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November 7, 2024 Advisor News No comments

Innovative financial literacy’s greatest hits

Image shows a collage of money and a brain — Strong financial literacy can help Americans avoid money mistakes.

By Steve Oniya

“An investment in knowledge pays the best interest." — Benjamin Franklin

The OM Investments’ Achieving Life and Finance Goals newsletter on LinkedIn and (mostly) on its website has been making a positive impact on communities by explaining many basic and creative holistic financial literacy tips in resonating ways.

It’s the first, or one of the few, that is open to consumers for free and integrates social media from a Certified Financial Planner® Certificant. The editions covered to this point are:

It makes a low entry point for anyone trying to build or preserve their wealth from a Certified Financial Planner® professional. Here are some nuggets or greatest hits that seem to resonate with both achieving life goals and financial literacy readers.

Don’t forget: The Importance of Taking a Time Out

“You need to do things that bring you joy and peace so you can re-center, refocus and #reenergize,” says Mariam Wahby, Ph.D., LMFT-S at TIRR Memorial Hermann

Create S.M.A.R.T. #goals around things you're passionate about (like #Hobbies).

Remember on spending or budgeting,

Have a budget in mind
Set reminders or notifications to help remember if need be
Self-care - It's okay to say no or "not right now"
Make companies and providers compete for your money - shop around. Find better alternatives
Remember your why (goals and values)! Sacrifice in the short term to save in the long term. And reward yourself within limits

Active Decision-Making

You want to make decisions that are sustainable to your values and goals long-term. Analyze your real needs, goals, and values in life then prioritize them to make decisions. Visualize your goals and where you want to be.

Then take S.M.A.R.T. (Specific, Measurable, Attainable, Realistic, Time-oriented) goals and steps to get you there even if it's slowly but surely. Don’t be afraid to use strategy, confidence, alternatives, and resourceful creativity, among your other strengths to reach your goals. Or ask for some help.

Interrupting Status Quo Biases

Financial: Take estate planning like a will, one step at a time to get the process moving. For example, run through a will rough draft on www.freewill.com and print it. Leave it somewhere safe and visible you can look at every day "to nudge you" to improve it, get it signed off, etc.

Health: Intentionally pick healthier foods and curiously educate oneself on what may actually be healthy. Or discover masquerading foods that were all along, unhealthier than we realized ( like me and Nutri Grain bars, see the link). Fooducate helps a lot in discovering why foods may be considered healthy and can help retrain the brain (perhaps away from advertisements) on what to avoid or look for (although it is not perfect and may have errors).
Business and Work: Companies intentionally hold their leaders accountable to improve company culture meaningfully for everyone to make the business more productive and efficient.

Many of the actions and scenarios above, although not perfect, can help create better habits that improve a deteriorating/limiting status quo.

Talk to a medical, mental, and holistic financial professional among others about custom solutions most appropriate for you.

Debt Management

There are plenty of posts on the LinkedIn OM investments page as well as blog articles written on the website. It was also referenced in articles I was featured in. So, I don't need to beat the topic to death. Outside of budgeting, utilizing resources such as the National Foundation for Credit Counseling and others, as well as organizing finances to better coordinate expenses, I will share something new and interesting.

I am a part of The National Society of Leadership and Success. It used to be for members only. But some portions are now open to the public, while others are still private. And some of the topics mentioned in a public podcast video episode recently relate to certain themes I'm trying to touch on as well. This episode dives into navigating student and credit card debt vs. passive income from investments etc.

It is titled "Secrets to Surviving Student Debt" I don't approve of everything that was said (nor anyone else's), but it does provide general insight and a different perspective on avoiding being stuck "in the debtor class." I think it's eye-opening because this is a mindset shift, self-reflection, and deep plan of action case to utilize how the tax system is designed as well as investments to one's favor.

Taking Calculated Risks to Fight Risks

"I think the biggest risk to not doing a strategy akin to dollar cost averaging is counterintuitive. Being underinvested in general and during a rally risks the inability to reach certain financial goals and fight high inflation; resulting in purchasing power loss. Many consumers, media, businesses, etc. say they are pessimistic or scared the frothy market isn't warranted.

But if we look under the hood at the key components, we cannot fall for the magnified fear that is out there. Unemployment is low, business profits have been holding quite well, inflation growth has decreased dramatically, and we are in an election year of promised changes among many factors. When consumers are extremely optimistic about the economy or markets, that often is when we are at the peak and things can go downhill from there or large sell-offs ensue when things go wrong.

When consumers are not feeling great, but are spending great nonetheless because they can (with high savings in money market accounts albeit those interest rates will fall eventually thus supporting stocks further with money growth demand), it can demonstrate we are in an expansive market/economy with a potential "we're so down, there's nothing but up to go" opportunity." - Steve Oniya.

