There is always something to hold us back, someone telling us there’s too much risk involved. We can’t control the outcome enough. What if we fail?

The game of “what ifs” can turn into a death spiral if we let it. Learning to control the controllables and ditch the game of “what ifs” will put you on a path to realizing a happy and successful life.

The same portion of the brain that lights up when one is in mortal danger lights up when we lose money. Running from a bear is like running from a bear market.

I want to highlight some of the areas that we know we can control to the greatest degree and let’s rid ourselves of the worry of the areas we can’t.

First, let’s tackle the biggest thing we think we can control: Return. We can allocate in a manner to take advantage of market moves and trends and speculate to some degree, but we also know that the market is a beast of its own and will throw us a curve ball and react to varying macroeconomic or black swan events in a manner we didn’t expect, namely, COVID.

Prudent money management is an absolute must and something that, in the long term, we should look back and see a strong positive return based on how we’re allocated. Notice I said “long term.” Short-term swings are the price we pay for long-term returns.

Let’s dig into the controllables and know that once you ditch the rest and focus on what you can control, a sense of peace and liberation enters.

The five areas that we can control are as follows:

•Spending—our lifestyle.

•Savings—money dedicated for investment.

•Timing—when we want the event to occur.

•Risk—the level of volatility we’re willing to accept in our portfolio.

•Legacy—assets we want to transfer or leave at death to beneficiaries.

In regard to spending, we’ve heard of the millionaire next door or the true story of the person who left $3 million to their hometown to build a pool but used an old zipper as a shoelace. How did someone like that amass millions of dollars only making a small annual salary? They lived well below their means. Now don’t get me wrong; I am not an advocate for extreme frugality, and I believe that we earn money to save, then spend the rest in the way that gives us the greatest joy.

If your financial plan is on track, then spend away, but the big thing is doing it with cash, not debt. If you don’t know how much you spend, I would recommend printing off three months’ worth of statements for your bank or credit card and allocating all expenses on a monthly basis to get an idea of where you currently spend, I would also recommend doing this over a glass of wine.

When it comes to savings, we can control how much of our income we put away on a monthly basis to put us on track for financial independence. I get there are phases of life in which we’ll be able to put away more than other times, and that’s fine. You do your best.

For recommended savings, I shoot for having three to six months’ worth of expenses, then the rest invested to get you the greatest bang for your buck. From a monthly savings standpoint we shoot for 10% to 20% of your gross income over a 30-year period of time. 

As for timing, the crazy thing about this one is the more time you give your dollars to grow, the less you need to save, the less risk you need to take on, the greater opportunity you have for a legacy, and your spending could increase. The biggest reason is because if you start when you’re young, compounding interest is a massive back wind.

In regard to risk, how a portfolio is allocated determines how much risk one is taking on. It’s important to realize that volatility is the price we pay for return, and it’s temporary. Risk is different; risk is the potential for permanent loss of capital. When we’re young, our risk tolerance is high, we have a longer time frame to recover, and have not hit the point of financial independence. Once we do reach that point of financial independence and start to need an income stream from the portfolio, we’re not able to bear that risk any longer, so, we take on less risk which means less return.

Focusing on legacy, “Die with the last penny in my hand,” or, “Leave a million dollars,” are the two most common approaches we hear. No one of them is right or wrong and both can be planned for within reason. I will note, dying with your last penny scares me, as we have no idea when we’ll actually die, so having a buffer at the end is always prudent. Think about who you want to support and how you want to support them after you’re gone.

Enjoying every minute you’re alive is a worthy goal, and part of that means controlling those items that you can with regard to your money and ditching the “spiral of what if’s.”

Ben Klundt is a financial adviser at Ten Capital Wealth Advisors LLC, in Spokane. He can be reached at 509.324.2003 and [email protected].