The Important Things: tuning out the financial noise to focus on what really matters

Michael Carrico, CFP®, CRPC®, Wealth Manager

As the end of the year rapidly approaches and we all spend time with our friends, family, and loved ones, it feels as though time is accelerating and 2023 will be in the past before we know it. Reflecting on the topics of blog articles this year, I wrote about legislation a few times including changes to Roth rules, debt ceiling battles, and banking regulation interventions. Macroeconomic conditions, geopolitical tensions, and market reactions to both were also common topics. Perhaps the most common subject was the Federal Reserve and the Federal Open Market Committee (FOMC), and it was so frequent that we need not count. There was another Federal Reserve meeting this week and, while the Summary of Economic Projections was a point of some interest for the markets, reflecting on such a strange year for economics and the markets got me thinking of the bigger picture. Perhaps it’s the season, but it feels like a good time to take a step back and reflect not on the noise of the financial press and the minutiae of the financial markets, but on the reasons we all bother to get up in the morning, go to work, do the hard things, and invest for the future.

Collage with financial news and families enjoying the holidays
Illustration by Elizabeth Koch

“I wish I had not spent my hours worrying over another nickel for the carousel, but instead running barefoot through the fields of yellow bonnets.”
― Lisa Wingate, Tending Roses

Worrying About Money

It’s hard not to worry about money in a world where money is the stuff of survival.  The vast majority of Americans can’t just eschew money, pick up a rifle and a hoe and live off the land.  If you haven’t read Into the Wild, it’s a fascinating story but it doesn’t end well.  Heck, when you think of all that rides on having money in our society it’s probably a measure of sanity to worry a bit.  However, worrying about money can create a lot of problems.  According to Bankrate, “52 percent of adults say that money negatively impacts their mental health, including by causing stress.”  A survey by CNBC found that approximately 70% of Americans report being stressed about their personal finances.  Survey results differ, but it’s clear that finances are a source of stress for many people.  While stress is a natural consequence of being alive, excessive stress can lead to a whole host of issues including physical effects on just about every system in our bodies.  So, while it’s important to be mindful of one’s personal finances, it’s perhaps more important to balance that with a healthy perspective of the role of money in one’s life.  As we’ve explored in the past in this newsletter, there is always some financial risk to worry about and news sites put those stories front and center because anxiety leads to clicks.  This year has been no exception with continued concerns about inflation, geopolitical conflicts, credit crunches, and recession fears.  While the concerns about inflation and a hawkish Fed seem to be leaving the collective consciousness, rest assured that pundits will find another “tail risk” to fill the void.

Dealing With Financial Stress

Financial stress is a big deal, and the holidays can often ramp up the level of stress, so it’s worthwhile to take steps to manage it.  Since the source of financial stress is monetary, there are several things that can be done financially to help manage things.

Although it isn’t exciting, budgeting is a valuable tool for financial stress management.  This could be as simple as setting a holiday-specific budget for presents, dining out, and entertainment.  However, if financial stress is a common experience, it may be time to make a more complete budget.  Budgeting is often a dirty word in financial planning.  No client is ever happy to hear that word come out of an advisor’s mouth, and it often feels like someone else coming into your life and telling you to give up the things you love.  Budgeting is classically framed as wants vs. needs with wants being eliminated and needs being the only acceptable spending category, but this doesn’t have to be the approach.  Wants are also important and they are a big part of what makes life fulfilling.  Rather than thinking of a budget as wants vs. needs, think of the retain, reduce, and eliminate framework.  Things to retain would include needs like food, shelter, and clothing, but also wants like your passion hobby or spending on events with loved ones.  Reducing the wants that are less fulfilling might mean scaling back on creature comforts without giving them up entirely.  If getting an expensive latte from the coffee shop brightens your day, still do that, just pick two or three days a week instead of every day.  Those things you can eliminate are ones you can truly do without, like the streaming service that no longer has any shows you like or whatever this might be.  It looks different for everyone so take some time to think about it.  If you need to track expenses, make it easy.  You don’t have to track every penny.  You know you’re going to pay the mortgage or rent and buy groceries and tracking every expense can make budgeting so onerous that you don’t do it at all.  Instead choose the three or four categories that you’re trying to change the most and pay attention to those.  Make it a five-minute exercise rather than an entire afternoon.

Financial stress can also come from anxiety about fluctuations in an investment portfolio or a feeling of uncertainty about financial preparedness.  Having a financial plan can help calm those nagging thoughts, and make you feel more certain about your financial situation and the steps you can take to improve where necessary.  If you aren’t inclined to have a fully formed financial plan, at least listing out big future expenses and creating a savings plan for those specific items can help alleviate worry.  As for the investment portfolio, checking on your balance every day or week probably does more harm than good.  On a given day or week the price fluctuations of the stock market can look wild, but over the course of years those wild daily swings are barely perceptible on the chart.  Have a strategy, think long-term, and check on the accounts only quarterly to save yourself some unnecessary stress.

Even though financial stress originates from concerns about money, stress is stress and there are many techniques to help manage it from exercise and proper sleep, to therapy and support networks.  Good personal finance management coupled with healthy lifestyle choices can help keep stress under control.

What Really Matters

What really matters is unique to each individual and we all must decide for ourselves what we hold dear, but there are some common themes that are universal.  A palliative care professional wrote a book about the most common deathbed regrets she encountered and not a single one of them was financial in nature.  In fact, they could all be generally summed up with the sentiment that the people in our lives, our time, and being true to oneself is what is truly important when we have clarity and perspective.  If asked to write down a list of greatest accomplishments in life, would anyone honestly cite that one year they picked the hottest stock before it took off or the time they moved to cash before a sharp drop in prices?  Perhaps if they are a day trader or a fund manager.  However, for most people money is a means to an end and the more we can align our use of money with the values we hold dear, the more fulfillment that money will bring us.  At the end of the day, we all want to control our finances and not be controlled by them.  This holiday season I hope you find the time to take a deep breath, step away from your finances and all the noise, appreciate the time you have with your loved ones, and do something that brings you joy.  Happy holidays!

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Michael Carrico

Michael Carrico is a Wealth Manager at Howe & Rusling.

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