Does it seem to you that with the stock market rebound since late December that you feel “good” or “better” today than you felt in early January?
If you DO feel good, that “good” feeling today may not be as strong as the “pain” you felt in January following December’s big decline.
If you do NOT feel “good” or “better” today, is it attributable to the markets? (Unlikely) A job or the economy? Family? The political environment?
The reason I ask is that good and bad feelings – especially related to the stock markets – come and go. However, extensive research* says that “bad” or “painful” times are felt more strongly than “good” times. Maybe good is boring but I would rather have good than bad.
I found the following TGIF 2 Minutes edition from late August 2018. It could have been written TODAY or in December 2017 – when economic times are/were good. The bottom line: I believe it is easier to face tough financial decisions when times are good. Therefore, NOW would be a very good time to tackle your most difficult (taxes) and complicated (understanding your spending) financial tasks.
Here are excerpts from eight months ago — note the similarities to today and the inevitability of both bad and good times to come and go:
(“Straw Hats in Winter”, TGIF 2 Minutes, August 2018)
ECONOMIC TIMES ARE GOOD! This week the revised U.S. GDP report – the key measure of economic growth – revealed a strong, strong US economy.
Alongside this positive news were recent reports of:
- Soaring US corporate profits
- Strong consumer spending continuing months of strong gains
- Rising household income (these are national averages)
- Soaring consumer confidence (consumer spending is more than 2/3 of the economy)
- “Healthy” levels of inflation
- Continued solid business investment
…the list was long. These reports must have been the basis one week ago for US Federal Reserve Chair Powell’s positive assessment heard worldwide that “the US economy is strong.” OK, that is great news!
All this gets me to the point about “buying straw hats in winter” and our current mindset – which in most cases is fairly positive, even carefree. The “straw hats” expression alludes to an awareness that good times come and go – and that it is a heck of a lot easier to make tough decisions in GOOD times than it is in the middle of a crisis.
We are faced daily with decisions on where to allocate cash –
- Spend it?
- Save it?
- Buy a new house?
- Buy needed insurance?
- Buy a new car?
- Invest in our business?
- Go on vacation?
- Live for today?
- Save for tomorrow?
- Spend to address a crisis?
- Spend to celebrate together?
Take the time while “the gettin’s good” over the coming weeks and months to think through both the good and more challenging times and decisions to come.
My message is to show you the similarities amidst cycles of both bad and good times. Enjoy your weekend.
*Kahneman, Daniel. Thinking, Fast and Slow, Farrar, Straus and Giroux, 2011; among many, many other bodies of research.