November 4, 2022 • By Dennis Beaver
“Jerry,” my 65 year-old father, is beating himself up over failing to get out of the stock market months ago when it was so high. He is obsessed with making money and now consumed with regret and guilt.
“He has always been impulsive, not wanting to miss out on a hot stock, and I am afraid now he is vulnerable to making a wrong decision to get back what he lost. Dad is becoming a stranger to the family.
“We have told him for years to work with a financial advisor, but he is a know-it-all. Do you know of anything he can read which might help him feel less angry with himself over his decisions and encourage working with a financial advisor? Thanks, ‘Liz.’”
I certainly do: The Power of Regret – How Looking Backward Moves us Forward by New York Times bestselling author Daniel Pink, published this year, and Your Total Wealth: The Heart and Soul of Financial Literacy, by Lyle Sussman and David A. Dubofsky, which came out in February of 2021.
When I Say “Regret,” What Comes to Mind?
Think about some of the things you’ve regretted, and how things today might have been different if what happened back then didn’t. Or, if instead of doing something, you held back.
Was it that person you so wanted to meet, something — a feeling — came over you that this just might be the one? But, you didn’t take that step forward, didn’t say, “Hi,” and moved on with your life, wondering, always wondering what might have been?
Pink made clear during our interview, an understanding of what we regret can open doors to a better, more secure tomorrow — especially in a confused financial world.
He describes four categories of regret that are universal — people all over the world have these same regrets that have special applicability to financial planning.
(1) Foundation Regrets
These are failures to be responsible, conscientious, prudent, and they leave you thinking, “If only I had done the work.” A lot of finance- and health-related regrets are in this category.
(2) Boldness Regrets: Inaction
These include opportunities not taken, such as applying to medical school, starting a business, “chasing” a true love, and leave us thinking, “If only I had taken that chance.”
(3) Moral Regrets
They leave you wondering, “If only I had done the right thing.”
(4) Connection Regrets
These regrets happen when we neglect the people who matter to us; “If only I had reached out.”
How Being Aware of our Regrets Helps us
Pink says, “Our regrets are a great source of information and part of who we are. They can be helpful when, for example, business leaders say to their teams, ‘Here is what I regret about where we are and what we need to discuss.’ This candor earns that person respect and positive change for the organization.”
Avoiding Financial Regret in the First Place
If, when Jerry was about 25 or 30, someone had given him a copy of Your Total Wealth: The Heart and Soul of Financial Literacy, and he had taken the authors’ advice to heart, I would not have this story to write.
But, of course, it only came out in early 2021.
A theme runs through the book that applies to so many people obsessed with seeing their portfolios go up in value. Sussman tells us, “It is a simple truth; you can minimize financial regret and guilt by understanding the cost of obsessively focusing on monetary wealth.”
Dubofsky adds, “If you are consumed by making money, and greed, you lose family, self-esteem, happiness. These things often become unintended consequences of acquiring financial wealth.”
Suffering from FOMO
Sussman sees Jerry as the poster child for FOMO.
“Liz describes her father as someone with an almost pathologic fear of missing out – that’s FOMO,” Susman says. “When the stock market was going up, acting on the tips he got combined with his own FOMO issues, he made money.
“Now, Jerry is at great risk for getting on the bandwagon of some stock that is hyped as helping investors recover their losses. He admits to suffering financial regret, which essentially is someone saying, ‘I should have done something with my money that I did not, and therefore, I am missing out on something I should have had.’
“He is in an extremely dangerous situation.”
How a Financial Adviser Can Help
“Financial advisers help us deal with uncertainty, and the best advisers are skilled with finance and psychology, helping their clients achieve financial stability. That’s what a good financial plan does,” Dubofsky points out.
“A growing group of advisers are in the ‘protection business’ and focus on clients who are vulnerable to being scammed. They build firewalls between a client’s portfolio and their poor investment decisions. The objective is to make sure that the portfolio isn’t going to be drained.”
A Prescription to Sleep Better
The authors suggest these steps for families to take during these financial times:
(1) If adult children are financially savvy, they need to be aware of what Mom and Dad are doing.
(2) Increase your due diligence. FOMO is very powerful and invites taking financial risks that will break your heart and your portfolio.
(3) Have a long-term perspective.
(4) Our country has survived a lot of bad calamities in its 200+ years of existence.
(5) Companies will always figure out how to make money.
(6) If you have a long term horizon before retirement – 20 years or more – don’t sell right now and even consider buying. But with a 5-year horizon, it could be more problematic.
These Two Books are Especially Relevant Today
Especially now, both of these books are relevant, practical and so helpful. Also, each is a great read!
Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.