timing strategy?

    No. My position is that we should all encourage the launching of a national debate on what works. The academic research has been showing for 30 years now that valuations affect long-term returns. That finding should have changed our understanding of how stock investing works in a fundamental way. Progress has been held back because The Stock-Selling Industry has put the short-term profit interests of the industry ahead of the long-term retirement interests of investors. I think that approach has become too costly for all concerned (including The Stock-Selling Industry) in recent years.

    I’ve spoken with several financial planners who have told me that their clients are interested in learning about more realistic approaches. And it is clear to those willing to read between the lines a bit that the financial planners themselves would love to be able to recommend more realistic strategies. The problem is — they’re stuck. We all are feeling great shame today about how long we have let this unfortunate situation continue. Anyone who speaks up in plain and clear and no-nonsense terms about the damage that Buy-and-Hold is doing to us gets a ton of bricks thrown at him. That ain’t the way to a better place, Carlyle!

    No one benefits by us all failing to learn the realities of stock investing. We need to find a way out of the corner into which we have painted ourselves. My view is that all responsible people should make an effort to open up the discussions by insisting on their right to post honestly while also showing as much compassion and charity for those who have made mistakes in earlier days as is possible.

    We got into this mess together. We are going to have to find our way out of it together. The good news is that there are all sorts of wonderful insights that it becomes possible for us to profit from once we gain the ability to talk openly about what the academic research has been showing for close to three decades now. If we permitted honest and informed discussions, I believe that we could quickly restore confidence in the markets and thereby make significant progress toward the goal of overcoming the economic crisis.

    Instead of reacting with hostility to new ideas (I think it would be fair to characterize the tone evidenced in your post as negative, Carlyle), we all should be excited about the learning experiences that are now possible for us. We should not only permit honest posting but invite it and welcome it and celebrate it, in my view.


  5. Joey and Money Crush,

    I also like that idea…but it’s one I need to constantly remind myself of.

    My goal for 2010 is to be mindful of enjoying myself – I believe we can all find a way to enjoy our work. One way is to think of how we are serving others. That always seems to help me pull through.

  6. “We all are feeling great shame today about how long we have let this unfortunate situation continue.”

    I feel no shame over the imaginary scenarios you seem to find so compelling. Honest posting may be observed at personal finance discussion boards and blogs all across the internet. What is missing at many of those same boards and blogs is your participation, as many venues have banned you after finding your wall-of-words contributes little to the understanding of personal finance topics.

  7. many venues have banned you

    That’s a fact, Carlyle. It’s also a fact that I miss all my friends and all the wonderful learning experiences we enjoyed together in the days before the bans. And it’s my opinion that those who insisted on the bans could enjoy some fine learning experiences as well if they opened themselves up to them.

    I obviously have a different take than you re what is going on.

    Those reading these words will need to form their own takes re the realities. That’s of course as it should be.


  8. Neal,

    Without results how do you measure and gauge the direction you’re going? I believe results should be measured, but should not measure your worth.

    Getting attached and creating outcomes for things that you’re not directly in control of, I believe, is setting yourself up for failure. But creating results driven goals for the things you can control, such as blog posts written, prospects called, or dollars saved, is a very effective way of achieving a positive outcome.

    Best of luck in 2010