Gardening and Investing

“Stocks offer investors the greatest potential for growth (capital appreciation) over the long haul. Investors willing to stick with stocks over long periods of time, say 15 years, generally have been rewarded with strong, positive returns.” – www.Investor.gov

Successful investing, like successful gardening, typically takes patience and discipline. Many trees take a long time to grow from seed to fruit or nuts (I'm still waiting years for my pecan tree that grew from seed to fruit). But when it's done right and we get the fruit of the labor, that's a lot of fruit and nuts for a lifetime! Pecan trees can produce nuts for 300 years. Now that's a generational wealth (especially if you've seen nut prices)! And again, planting is also not guaranteed.

As the investor.gov quote said above, sometimes it might take 15 years and it's not guaranteed. History is not indicative of future results. And yet, research shows lower probabilities of loss, typically the longer one holds these types of investments. That's one reason why women tend to do better in investing than men.

I cover investing insights like that and further detailed referenced research in the classic OM Investments article What November Taught About Investing. I wrote that 2022 article near the bottom low of stock prices falling. That article's insight and research I authored, were published before the 2023 bull market we now know and the current rally in 2024.

There's no guarantee the rally will continue. And to be frank, a guarantee is not needed. Stocks can grow greatly and give a high reward because they carry the risk of losing some or all money invested. And investors need to keep that in mind regarding risk tolerance, risk capacity, goals, time horizon, and other needs.

Politics

This might be one of the most non-political political comments you'll see (oxymoron, I know). Many people may know this but need to be reminded. Research shows politics typically don't have a large impact on investments. It's not truly about who wins the Presidency or who's in Congress.

There are plenty of different statistics that show either political party is only marginally better, but not certainly, and it may not be the party that people typically think. Stick to long-term goals, risk tolerance, time horizon, diversification, and other pertinent needs.

OM Pro-Tip on Food and Exercise:

Exercise and eating right is not only good for protecting our health and a longer future with loved ones, but it's also good for our mental acuteness and stress! As the Planting Seeds and Deep Decisions newsletter mentioned, there are plenty of foods research shows that make a positive impact such as yogurt, citrus fruits, leafy greens, apples, whole grains, blueberries, walnuts, seeds, salmon, bananas, and more!

Habitually eating diverse nutritious foods can have the best effects. Nutrition can be a prime example of diversity, equity, belonging, and inclusion at its finest (as if we all didn't inherently know).

OM Pro-tip on Restaurants, Health, and Finances: Spending excessive money at restaurants tends to hurt us at least 2 ways - financially (high inflated prices vs. grocery store's typical cost per unit; and health-wise since many restaurants are focused on taste (so you can spend and come back more) vs. healthy ingredients like (the quantity and sub-par quality of oils (i.e. not using olive oil since it typically hurts their profits more), fats, and sugars used).

That's why portion control is extremely important at restaurants from a financial cost and a health cost perspective, multiple birds with one stone. For example, I often like to discuss with others the cost of a 2 liter soda or even a bottle of alcohol at a grocery store (especially if it's a store brand/ private label) vs. the price of a cup at a restaurant.

In addition, make sure you know the difference between canola oil vs. vegetable and corn oil. Olive oil, avocado oil, and canola oil (typically cheaper) in home cooking can do wonders for health vs. what may be served at restaurants. And surprisingly, even grape seed oil can be healthier than canola oil in some aspects.

Protecting Against Inflation with Investing

Saving money coupled with investing as much as possible or appropriate can also help generate and protect wealth from inflation plus unexpected life costs. Here's a new approach or novel concept to investing I want people to realize. Be less of a spender, save your money more, then invest/give to/ hire diversified top-tier publicly traded companies for the long-term who are better at making money than you to share their profits (or losses) with you.

It's an easy way to be a part business owner and figurative manager that delegates! Hence, a person has the opportunity to make money when they sleep and not only when putting in heavy hours with an employer to make money. This is how the future may be with AI and many replaceable jobs, as society gets more advanced.

Also, keep in mind, that diversification can protect wealth, and concentration is known to build wealth. That was mentioned and covered in this African Houston Business Directory post.

Cybersecurity

I'd be remiss to not talk about cybersecurity as a form of insurance. As technology, people, and techniques grow, so do bad actors' abilities. This again points to the importance of people needing to grow themselves at the very least for conservative protection. There are free and paid software that help negate and educate people from clicking on bad links or deceptive practices. This is especially important as more seniors fall victim to financial losses. And it happens to younger people too.

Markets and Long-Term Investing

Be mindful of macroeconomic and microeconomic risks. The precedent influences nearly everything within an economy or market and the latter influences individual businesses or subsets, not necessarily the entire economy or category. There is a difference.

As the spring newsletter explained, there was an opportunity to buy companies at a cheaper price (there still is) that can help long-term growth down the road, as I have done (more on that below). Even if markets go down again lower than where we were on Aug. 5th, the previous newsletter forewarnings mentioned the importance of leaving the capacity to handle risk, having a long-term perspective, and more.

OM Pro-Tip: How are you habitually starting your day so you can help handle whatever stress comes your way, including a market sell-off among other real-life problems? Personally, I utilize what the summer newsletter forewarned. I start every day essentially with fruit and green or oolong tea with lemon or lime. And typically end the day with yogurt, fiber, and fruit. Not only does research show these items can help with stress, but practically all of those items help with weight loss as well (Message! ("Don't Be A Menace" movie reference. Throwback feels.))

