Back from the dead, for many 401(k)s are beginning to recover with the recent market uptick. The question remains, though: is my 401(k) really going to make it?
Study after study confirms that investors chase past performance, buying whatever made money for other people. These same investors also chase their own past performance, buying more of what has worked for them in the past.
Economist David Laibson of Harvard University has researched 401(k) participants and their investment behavior to find they will add significantly to the funds they already own that have gone up in value the most. “Investors expect that assets on which they personally experienced past rewards will be rewarding in the future, regardless of whether such belief is justified,” Laibson says.
Apparently this is how investors are currently making their buying decisions. In June, 401(k) participants contributed about 41% of their investment dollars to stocks. In July, as the Dow rose by 725 points, 401(k) participants increased their funding of equity investments to 42.3% of contributions. At the same time, they were dumping value preservation funds that hold bonds and cash.
In The Intelligent Investor, Benjamin Graham wrote “the investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizeable declines nor become excited by sizeable advances.” Basically, to be a true investor, you must strip emotion from you decision-making process.
Ultimately, to buy more of a stock, fund, or investment simply because its value has gone up is to believe that stocks become safer as their prices rise. This type of investing belief system is what perpetuates bubbles, not unlike what we’ve recently experienced. Defining an investment objective, maintaining a disciplined approach, and regularly saving money will help you avoid bubble-vision and make the most of that 401(k).
Like it? Check out LukasCoaching.com and join the Reader's Group to get real weekly insight about money, life, and business.
Showing posts with label savings. Show all posts
Showing posts with label savings. Show all posts
Wednesday, September 2, 2009
Thursday, August 27, 2009
Back to School Financial Frenzy
The dog days of summer slowly yield to the most wonderful time of year for parents: back-to-school time. That’s right, we’re standing on the threshold of the 2009 – 2010 academic year. Certainly your kids are eager to jump back into the learning world; field trips, science fairs, and late nights of algebra homework are just around the corner!
Are you ready to jump into the back-to-school shopping frenzy? Sure, part of the frenzy is dealing with back-to-school sales and the droves of parents and their children racing through aisles, cutting in check-out lines, and clogging parking lots. The other part is the frenzy of funding this annual adventure.
How do you typically pay for back-to-school shopping? According to the National Retail Federation, the average family with students in grades Kindergarten through 12 is expected to spend $548.72 this year. That’s a pretty big outlay each year for new clothes and school supplies. If we put these purchases on credit cards, we’ll likely still be paying on them when the last report card comes home next spring!
The best way to plan for back-to-school shopping is using a non-monthly expense account. Take what you intend to spend each year and divide it by 12. If you plan to spend $600 on your children, that’s $50 each month you can set aside in a savings account. When back-to-school season kicks into high gear, you can simply pull those savings out in cash (yes, the green stuff) and never worry about breaking the budget or making monthly payments until your kids are in college!
Try using this concept for all sorts of other non-monthly expenses: vacations, insurance premiums, birthdays, property taxes, and Christmas. This is a surefire way to avoid the budget busting blues all year long.
Like this? Join the Lukas Coaching Reader's Group for weekly insight on your money, career, and business.
Are you ready to jump into the back-to-school shopping frenzy? Sure, part of the frenzy is dealing with back-to-school sales and the droves of parents and their children racing through aisles, cutting in check-out lines, and clogging parking lots. The other part is the frenzy of funding this annual adventure.
How do you typically pay for back-to-school shopping? According to the National Retail Federation, the average family with students in grades Kindergarten through 12 is expected to spend $548.72 this year. That’s a pretty big outlay each year for new clothes and school supplies. If we put these purchases on credit cards, we’ll likely still be paying on them when the last report card comes home next spring!
The best way to plan for back-to-school shopping is using a non-monthly expense account. Take what you intend to spend each year and divide it by 12. If you plan to spend $600 on your children, that’s $50 each month you can set aside in a savings account. When back-to-school season kicks into high gear, you can simply pull those savings out in cash (yes, the green stuff) and never worry about breaking the budget or making monthly payments until your kids are in college!
Try using this concept for all sorts of other non-monthly expenses: vacations, insurance premiums, birthdays, property taxes, and Christmas. This is a surefire way to avoid the budget busting blues all year long.
Like this? Join the Lukas Coaching Reader's Group for weekly insight on your money, career, and business.
Back to School Financial Frenzy
The dog days of summer slowly yield to the most wonderful time of year for parents: back-to-school time. That’s right, we’re standing on the threshold of the 2009 – 2010 academic year. Certainly your kids are eager to jump back into the learning world; field trips, science fairs, and late nights of algebra homework are just around the corner!
Are you ready to jump into the back-to-school shopping frenzy? Sure, part of the frenzy is dealing with back-to-school sales and the droves of parents and their children racing through aisles, cutting in check-out lines, and clogging parking lots. The other part is the frenzy of funding this annual adventure.
