Mark D. Goldstein, CFP®
Certified Financial Planner
NEW MEXICO OFFICE
Pueblo Plaza Executive Suites
1100 S. Main, Suite 10
Las Cruces, NM 88011
Intelligent Office Complex
7362 Remcon Circle
El Paso, TX 79912
3701 Algonquin, Suite 150
Rolling Meadows, IL 60008
(877) 442-0698 Toll-Free
"Guaranteed SAFE-Money Solutions for a Successful Retirement!"
Russian Roulette is a "game" that involves the placement of a single bullet into a revolver, spinning the cylinder, pointing the gun at your temple and pulling the trigger.
Crunching the Numbers: If there are six chambers and five are empty, there is an 83% chance you will live. However, while the odds of survival are in your favor, nobody in their right mind would consider Russian Roulette a "low-risk" game.
Question: Is there a financial equivalent to Russian Roulette? Like exposing our nest eggs to potential disasters that could devastate our financial well being?
1. Loading up our 401(k)s with employer stock and watching our company turn out to be the next Enron, Lehman Brothers, WorldCom, Bear Stearns or AIG.
2. A booming stock market boosts our self-confidence, we load up on more stocks... and witness a repeat of 10/2007 to 03/2009's 60% market decline.
3. We bet everything on one country's stock market and that country turns out to be the next Japan (In December of 1989, Japan's Nikkei 225 stock market index hit an all-time high of 38,916. As of this minute, exactly 12:00 noon on January 19th, 2018... 28 years later... the Nikkei was still down 39%, at 23,808).
So, you can't imagine anything like that ever happening in the United States? Let's hope not. But just remember back in 1989, Japan had the most admired economy on the planet... and I still recall how America's business people were strongly encouraged to learn Japanese!
The real danger in the strategies above is that we can be rolling along quite nicely for a while, oblivious to the risks we're taking and then... B-A-M-!-!-! Suddenly we're set back financially by 10 to 20 years.
And that brings me to...
Pascal's Wager: Blaise Pascal (1623-1662) was a French mathematician, physicist, inventor, writer and Christian philosopher. In fact, he was one of the inventors of the mechanical calculator (Merci beaucoup, Blaise!).
According to Monsieur Pascal, it was completely rational to believe in God, because if we believed and it turned out there was no God, our cost was quite modest (around an hour every Sunday).
But it we did not believe and it turned out that God does indeed exist, the price was unbelievably high: an eternity of burning in hell.
Mark's Message: Let's focus LESS on the odds of success or failure... and focus MORE on the potential consequences. Maybe we can win at Financial Russian Roulette... but all it takes is one loss to put an end to a happy financial future.
Fortunately, nobody sticks a gun to our head and forces us to put our hard-earned savings at risk or buy overpriced investment products. We all have choices and as we get closer to retirement... or if we're already retired... we need to be especially careful with our financial decisions, because the stakes are so doggone high.
Remember, my friends, you've got one chance to get it right. Make the wrong choices and our lives can be constantly dogged with financial worries. Make the right choices and we achieve the financial freedom to lead the lives we want.