Compounding

"Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it," often attributed to Albert Einstein (we're not sure)

OM Pro-tip: There are also compound and reinvesting effects with diverse seafood, like canned (including non-brand) and other varieties in replacement for less red meat or meat in general. It can save money, improve health, lose weight, help the brain and physical health, plus a plethora of other benefits.
OM Bonus pro-tip: Put yourself in a position of power where time is on your side, e.g. positive long-term habits, compounding, patience, investing, and high-interest saving accounts, even an education vs. time is against you, e.g. accumulating credit card or high interest debt, compulsive spending, short-term thinking and more.

Adapting Mistakes, Adversity, and Failures to an Advantage

Adapting, like sour lemons in a marinade, nutrition, etc. from the spring newsletter. When stocks are down or an investment was overbought and now down, it can be an opportunity to course correct, track, or use as a reference point to buy cheaper or avoid. Something on its surface that's typically seen as bad can be utilized as good with the change of perspective, timing, and needs. One person's trash is another person's treasure, as we've mentioned.

You can't expect the markets to do daily what you want to do. You have to have patience to let it do what it is designed to do long-term.

Stocks are like life. Sometimes, we go down so we can go up higher than ever before. Notice how stocks and economies, despite having their down days, typically eventually hit new highs. People can be the same. We can make mistakes or failures, have resilience, adapt, and learn from them to get better. Or we can give up, withdraw or pull out, that can sometimes harm us in the long run like pulling out of long-term investments only because there is some volatility in the short-term. There are very similar concepts. But giving up is not always a bad thing either as the Winter: Deep Decisions newsletter pointed out. It matters what in particular you're giving up on if it's not aligned with your true goals and values.

"Don't max out"

Deep Pro-tip: "Don't max out" Whether it's spending, borrowing debt, etc. It's typically wise to not max out your capacity so you can handle unforeseen risks, emergencies, variables, interruptions, volatility, etc. Leave some breathing room to handle what may come your way. There are different ways to calculate this, whether by percentage or set dollar amount and more that one is comfortable with or experts recommend that statistically show is helpful (i.e. debt to equity ratio, credit score's credit card account utilization, emergency savings of at least 3-6 months of living expenses, and more).

Just because we can spend, borrow, or take on a certain amount, doesn't mean we have to max that capacity out. If something new comes into the mix, it can harm us greatly and more than we imagined because we already "maxed out" what we thought we could handle. Leave room for error.

Essentially, no one or situation is perfect. For example, just because you can buy a big, fancy, expensive house (or car) near your max dollars available, doesn't mean you should. You may find out later you bit off more than you could chew, when you after the fact, factor in insurance, property and school taxes, maintenance (e.g. painting), HOA fees, upkeep (lawn maintenance), repairs (e.g. burst pipe), amenities/features to fill it in like furniture, and more.

A luxury or large vehicle similarly can be applied to this scenario, for instance, higher tier gas prices and car repairs. Don't max out. Otherwise, you don't want unplanned or unnecessary costs dragging down your path to financial independence. Money that could have been used to build up income/wealth from saved assets. Or result in a higher-cost lifestyle that is harder to afford, and sustain, or you have to work more to meet the unnecessary artificially increased income needs.

Plan for contingency. Plan for unforeseen spending risks. This is a similar rationale to estate planning mentioned in the summer newsletter or what a business or school plans out in case of a fire/emergency. We don't want bad things to happen. But we want an effective plan and contingency in place in case it does. Such is life.

Scoffing at Saving/Spending Money Wisely?

Restrained vs. Constrained

"Restrain yourself in good times or be constrained in hard times." - Steve Oniya

I might as well start giving my own quotes at this point. Here's some more that drive some points home.

"The bigger they are, the harder to maintain."

"The easier to attain, the easier to sustain."

"Everyone has a burden. Pack light."

One could argue there's a burden to everything. That is why you may not want to envy what the next person has. There's the other side of the equation that we may not be able to handle or want to handle (emotionally, financially, mentally, and more). Perhaps, ultimately the best burdens are the ones we can manage well. That is subjective. Making the burdens or lifestyle more streamlined, lean, effortless, and efficient may be ideal.

Even financially savvy billionaires like Charlie Munger and Warren Buffet were referenced in these previous newsletters professing this. And trying to save money is nothing to turn our noses up at. Even successful companies focus on "cost cutting" up to including, unfortunately, terminating employees or cutting back on resources to save money and improve their bottom line/ net profit/ take-home pay (Brother, aren't we all?). So why shouldn't we try to save money where we can? That's oftentimes, the smart money thinking.

Talk to a medical, mental, and holistic financial professional among others about custom solutions most appropriate for you.

Steve Oniya, CFP®, ChFC® MBA is a Chief Investment Officer, Certified Financial Planner® professional, and has a Master of Business Administration. You can find out more about him at www.ominvested.com.