Sometimes we just need to be able to admit our weaknesses.
By AARON KATSMANCalculating taxes(photo credit: INGIMAGE)“The second you think that all your good fortune is a product of your virtue, you become highly judgmental, lacking empathy, totally without self-awareness, arrogant, stupid – I mean, all the stuff that our ruling class is.” –Tucker CarlsonSometimes we just need to be able to admit our weaknesses. I can just see my wife’s eyes roll as she reads these words coming from me. But recently I have had a few meetings where the lack of individual self-awareness is almost certain to end up costing the people I was consulting large amounts of money. Garima Srivastava of Whiteswanfoundation.org discussing the need to be self-aware wrote, “This exercise is about finding out how self-aware we are as individuals. Self-awareness (sometimes also referred to as self-knowledge or introspection) is about understanding your own needs, desires, failings, habits, and everything else that makes you the unique individual that you are. The more you know about yourself, the better you are at adapting to life’s changes. When we have a better understanding of ourselves, we are able to experience ourselves as unique and separate individuals. This empowers us to make changes and build on our areas of strength, as well as identify areas where we would like to make improvements. Self-awareness is often the first step to setting goals.”She continues, “Research shows that self-awareness is directly related to both emotional intelligence and success. It helps you create achievable goals because you can consider your strengths, weaknesses, and what drives you when you are setting goals. It allows you to guide yourself down the right path by choosing to pursue the opportunities that best fit your skill set, preferences and tendencies.”The first call was with a middle-aged man from the US who was contemplating making aliyah. He had not been to Israel in 15 years. He was single and wanted to get married. He had inherited a retirement account worth $250,000 and was managing his money by himself. He had a plan to sell all of his investments and buy an apartment in northern Israel, sight unseen. When I asked if he was aware of any potential tax consequences that would occur as a result of his liquidating an inherited retirement account, he had no idea. I stressed that I am not an accountant, but that distributions from these types of accounts are considered income and taxed as such. That would be a huge tax hit for him. He was shocked. I’m not even going to go in to his plan to buy an apartment, needless to say, it was a very bad idea.Then I had a Zoom with a couple who were doing well financially and had managed to save a modest amount. They just wanted my thumbs up to their plan. They told me that their friend told them how to invest the money safely. When I asked what they meant by safe they said a few tech stocks. It turns out that they plan on using this money in the next 1-3 years to help 2 married kids buy apartments. I then explained that maybe it’s not a great idea to aggressively invest the money for a short period of time, knowing that the money was going to be used for down payments, and if they lost a lot of it, there would be no apartments for their kids. Needless to say their friend may have meant well, but gave lousy advice.Luckily, in both of these cases the people involved decided to get a second opinion. In both cases I managed to save them from making potentially very expensive mistakes. If you have a good understanding of investing, which also includes tax ramifications, then go ahead and do things yourself. But if you don’t, get professional help. If you need legal documents drawn up, chances are that you will go to a lawyer, and not try and do it yourself. When we lack expertise in a certain field we generally go to a professional in that field. For some reason when it comes to money, people think that they can handle it themselves. Much to my chagrin, I too often meet people who thought that they could handle the financial issues themselves and end up coming to me because they made a mistake, and need help trying to salvage some money. Understand what you do and do not know and be truthful with yourself. There is no shame in asking for professional help.The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing. www.gpsinvestor.com; aaron@lighthousecapital.co.il
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