CINCINNATI BUSINESS COURIER
February 6-12, 1989

Investments
By Charles D. Vaughan

Financial Independence – You can choose to be a winner

THE THREE STOOGES.
You probably think the three stooges are Curly, Larry and Moe. Well they’re not. They are ignorance, apathy and procrastination!

According to a U.S. Department of Commerce study 95 out of 100 Americans are almost totally dependent on Social Security and company retirement plans at retirement. In a fiscal sense, only 5 percent of the population in the study achieved true financial independence. That means having the ability to maintain one’s chosen lifestyle without continuing to work.  Most people had the opportunity to win financial independence, but didn’t make it. Why?

Blame it on the three stooges. There is an old story about a lecturer discussing financial management. He spied one old guy sitting in the front looking like he was drifting into the Land of Nod. Suspecting that the wife had dragged him to the talk, the lecturer addressed his question at the dozer.  “Sir, do you know the two leading causes of financial failure?” Without opening an eyelid or looking up, the man shot back, “I don’t know and I don’t care.”

“Right the first time ignorance and apathy,” the lecturer said. Now if you just add procrastination, you got the big three. You may notice that these are personal characteristics, not financial. In many years of working with investors, I have observed that high income does not always correlate with financial independence.

Those who succeed in the financial sense are frequently middle income people who don’t feel the pressure to spend that some executives do. They have several common qualities that could be instructive to any financial planner.

First, winners almost always have a realistic goal in their mind. It may be just to quit working at 65 and sustain their current lifestyle. It may be a lot grander, but it is a real vision at a determined date. Second, they nearly always have made a habit of saving a fixed amount or percentage of income right off the top. Third, they have a healthy skepticism about risk-reward ideas. Like Will Rogers, they are more concerned with the return of their money than the return on their money. Finally, they have a strong aversion to turning complete control of their money over to anyone.

In other words they take an active concern for their future and have a desire to determine their own destiny. They are willing to use the proven principles of disciplined saving and compounded growth.  They keep up with current ideas and rates of return. But, they are not “too smart” with their money and shun the cutting edge of investment “wisdom.” No stooges here.

This profile may sound like a stockbroker’s nightmare. Here is a guy who has a lot of money saved up, but who doesn’t want to listen. He won’t put his money with a discretionary account manager, he won’t swing with the market and he doesn’t care much for new ideas. Not likely to generate much commission.

Indeed why would such an investor need or want a financial planner either? Recent surveys have shown a high level of interest in three specific areas. First, tax saving ideas. Most people recognize that they are probably missing opportunities that could save them money. Second, risk reduction. There is a general acceptance that financial risks are hard to define now. Federal and foreign debt, bank safety and potential inflation issues concern even the most conservative investors. They want to know they have covered these risks. Third, due to the complexity of today’s financial environment, many people feel they need help in pulling all the pieces together.

Winners have solved the procrastination issue by recognizing very early that time is money. It will never get any easier to save. Money works best when it works longest. Winners have solved the apathy issue by taking personal responsibility for their future. They don’t expect their government, their company or some financial wizard to do it for them. Winners have solved the ignorance issue by recognizing their own limitations. They take a hardnosed approach to innovative solutions, but are willing to study and to get professional help when they need it.

Financial success is more a matter of attitude and process than it is of income. Being a winner is a conscious choice not of how to start, but when. Doing nothing is also a choice  it’s up to you  Curly, Larry or Moe?