emotions

Why Do We Try to Keep Up with The Joneses?

July 24, 2024 by Hans Blake, CFA, CPA

Reading Time: 4 minutes

The phrase “Keeping up with the Joneses” originated in early 20th century America from Arthur (Pop) Momand’s comic strip titled “Keeping Up With The Joneses,” which first appeared in the New York Globe in 1913. The strip quickly gained popularity, and by September 1915, it was adapted into a cartoon film shown in US cinemas. The ‘Joneses’ in the comic were not based on specific individuals but served as a generic representation of neighbors, with ‘Jones’ being a common surname.

In today’s fast-paced world, appearances can be deceiving. The notion of “keeping up with the Joneses” has become increasingly prevalent, fueled by social media and a culture of instant gratification. But as Dave Ramsey wisely points out, “Very few people who look like they have money actually do.” This phenomenon often leads individuals and families into precarious financial situations. At Intelligent Investing, we believe in organizing financial “junk drawers” to ensure our clients can make informed decisions without the pressure of maintaining appearances.

The Illusion of Wealth

The rise of social media platforms has created a continuous stream of visible consumption. It’s now easier than ever to see the luxurious cars, sprawling homes, and exotic vacations that friends, family, and influencers indulge in. This constant exposure has led to a significant number of Americans experiencing what psychologists call “money dysmorphia” — a feeling of insecurity regarding their financial well-being, even if they aren’t as financially unstable as they perceive.

Similarly, in today’s 24/7 news cycle, it’s easy to feel overwhelmed by the sheer volume of information we are exposed to daily. News outlets often emphasize sensational stories to attract viewers and boost ratings. This can lead to a skewed perception of reality, where the world seems more dangerous or chaotic than it actually is. At Intelligent Investing, we understand that this constant exposure to negative news can affect not only your mental health but also your financial decisions.

According to a survey by Qualtrics for Intuit Credit Karma, 29% of American adults report feeling this financial insecurity. The psychological disconnect between perception and reality is even more pronounced among younger generations. A LendingTree survey found that 62% of Gen Z Americans feel financial pressure to keep up with their peers, leading 51% to admit to overspending to impress others. Amongst this group, 56% are now in debt due to their attempts to maintain these appearances.

Lifestyle Inflation and Debt

Borrowing money to splurge on luxury items just to impress others can trigger unsustainable lifestyle inflation. Once a budget is stretched to accommodate a new car, a bigger home, or a lavish vacation, sustaining those expenditures becomes increasingly difficult. This is likely why many high-income Americans are struggling financially. A recent Lending Club survey revealed that roughly half of six-figure earners live paycheck to paycheck.

At Intelligent Investing, we emphasize the importance of understanding the true cost of debt and the impact it can have on long-term financial health. Our proprietary financial software, Intelligrations®, helps clients see the bigger picture and make decisions that align with their values and goals, rather than societal pressures.

True Indicators of Wealth

On his website, Ramsey outlines his definition of financial success: “True wealth is about three things: making an impact through giving, leaving a legacy, and having options for how you live your life.”

At Intelligent Investing, we resonate with this definition. We believe that financial success involves compassion, legacy, integrity, excellence, nimbleness, and truth — core values that guide our approach to wealth management. Being able to donate to charitable causes is a genuine indicator of economic security. In 2022, regular Americans made 64% of all charitable donations in the U.S., reflecting a strong culture of giving.

Leaving a legacy is another significant sign of wealth. A USA Today Blueprint report found that 68% of Gen Z and millennial Americans expect to receive an inheritance, with the average size being $320,000. This transfer of wealth is a testament to the financial planning and foresight of previous generations.

The freedom to choose one’s lifestyle is perhaps the most subjective measure of wealth. The ability to decide where to live, how to spend one’s time, and the flexibility to pursue one’s passions are invaluable aspects of financial success. At Intelligent Investing, we strive to help our clients achieve this level of freedom through personalized financial strategies.

