Good Financial Decisions are Rarely Black and White
President Obama was asked whether he was frustrated by dichotomy of a focus on the deficit but a fear of cutting programs. “It doesn’t mean we’re not going to have some tough choices,” Obama admitted, but the president stressed it was important to get beyond this simplified view of spending vs. spending cuts. Real financial decisions are more complex than that.
“What I think is absolutely true is that the general public does not have all the information they need in respect to how the federal budget is constructed,” Obama said. “I don’t blame them. When I was not actively involved with the federal government, I had no idea what was taking place and what was in appropriations bills.”
But that simplified view isn’t going to make ends meet, or create a secure future.
Isn’t that the truth with any budget or financial decision? Most Americans feel overwhelmed when signing up for their first 401k – and many undoubtedly still feel that way for years, scratching their heads when considering the prospects of an IRA rollover or examining mutual fund expense ratios. There are lots of little details, but they could have big implications in the long run. It’s easy – and sometimes more comforting – to overlook the minutia of complex financial decisions.
Just as the budget tug-of-war is much more complicated than the simple choice of whether to spend or cut, achieving your retirement goals depends a true understanding of your investment options. Especially in this complicated market, you can’t settle for such black-and-white approaches to investing as stocks or bonds, low risk or high reward. Those approaches may be simple, but could end up costing you.
When Austan Goolsbee was asked about the administration’s sense of urgency to address the economic challenges of our times, the White House’s top economist assured those at the summit that the president indeed views the situation as serious. But “we do not have a sense of panic,” Goolsbee asserted.
That’s an important lesson. Many economic issues these days, including retirement planning, are serious business with serious consequences. From 40-somethings wondering if they’ll have to work another 40 years to current retirees worried about another crash destroying their nest egg, there are real fears at play. And they are not irrational fears, either.
But panic gets you nowhere. Keep a clear head, acknowledge the challenges you face and set realistic expectations. That’s not to say you bury your head in the sand – but investment decisions made on pure emotion and fear instead of logic and research are typically the wrong ones.
It’s one thing to be pessimistic about the economy or your investments based on the facts. It’s another thing entirely to be fatalistic.