Long ago, many of our parents and grandparents provided us this advice: "Go to school, get a good education, then find a stable job with a secure company that pays for benefits such as a pension, insurance, and vacation time. Buy a house, raise a family, and work diligently until you turn 62 and then you'll be able to enjoy your retirement." This became known to millions as the American Dream and generations of early adults aspired to build this ideal within their lives. Unfortunately, demanding economic circumstances have thwarted this concept for many, but too often we have become our own worst enemies as a product of poor financial decisions and a mentality of "gotta have it now". Proper wealth management has taken a back seat.
The most recent thirty years have seen one generation, and perhaps now a second, develop what my parents used to christen "champagne taste on a beer budget" as luxurious wants began to take the place of bona fide needs. Rather than saving to buy a house, it was done with no money down, instead of driving a car within the family means and budget, extended financing permitted for longer loan terms and leasing, and when saving funds away for that proverbial rainy day should have been priority one, many opted instead for vacations, designer clothing, lavish meals, and spending with little or no forethought to the future. Credit cards were maxed out and home equity was drained until one day factors beyond their control cried out "No Mas!" as hundreds of corporations, financial markets, and banking institutions crumbled while the few economic survivors tightened their coffers and trimmed the fat. Almost overnight, job security was eliminated, pensions and retirement accounts vanished, and buying with credit became tougher than eight seconds on a Brahma Bull. Yes, we may want to point our fingers at the banks or the government or the car makers but the reality of our demise is greed and impatience that spurred the attitude of immediate gratification and instilled us with a sense of entitlement for the American Dream before we had truly paid the price. And while scores of Americans did not give in to this attitude of abundance, the fallout has been felt by all with few, if any, escaping unscathed.
So now where do we go?
For many, it is time to start over from the bottom up and, unfortunately for many employees, pensions have become all but extinct and the individual must assume the responsibility for their own retirement account. The hazard here is that most are not equipped with the financial awareness needed to adequately plan and manage this task. Add to this the detail that financial products have greatly increased in complexity and the average American finds themselves rowing upstream without a paddle. For these individuals, proper guidance and planning is necessary to get back on the right track and regain some vision for the future. Working with the proper financial advisor to firmly map out a wealth management plan is step one in the progression. Adhering to a budget, clearly defining wants vs. needs, paying off debt, and structuring a retirement portfolio are essential.
But how about people who refrained from the unwarranted spending and still have portfolios intact?
We're probably talking about baby boomers and those approaching retirement in this category and for you, shielding your assets and avoiding any would-be future market slides is clearly the best strategy. You've seen now how staying the straight-and-narrow course doesn't defend you fully when the world surrounding you is crashing, but active portfolio management with an experienced financial planner helps you to avoid the bottoms of the market's peaks and valleys. Statistics attest that in the past 25 years (1984-2009) avoiding the worst days in the market are a great deal more important than catching the best days. Since "buy and hold" doesn't help you to miss these black market days, active portfolio management with a qualified professional will frequently outperform the indexes.
Regardless of your current situation, you can still realize the American Dream and establish a bright future and comfortable retirement. The key will be receiving the right investment guidance from the right people and then having the right attitude.
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By: John Dubots
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Learn more about active portfolio management and its benefits by contacting John Dubots, Temecula financial advisor, with Dubots Capital Management. Dubots has over two decades in the industry and will provide a free consultation to answer all of your portfolio management questions.
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