The truth about having money to lose

Faith in financial alchemy the past 15 years has convinced the masses that investment risk can solve all their financial needs. The suggestion is that one can afford all the lifestyle items as well as fund kids’ education and a comfortable, long retirement, all at the same time. The truth is that most cannot. For 99.9% of the population, conscious choices must be made to control lifestyle spending and set reasonable guidelines around what one can afford for living expenses and to aid children and grandchildren.

This segment talks about some of the key issues impacting individuals and financial plans. Ironically the main speaker is from Bank of America, Merrill Lynch who like most broker/dealers, makes their highest fees by allocating savings to the highest risk financial products. After highlighting some of the key challenges well, he is then quick to suggest that his firm can provide portfolios and strategies that will not require the client to chose savings over present consumption…which is false.

Here is a direct video link.

The answers lie in conscious prioritization and controlled spending as well as limiting the risk that savings is exposed to once it is amassed. The fact is that once we have savings, we have more downside than upside in risk markets. “It takes money to lose money” is not a slogan widely advertised, and yet useful risk management must start there. As discussed in this article, worse-case financial outcomes are actually fairly common in today’s highly levered, over-valued, low yield, heavily marketed financial markets.

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