How do you typically pay for back-to-school shopping? According to the National Retail Federation, the average family with students in grades Kindergarten through 12 is expected to spend $548.72 this year. That’s a pretty big outlay each year for new clothes and school supplies. If we put these purchases on credit cards, we’ll likely still be paying on them when the last report card comes home next spring!
The best way to plan for back-to-school shopping is using a non-monthly expense account. Take what you intend to spend each year and divide it by 12. If you plan to spend $600 on your children, that’s $50 each month you can set aside in a savings account. When back-to-school season kicks into high gear, you can simply pull those savings out in cash (yes, the green stuff) and never worry about breaking the budget or making monthly payments until your kids are in college!
Try using this concept for all sorts of other non-monthly expenses: vacations, insurance premiums, birthdays, property taxes, and Christmas. This is a surefire way to avoid the budget busting blues all year long.
Like this? Join the Lukas Coaching Reader's Group for weekly insight on your money, career, and business.
Are you ready to jump into the back-to-school shopping frenzy? Sure, part of the frenzy is dealing with back-to-school sales and the droves of parents and their children racing through aisles, cutting in check-out lines, and clogging parking lots. The other part is the frenzy of funding this annual adventure.
How do you typically pay for back-to-school shopping? According to the National Retail Federation, the average family with students in grades Kindergarten through 12 is expected to spend $548.72 this year. That’s a pretty big outlay each year for new clothes and school supplies. If we put these purchases on credit cards, we’ll likely still be paying on them when the last report card comes home next spring!
The best way to plan for back-to-school shopping is using a non-monthly expense account. Take what you intend to spend each year and divide it by 12. If you plan to spend $600 on your children, that’s $50 each month you can set aside in a savings account. When back-to-school season kicks into high gear, you can simply pull those savings out in cash (yes, the green stuff) and never worry about breaking the budget or making monthly payments until your kids are in college!
Try using this concept for all sorts of other non-monthly expenses: vacations, insurance premiums, birthdays, property taxes, and Christmas. This is a surefire way to avoid the budget busting blues all year long.
Like this? Join the Lukas Coaching Reader's Group for weekly insight on your money, career, and business.
Thursday, July 2, 2009
Life and Money Outside the Box
Would you classify yourself as an independent thinker? Would you say that you are a visionary? Your thought-life has direct implications on your real life, so what do you think about? In researching the characteristics of millionaires, independent thinking and casting vision are common denominators.
Millionaires think differently about everything – not just money – because they know that conforming to social norms is a recipe for mediocrity. From how they spend their time to how they use their energy, these people identify what is important to them and then go about pursuing it.
We tend to sensationalize millionaires in our culture, believing they all have private jets, homes around the world, and heated toilet seats. In truth, the typical millionaire in our country observes what works and doesn’t work, then casts vision for his or her financial future.
What works? Saving and investing money, making wise purchases, living with a purpose for monthly income, and helping others. What doesn’t work? Trying to borrow your way to wealth, having a “keeping up with the Joneses” mentality, following the herd, and being self-centered.
We’ve all heard the phrase “think outside the box,” and most of us recognize that we’re at our creative best when we avoid groupthink. What if instead of just thinking outside the box, you lived outside the box? What if the way you approached all of your financial decisions took into account what you want to accomplish for your life – not just tomorrow, but also ten years from now?
Thinking independently requires we get away from the noise and clutter in our media. Having a vision means sitting down and honestly deciding what you want out of this life. Creativity and a positive attitude accompany those who know what they want. They are the ones who align their beliefs and values with their actions somewhere outside the box.
Millionaires think differently about everything – not just money – because they know that conforming to social norms is a recipe for mediocrity. From how they spend their time to how they use their energy, these people identify what is important to them and then go about pursuing it.
We tend to sensationalize millionaires in our culture, believing they all have private jets, homes around the world, and heated toilet seats. In truth, the typical millionaire in our country observes what works and doesn’t work, then casts vision for his or her financial future.
What works? Saving and investing money, making wise purchases, living with a purpose for monthly income, and helping others. What doesn’t work? Trying to borrow your way to wealth, having a “keeping up with the Joneses” mentality, following the herd, and being self-centered.
We’ve all heard the phrase “think outside the box,” and most of us recognize that we’re at our creative best when we avoid groupthink. What if instead of just thinking outside the box, you lived outside the box? What if the way you approached all of your financial decisions took into account what you want to accomplish for your life – not just tomorrow, but also ten years from now?
Thinking independently requires we get away from the noise and clutter in our media. Having a vision means sitting down and honestly deciding what you want out of this life. Creativity and a positive attitude accompany those who know what they want. They are the ones who align their beliefs and values with their actions somewhere outside the box.
Subscribe to:
Posts (Atom)
