When inflation spikes, stock markets slide backwards, and news media report the inception of a bear market, many people contract “financial cataracts.”
What are “financial cataracts” you ask? Financial cataracts are when the vision of your personal finances gets clouded and you mistakenly believe that you are seeing the future.
It starts with the thought, “I’ve lost x% of my wealth.” This is not a fact which I will explain in a moment. Randy McNamara, our company’s mission realization coach, tells me that what gives this thought power over the
John J. Grande
person who is having the thought is the way in which our minds function. He points out that our minds identify with something and, without noticing it, we act and feel like we are that something. He says that if you identify yourself or your value as a person with the amount of money you have, you feel elated when your finances expand and feel threatened when it looks like your finances have contracted.
Check this out in your own experience. Keep entertaining the thought, “I’ve lost x% of my wealth.” Anxiety begins to grow. This leads to tension in the body and reinforces negative thinking and trouble sleeping.
When a patient with cataracts meets with his/her ophthalmologist the doctor looks at the person’s eyes and calmly informs the patient that their cloudy vision can be corrected in about 60 minutes for each eye. The patient has the procedure, the cloudiness is eliminated, and any worries the person may have had about going blind vanish.
When financial conditions change, as they are changing now, investors come to their financial advisers seeking their counsel.
Pathway to sanity
First, the thought, “I’ve lost x% of my wealth,” is a thought. It is not real. Until you sell an asset, you have not lost anything. Stop listening to the voice in your head telling you that you have lost some percentage of your wealth.
Second, I have been in the financial industry for more than 40 years, and I have studied the booms and busts of the last 100 years. Contractions such as from 2000 to 2003 and 2007 to 2009 were always followed by expansions. What goes down eventually goes up. But, the person who thinks they are their wealth also thinks, “This time, in this era, with the world in turmoil, this time, the financial markets will not recover, so I’ll just cut my losses.”
A wise person whose eyes get cloudy goes to their ophthalmologist and has their cataracts removed. A wise person goes to their financial advisor and listens to the advice which, almost always boils down to: “Stay the course. This too will pass!”
John J. Grande, CFP, is a registered principal and managing partner of Grande Financial Services Inc in Oakhurst, New Jersey.