Practical Steps to Financial Health

Assess Your Financial Situation: Consider using tools like Intelligrations® to get a comprehensive view of your finances.
Set Realistic Goals: Align your financial goals with your values and long-term aspirations.
Create a Budget: Track your income and expenses to ensure you live within your means.
Build an Emergency Fund: Save enough to cover 3-6 months of living expenses.
Invest Wisely: Diversify your investments and seek professional advice to ensure your portfolio aligns with your risk tolerance and goals.
Avoid Unnecessary Debt: Borrow only what you can afford to repay and focus on paying off high-interest debt first, if you have any.

Avoiding the Trap of Appearances

A classic example of someone who pursued the appearance of wealth only to face financial ruin can be found in the biblical story of the Prodigal Son. In this parable, a young man demands his inheritance from his father and promptly leaves home to indulge in a life of extravagance and excess. He spends his wealth on lavish living, attempting to portray an image of affluence and success. However, his reckless spending quickly depletes his fortune, leading to his downfall. Stricken by poverty and regret, he finds himself destitute and humbled, forced to work as a swineherd. Ultimately, he returns to his father’s house, repentant and seeking forgiveness. The story illustrates the perils of prioritizing the appearance of wealth over financial prudence, demonstrating how the pursuit of superficial status can lead to ruin and the eventual realization of what truly matters.

The pursuit of appearing wealthy can lead to financial ruin. Instead, true wealth is about financial security, the ability to give back, leaving a legacy, and enjoying the freedom to live life on your terms. At Intelligent Investing, we help our clients achieve these goals through strategic planning and a focus on what truly matters. Remember, all that glitters is not gold, and real wealth lies in the peace of mind that comes with sound financial management.

Consider joining our clients and making Intelligent Investing your financial accountability partner. Together, we can navigate the uncertainties of election seasons and beyond, ensuring that your investments remain aligned with your long-term objectives.

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Navigating Election Volatility in Your Portfolio

July 2, 2024 by Hans Blake, CFA, CPA

Reading Time: 4 minutes

Election years often stir up market volatility, especially when candidates present starkly different viewpoints. While historical data can provide some insights, the future remains unpredictable. Election processes have evolved, with mail-in voting and concerns about voting fraud becoming more prominent issues. In fact, there is a thing called Election Stress Disorder, and perhaps you’ve experienced it.

Election Stress Disorder (ESD) refers to the heightened anxiety and stress individuals experience during election seasons. This phenomenon can be triggered by constant exposure to political news, social media debates, and the uncertainty surrounding election outcomes. Symptoms may include irritability, difficulty sleeping, and feelings of helplessness. Managing ESD involves limiting news consumption, and maintaining perspective on the election’s impact on daily life.

It’s crucial to remember that elections, despite generating headlines, should not deter you from adhering to your financial plan. While it’s natural to have concerns about the election’s impact, history suggests it will likely be a nonissue for your portfolio.

Elections Matter (But Not So Much to Your Investments)

Contrary to what the news might suggest, a wealth of empirical research indicates a different narrative. Vanguard conducted a comprehensive study on stock market performance during presidential election years. One key finding was that market returns do not vary drastically between election and non-election years. Examining data from 1860 to 2010, the average return difference is a mere 0.8%. In addition, Dimensional Fund Advisors has an interactive blog on “How Much Impact Does the President Have On Stocks.”

Markets Tend to Ignore Election Years

Another common concern is market volatility leading up to an election. Headlines and public sentiment might suggest increased market instability as elections approach. However, data shows otherwise. Analysis of the S&P 500’s volatility 100 days before and after elections reveals that volatility remained consistent at 13.8% in both periods. This demonstrates that markets generally tend to ignore the noise surrounding elections.

Staying the Course with Intelligent Investing

At Intelligent Investing, our mission is to minimize financial stress and maximize your life. We act as a buffer between sensational headlines and your portfolio. It’s natural to feel uneasy during election seasons, but it’s crucial to stay grounded and focus on your long-term financial plan.

Successful investing involves focusing on what you can control and keeping emotions secondary to your financial strategy. By maintaining perspective, discipline, and a long-term outlook, you can continue progressing toward your financial goals, despite the short-term uncertainties elections may bring.

