Wednesday, November 28, 2007

Retirement Planning and Bernard Baruch

I will admit that when I chose a quote for the book by Bernard M. Baruch, I did so with numerous possibilities in mind. The American financier, economist, advisor to US presidents had a treasure trove of quips and notable quotes that would apply to just about any situation.


I could have used “A speculator is a man who observes the future, and acts before it occurs.” Or perhaps “During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think.” Might have served its purpose, allowing me to twist towards the ultimate goal of explaining how important what you do today is on how you will live tomorrow.

Mr. Baruch was a speculator who also said: “I made my money by selling too soon” and “I never lost money by turning a profit.” His thinking on how this was done is best explained in his wry observation of himself.

“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.”

Aside from the speculative nature of investing in the stock market – I do not pursue this as a method to good retirement planning except when the investment used is the mutual fund, he did believe that a good understanding of who you are and why you do things helps in your decision making process.

Asking yourself why could be at the center of how you approach your plan. Mr. Baruch suggested, “Millions saw the apple fall, but Newton was the one who asked why.” Do you ask why you continue to put off beginning your plan or do you ask yourself why you have under funded it? Chances are, you haven’t.

For this he observed, “In the last analysis, our only freedom is the freedom to discipline ourselves.” This will take some doing. At the key to all of our successes has been the ability to push ourselves forward, possibly even testing our boundaries.

“Only as you do know yourself can your brain serve you as a sharp and efficient tool. Know your own failings, passions, and prejudices so you can separate them from what you see.” That said, how do we do that? Nothing presents itself in stark contrast to what we perceive and what reality is than the task of creating a budget.

A budget outlines our failings, our passions and our prejudices in sharp detail. And in doing so, it allows us to see what our financial life looks like as compared to our financial futures.

Change is difficult. No one would ever argue that point. But it is important to make the change while you still can. Because there is always this prospect: “We grow neither better or worse as we get old, but more like ourselves.”