Admit your financial mistakes and move on
As originally appeared in The Jerusalem Post on April 28, 2023.
Experience is simply the name we give our mistakes. Oscar Wilde
Earlier this week, one of the younger drivers in our family came home with a parking ticket. After telling me, the driver started giving an excuse as to why the car was parked illegally. Thankfully it was just a parking ticket, the driver paid it and all turned out well.
In this week’s Torah portion, we read about the High Priest’s confessional on Yom Kippur. Rabbi Jonathan Sacks Z”L writes, “Some years ago I was visited by the then American ambassador to the Court of St James, Philip Lader. He told me of a fascinating project he and his wife had initiated in 1981. They had come to realise that many of their contemporaries would find themselves in positions of influence and power in the not-too-distant future. He thought it would be useful and creative if they were to come together for a study retreat every so often to share ideas, listen to experts and form friendships, thinking through collectively the challenges they would face in the coming years. So they created what they called Renaissance Weekends. They still happen.”
He continues, “The most interesting thing he told me was that they discovered that the participants, all exceptionally gifted people, found one thing particularly difficult, namely, admitting that they made mistakes. The Laders understood that this was something important they had to learn. Leaders, above all, should be capable of acknowledging when and how they had erred, and how to put it right. They came up with a brilliant idea. They set aside a session at each Weekend for a talk given by a recognised star in some field, on the subject of “My biggest blooper.” Being English, not American, I had to ask for a translation. I discovered that a blooper is an embarrassing mistake. A gaffe. A faux pas. A bungle. A boo-boo. A fashla. A balagan. Something you shouldn’t have done and are ashamed to admit you did.
This, in essence, is what Yom Kippur is in Judaism. In Tabernacle and Temple times, it was the day when the holiest man in Israel, the High Priest, made atonement, first for his own sins, then for the sins of his “house,” then for the sins of all Israel.”
It’s the same with managing your finances. Mistakes happen to everyone; the goal should be to learn from the miscues and try not to repeat them again and again.
Too often I meet investors who are repeat mistake offenders. In order to have a successful and secure financial retirement, it’s imperative to learn from mistakes. So here are a few common missteps that if corrected can have an immensely positive impact on one’s retirement.
Recently I sat with someone who was planning on retiring in 2 years. She had a huge mess on her hands. Multiple US bank and brokerage accounts, and since she worked in hi-tech in Israel and made the rounds from failed startup to failed startup she had a bunch of different Israeli pension and Keren Hishtalmut accounts. She told me she was thinking of opening up another account, not in order to consolidate everything, but because she heard that she should have multiple bank accounts for safety. I explained that she already has multiple accounts, she needs to go the other direction and consolidate. It’s awfully hard to plan for retirement when you have no clue what you own. Not only does having so many accounts make it complicated to get a full financial picture, it can create havoc when the retiree gets older and may not be able to stay in control of the accounts or worse, forgets that the accounts even exist.
Another mistake that I see regularly is keeping too much money in cash. It goes without saying that an important part of any financial plan is to keep between three and six months of expenses on the side, totally liquid, in an emergency fund. The problem is that I often see investors keep a lot more than even 2 years of expected expenses in cash. They say that they think the market is high and are waiting for a drop before investing. When I point out that the market dropped 20% last year, they say that they weren’t even aware of the drop. Get your money invested to enjoy the benefits of compounding.
As I have written numerous times as retirees age, they usually don’t add someone to the account to execute changes on their behalf. I advise retirees to give a child or a trusted confidant trading authority. This way, if the client can’t fully supervise the account it doesn’t become frozen. More than once I have seen a case where an older client had an individual account, and took ill. They are unable to execute any instructions in their account. This is the time when access to money is extremely crucial, and since the individual is the only one with any authority over the account, the money becomes as good as frozen.
We all make mistakes. Once is enough. Avoid repeating them so that you can have a secure financial future.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.
