“Until you can manage your emotions, don’t expect to manage money.” – Warren Buffett
Managing your finances can be challenging for a number of reasons. One of the biggest ones is that there seem to be thousands and thousands of variables that we have to consider. I have discussed staying in your lane or focusing on what you can control in the past but I feel this is a topic that needs to be addressed every once and a while especially when markets make big moves one way or another.
Barry Ritholtz at The Big Picture had a great article this week where he discusses the fact that he needs to remind himself of this on a periodic basis. Here’s what he had to say:
“Indeed, one of the most important things I have learned in my careers as a trader/strategist/investor/ was recognizing what is in my control and what is not in my control. My experience has been that when I focus on what is in my control and learn to roll with what it is out of my control, everything else vastly improves.”
Barry then goes onto list what is within his control and what is out of his control. Here are his lists:
Within My Control
1. Having a long term investing plan
2. Continuing my education
3. What I watch (or don’t watch) on TV
4. Honoring my own buy & sell disciplines
5. Who I associate with
6. Recognizing importance of empirical evidence and data
7. My Portfolio Allocation
8. Recognizing my own emotions
9. What I choose to read (and not read)
10. How I structure my business, what I charge for my services, who I hire/work with, etc.
11. Doing something professionally that is deeply satisfying
12. My own ethical standards
Out of My Control
1. What the Fed does
3. How my wetware works
4. Market action, rallies and sell offs
5. Interest Rates
6. Congressional Action
7. The Nature of Humans
8. Corporate Earnings
9. What the major media report on and make front page news
10. Unemployment Rates
11. How my brain is wired
12. Other people’s reactions, overreactions and panic
Less is usually more when it comes to managing your money and building wealth. So the more you can weed out the mindless noise from the really important factors, the better off you will be financially and emotionally.
Dealing with your finances can be stressful. Money can cause us to make irrational decisions that we wouldn’t normally make. Focusing on what you can control will not take away all of your money problems. But it will allow you to stress about the actual important parts of your life that you control instead of the other aspects that will just keep you spinning your wheels and drive you crazy.
Thinking in this way can help you control the natural biases that can cause us to make uninformed decisions.
A few other simple items you can focus on are your investment costs, trading activity, the amount you save and setting long-term goals. These are all important aspects of a long-term investment plan.
What Do You Control?