The stock market often acts as a leading indicator, beginning to rise before an economic recovery is fully evident. This is one reason why markets can show upward movement even amid negative headlines. Pundits, economists, and other financial advisors will inevitably speculate on election outcomes and other significant events, but our investment philosophy is not based on short-term predictions. We believe in long-term investing, diversification across asset classes, and adherence to risk management principles.

As Leo Tolstoy wisely said, “The two most powerful warriors are patience and time.” Regardless of the election outcome, we appreciate our clients’ trust in us as their financial accountability partner. Our mission is to guide our clients away from emotional extremes, coaching them on adhering to their financial plan, and helping them stay aligned with their long-term goals and risk tolerance.

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Disclosures:
Returns Graphic: Vanguard calculations, based on data from Global Financial Data as of December 31, 2019. Data represents the 60% GFD US-100 Index and 40% GFD US Bond Index, as calculated by historical data provider Global Financial Data. The GFD US-100 Index includes the top 25 companies from 1825 to 1850, the top 50 companies from 1850 to 1900, and the top 100 companies by capitalization from 1900 to the present. In January of each year, the largest companies in the United States are ranked by capitalization, and the largest companies are chosen to be part of the index for that year. The next year, a new list is created and it is chain-linked to the previous year’s index. The index is capitalization-weighted, and both price and return indices are calculated. The GFD US Bond Index uses the U.S. government bond closest to a 10-year maturity without exceeding 10 years from 1786 until 1941 and the Federal Reserve’s 10-year constant maturity yield beginning in 1941. Each month, changes in the price of the underlying bond are calculated to determine any capital gain or loss. The index assumes a laddered portfolio that pays interest on a monthly basis.
Volatility Graphic: Vanguard calculations of S&P 500 Index daily return volatility from January 1, 1964, through December 31, 2019, based on data from Thomson Reuters. Note: Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
Notes:
Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. All investing is subject to risk, including possible loss of principal. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk.

11 Ways To Protect Yourself From Being Financially Scammed

December 23, 2020 by Hans Blake, CFA, CPA

Reading Time: 6 minutes

This is part two of a mini-series on protecting yourself from being financially scammed. You can read part one here.

There’s been a huge increase in online activity since the COVID-19 outbreak. Cybercriminals have been taking full advantage of this trend, but there are several easy things you can do to help protect yourself from being financially scammed.

I recently received a call from a loved one. “Hans, are you sitting down,” they said in a frail voice filled with emotion.

I immediately thought there was an accident or death in the family. My loved one began to explain how they were scammed out of thousands of dollars. They had called their credit card company and had reported the crime to the local sheriff’s office. However, nothing more could be done. The damage was done, and since it was an international scam, it was out of the local police’s jurisdiction.

The sad reality is that scams cheat older Americans out of almost $3 billion a year. That’s $3 billion with a “b.” Nothing is fool-proof, but this blog is to share knowledge about ways to protect yourself from financial fraud.

Protect Yourself Online

1. Safeguard your personal information

Be extremely critical of unsolicited requests for personal and/or financial information, including requests to confirm or verify your password. Let your phone go to voicemail if you don’t recognize the phone number calling you. If someone claiming to be your credit card company calls you asking for information, hang up. Call the customer service number on the back of your credit card to ensure it was not a financial scam. Search for the company’s website and contact them directly to verify the legitimacy of the request.

2. Think twice or thrice before you click

Clicking on links and attachments can result in downloading malware used to steal your personal information. It’s best to delete emails or texts from people you don’t know and trust. Never click on an unsolicited link or attachment from a company. Some of the biggest brands have been impersonated in phishing attacks, and often these attacks are difficult to spot.

3. Never use public Wi-Fi

When you use unsecured (public) Wi-Fi, criminals can intercept your activity and steal your personal information — even if you’re not accessing sensitive information like your personal email and banking account. Attackers can also distribute malware on your device and see all your past activity including logons and account information. Consider using a Virtual Private Network (VPN) when traveling such as NordVPN or privateinternetaccess.

