Is there such a thing any more as “conventional wisdom”?
It’s a fair question to consider as we retreat further and further into our ideological silos as a society — only reading “news” from the slant that makes us feel smartest (“See, if [smart person I read] says it’s true, and I already think it’s true then it must be!”).
Truly, it would take smarter writers and thinkers than this here tax accountant to make sense of what’s happening to us. The media landscape is vastly different than it was even 10 years ago … and it’s unclear whether it’s for the better. There are good arguments to be made that the eventual social results will be both much worse AND that they will be much better.
We shall see.
Either way, what used to pass for “conventional wisdom” in certain circles doesn’t in others.
But there are still certain realms in which there are yet “the way things are done” (i.e. conventional wisdom). The financial advice realm is certainly one of those.
So, today, I thought I’d do my little part to encourage you to think outside the box.
Before I get there, a quick tax note worth knowing…
I have told you before that most tax planning opportunities (i.e. making proactive moves to avoid overpaying your taxes) completely dry up after 12/31. Just to be clear, that is ONE MONTH AWAY.
We’re here to help…
When Conventional Financial Advice Is Wrong by Emelia Mensa EA, CPA
“If you believe it will work out, you’ll see opportunities. If you believe it won’t you will see obstacles.” -Wayne Dyer
The problem with “Googling for financial advice” is that you’ll often get the blandest or reheated leftovers for advice. The “content farm” websites out there churn out the same old information, and it’s simply not applicable in every situation.
That’s why it’s always helpful to have someone who can speak into your specific situation. (Which, ahem, is what we’re here for.)
Because when you make financial choices, “tried and true” ideas don’t always equate to the best outcomes for YOU. So, when you find yourself adhering to the following “rules”, it might be worth a second look…
1) Go for the highest return when you invest (always).
Seems like it would be a truism — but high returns frequently involve higher risks, as well as bigger fees. You may be better off seeking safer, more conservative investments, even if they don’t produce as much in the short run. It all depends on YOUR goals.
2) Your primary home should be a great investment.
You may think that renting is just throwing dollars down the drain. But most homeowners don’t properly account for maintenance costs, transaction fees (on the purchase AND the sale) and while mortgage rates are obscenely low right now … they won’t always be.
3) Avoid any and all debt.
“The debtor is slave to the lender” and all that. Generally speaking, Dave Ramsey is usually right when it comes to financial principles. And you should certainly avoid overextending yourself. However, some debt can be useful when buying a house (when that’s appropriate — see above), or in certain business situations. But sometimes, cash money can be seen as its own particular kind of resource — and you can “buy” it at different rates, and “sell” it at even higher ones. This is the essence of arbitrage.
It can be a dangerous game, however, when undertaken without discipline — and smart advice in your corner.
4) Sell high.
What goes up must come down, right? But when it comes to equities and other stocks, it is occasionally helpful to hold onto high-performing assets (stocks) in your portfolio simply to keep maintaining them as such. Resist the urge to cash out just because a stock has reached an all-time high. Otherwise, in time, you could end up with a bundle of low-performing investments.
5) You can do everything yourself.
You can trade your own stocks if you want, but you’ll often do better working with a good financial planner.
And you can prepare your own taxes, but, well … as I think you probably understand, it’s better to work with someone who knows the system like the back of their hand.
We pay attention to this stuff so you don’t have to. And we’re in your corner.
To your (extended) family’s lasting financial and emotional peace…
Emelia Mensa EA, CPA
CRISIS Action Plan” for my Connecticut tax clients and friends — which is still relevant today:
1) Don’t marinate in other people’s panic. Be mindful of your social media consumption.
2) Continue to stay financially and logistically prepared for worsening situations.
3) Make sure you have some ready, liquid assets, if you are able. (I.e., cash in the bank, and in hand.)
4) Set aside plans for any big spending until the dust settles — but especially look out for your small business owner friends and vendors.