Playing financial defense means that you have to become chief financial officer of your household. One of the most important things you can do one as chief financial officer is to control your emotions. One way to control your emotions is the limit the amount of noise that you let affect you. By noise we are referring to interference that you may encounter on a daily basis, for instance the news or newscast, gossip or water cooler talks, or social media blasts. Too much daily chatter can have you financially busted and wondering where you went wrong.
After all becoming CFO of your household means you’re going to have to make some tough decisions. You have to create a plan that will benefit your household and will have to work that plan. As one coach once shouted to his player, the plan is good work the plan!
Do your due diligence, do your research, and create your plan. When creating a plan you have to figure out under what circumstances will you make changes. you must clearly define what will make you divert from the actions that you have decided to take. It’s important also to note that when you do make a decision you write down your reasons why you chose to proceed on that path in the first place. That way when all of the daily chatter is telling you that you should be making changes or deviating from your path, you’ll be able to refer to your primary reasons for starting down that path.
For example, the Federal Reserve Chairman has said that he will keep interest rates low through 2014. Currently, he’s receiving a lot of pressure from his peers and from outsiders telling him that he should make changes, when he embarked down that path he knew that it would be a hard path to follow. Before making an announcement that he would keep interest rates low through 2014, you can be assured that he had weighed the pros and cons of such a drastic decision. So far he has stayed the course but who know what will happen in the next few months. Additionally, he is keeping to his plan even though he knows that he won’t have a job soon.
For his perseverance, the economy is growing and financial books are looking strong. Although the country should not be actively rescuing and investing in corporations, the country did profit from the bailouts from the 2008 fallout. Sometime the right answer isn’t the most popular, but it is the one that is necessary to make sure that you succeed.
To wrap this up, the S & P 500 index normally returns 15% annually but the average investor enjoys returns of 1.5 % to 2.1% annually because of financial decisions that they make involved with selecting investments, investment time frame, and knowing when to sell. These investors all started with a plan and made a decision but were persuaded to deviate from the plan, therefore hurting their own progress. As CFO, what are you willing to do to make sure that you can stay on track? Can you withstand the pressure from inside your home and inner circle to stay on track and fulfill your financial dreams?
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