4. Don’t respond to urgent requests

Scammers use urgency to send their victims into an “amygdala hijack.” Amygdala hijack shuts down the pre-frontal cortex, which is our rational, logical ‘executive function’ part of our brain. This causes us to act and not think.

Be extremely skeptical of any request to transfer money, make or provide payment details or confirm information. Even if it comes from someone you know, like your boss or a friend, it could be an imposter. When in doubt, follow-up with the email sender separately.

5. Create strong passwords

Choose passwords that are at least 13 characters long. Avoid using names or personal information like your birthday or ZIP code. Also, don’t use the same password for all your devices and apps — if cybercriminals got their hands on that password, they could get into all your accounts. Consider using a Password service such as LastPass or Keeper.

6. Update your software frequently to avoid Pharming

Pharming is another scam where a fraudster installs malicious code on a personal computer or server. This code then redirects any clicks you make on a website to another fraudulent Website without your consent or knowledge.

Keep your operating system and apps current to stay protected from security threats. Consider setting up automatic updates so you can benefit from beefed-up security as soon as it becomes available. Consider using a security suite such as McAfee, Bitdefender, Kaspersky, or Norton.

7. Protecting Yourself from Phishing

Phishing is by far the most common type of attack. It occurs when cyber criminals send a seemingly legitimate email urging you to verify your account, confirm your personal information, change your password or provide other sensitive information. Companies will rarely contact you this way. When in doubt, look up the company and contact them directly to verify the content of the email.

8. Safeguarding from Pretexting

Pretexting occurs when criminals pose as someone from your work, a delivery company or a service provider for example, and fabricate a situation designed to get your personal information. Armed with just enough information to make their scam believable, they can approach you by phone, in person or online. Whereas phishing often relies on scare tactics, pretexting is about gaining your trust so you divulge your information.

9. Don’t take the Clickbait

Have you ever gotten a solicitation for a free movie download, streaming service or a sought after white paper? Be careful, because it may be a baiting tactic. Baiting involves offering something of interest in exchange for sensitive information like your password. Often times, clicking on the link will install malicious software on your computer, enabling the criminal to gain access to your login and other personal data.

10. Safeguarding from Vishing and Smishing

Vishing uses phone calls, and smishing uses text messages, to get you to respond to an urgent request to supposedly protect you from arrest, large fines or an account compromise. The telephone version of vishing and text messaging version called smishing relies on “social engineering” techniques to trick you into providing information that others can use to access and use your important accounts. People can also use this information to assume your identity and open new accounts. The objective is to get your credit card and account information or other personal information used to steal your identity.

If you receive an email or phone call requesting you call them and you suspect it might be a fraudulent request, look up the organization’s customer service number and call that number rather than the number provided in the solicitation email or phone call.
Forward the solicitation email to the customer service or security email address of the organization, asking whether the email is legitimate.

11. Never Pay with Gift Cards

Gift cards are a popular and convenient way to give someone a gift. They’re also a popular way for scammers to steal money from you. That’s because gift cards are like cash: if you buy a gift card and someone uses it, you probably cannot get your money back. Gift cards are for gifts, not payments. Anyone who demands payment by gift card is always a scammer.

Protect Your Identity

Another way people are financially scammed is through identity theft, and the most common form of identity theft is financial identity theft. This is when someone uses another person’s information for financial gain. For instance, a scammer may use your bank account or credit card numbers to steal money or make purchases or use your Social Security number to open a new credit card. There is no way to prevent all fraud, and any prevention tools are not 100% guaranteed to work all the time. However, we wanted to share the following PDF that highlights ways you can safeguard yourself against identity theft.

[gview file=”https://investedwithyou.com/wp-content/uploads/2020/10/Safeguarding-Against-Identity-Theft.pdf”]

Protect Yourself Psychologically

Scammers are extremely good at what they do. LifePaths Counseling Center states that scammers use tactics based on human psychology to get people to miss important clues that something is not as it seems. As mentioned above, scammers often send their victims into an “amygdala hijack.” Amygdala hijack shuts down the pre-frontal cortex, which is our rational, logical ‘executive function’ part of our brain. This causes us to act and not think. Once the victim starts parting with money they are susceptible to another psychological process called “escalation of commitment.” This makes them more motivated to give more money in the belief they will get it all back.

One of the ways scammers operate is to force the person to act quickly to avoid a problem or to gain something. Another way they operate is to spend a lot of time talking with the person they want to scam to gain credibility and trust, Scammers often sound very friendly and concerned about the person they are trying to scam. They often isolate the victim by saying things like, “Your phone has been hacked, and you can’t call a loved one, because then their phone will also be hacked.” By limiting the conversation between the scammer and victim, it allows them to isolate their prey.

Protect Yourself with an Accountability Partner

Whenever one of our clients makes a request for a distribution from one of their accounts, we do our best to verify the client by calling them to hear their voice and ensure the distribution request is valid.

We also encourage our clients to call us if they suspect anything suspicious and want a second opinion on what they are seeing.

One of our first core values at Intelligent Investing is compassion. We understand that being scammed or being defrauded is one of the most stressful times in a person’s life. We are here to help our clients and be a sounding board and financial accountability partner to them. If there is anything we can do for you, we’d love to have a cup of coffee or a quick phone call with you.

Schedule a short discovery call or meeting

How to Emotionally Heal After Being Financially Scammed

December 9, 2020 by Hans Blake, CFA, CPA

Reading Time: 3 minutes

This is part one of our mini-series on being financially scammed. Please click here to read part two.

I recently received a call out of the blue from a loved one. “Hans, are you sitting down,” they said in a frail voice filled with emotion.

I immediately thought there was an accident or death in the family. My loved one began to explain how they were financially scammed out of thousands of dollars. They had called their credit card company and had reported the crime to the local sheriff’s office. However, nothing more could be done. The damage was done, and since it was an international scam, it was out of the local police’s jurisdiction.

As I heard the tearful admission on the phone, there were all sorts of mixed feelings and questions welled up inside of me.

How could someone do this to my loved one? Is there some other avenue of justice and repayment they haven’t thought of? What kind of people scam other people out of hard-earned money? How many other people have fallen victim to this scam?

The sad reality is that scams cheat older Americans out of almost $3 billion a year. That’s $3 billion with a “b.”

Falling for a scam is something that most people will not admit to. Scammers know this and use it to their advantage, but their victims have no reason to feel embarrassed. Many people have been conned out of money or personal information. Many are highly educated and affluent—not the type of people you’d think could fall for a scam. These deceptive people are very good at their jobs. In fact, our embarrassment and reluctance to share our experiences is the key to their continued success.

For more information on the emotional aspects of being scammed, click here.

What To Do Once You’ve Been Scammed

If you or someone you know has been scammed, it is crucial to notify the proper authorities as soon as possible for help recovering lost funds and to prevent others from being victimized. With so many kinds of scams and fraud, it’s hard to figure out where to report each type. Gather emails, receipts, and phone numbers so you’re prepared to complete your report. Click here to learn where to report your specific scam.

Start by reporting the scam to your state consumer protection office. If you lost money or other possessions in a scam, report it to your local police too. In addition to reporting the scam to your local or federal government, you may want to report the scam to organizations outside of the government. Third parties may be able to get your money back or remove fraudulent charges. Report a scam that happened with an online seller or a payment transfer system to the company’s fraud department. If you used your credit card or bank account to pay a scammer, report it to the card issuer or bank. Also, report scams to the major credit reporting agencies. Consider placing a fraud alert on your credit report to prevent someone from opening credit accounts in your name.

Ask for help when you need it

One of our first core values at Intelligent Investing is compassion. We understand that being scammed or being defrauded is one of the most stressful times in a person’s life. We are here to help our clients with risk management and be a sounding board and financial accountability partner to them. If there is anything we can do for you, we’d love to have a cup of coffee or a quick phone call with you.

If you are needing help with the emotional aspects of being financially scammed, consider reaching out for counseling. Though we do not endorse them, LifePaths Counseling offers such services.

Schedule a short discovery call or meeting