Big Hat and No Cattle – 5 Financial Lessons from Cowboys
Those that know me, know that I love horses…I might have always been a bit obsessed with them. Life in western times seems idyllic to me in many ways. There were hard times, but there are financial lessons we can learn from the ponderosa. Here are five financial lessons:
Don’t be afraid to fall
Few things in life are accomplished without taking some risk. If we sit back and coast easy through life, we will miss those moments of thrill with achievement. “Courage is being scared to death and saddling up anyway.” – John Wayne
In investing, I believe this risk should be considered within the context of a solid financial plan. I often refer to the terms “risk capacity” and “risk appetite”.
Risk capacity refers to the range between the minimum amount of risk you must take to have a reasonable chance of meeting your goals and objectives, and the maximum amount of risk you should take to still have that reasonable likelihood of success. Some clients would love to take all of their money and stuff it under their mattress, and others would love to take it all to the casino and bet on black; neither of those is likely a good option, nor is either of those likely to help them accomplish their goals.
Within that range of risk capacity falls a client’s risk appetite. Once the financial plan has been established, it should be stress tested at varying risk levels to evaluate the risk/reward trade-off of varying allocations. How much potential growth are we giving up if we maintain a lower equity allocation? How much sleep are we going to lose if we go after that extra return? There is a place on that spectrum for each individual, and it is part of the advisor’s job to help guide you to finding yours.
Get back on the horse
Unfortunately in life, things do not always go as we plan. We set off in the morning with hopeful expectations of the ride ahead of us…the glow of the sunrise, the breeze in the air, the sounds of the birds. However, as we gallop around the next corner of the trail, we (and our horse) might’ve forgotten about that rain shower from yesterday…and the resulting water puddle showing our reflection back to us. Your noble steed balks…does he run through it, jump it, go around it? As he fast approaches the puddle, he decides to jump around it in a quick maneuver fashion that you were not prepared for…and off you go into the mud. Yes, I’m writing that one from experience. My horse, Apache, actually loves water and would’ve done just fine. However, that day I decided to ride a different horse with a bit more “spunk”. I can say, though, that I did get back on.
In our financial lives, some endeavors will not play out in the manner we intended. That business venture, that career position, or even that stock purchase – not every idea is a winner. However, the important thing is to dust off your boots, learn from your mistakes, and go again…in maybe a more prudent fashion the next time.
Don’t squat with spurs on
Sometimes we can be our own worst enemy. We know our vices and weaknesses, and yet we put ourselves in the same positions. It could be as simple as going to the grocery store while hungry and ending up with loads of junk food and nothing of substance. Or maybe we think we will just go test drive that new truck to see the new features, but not buy one. Or maybe we have had a bad day, and it’s too easy to escape to the shopping mall or Amazon for some retail therapy. In either case, we know better; we just get careless and set ourselves up for failure.
A little self-discipline can go a long way. Take time to know yourself and to create a budget and calendar to help set some guardrails. You will be glad you did.
Big hat and no cattle
Ever seen that “cowboy” that is dressed to impressed…he has the Stetson hat, the pearl snap shirt, the boots, the Wranglers…he is styling. But have you ever seen him even ride a horse? Or is it all just show?
I would liken this to the family with the designer clothes, the newest of luxury cars, that new house on the corner…are they really doing well? Or are their banks and credit card companies doing well off them and their debt? Don’t be so quick to judge the book by its cover and be too easily impressed. That neighbor down the street with the classic chevy may be debt free, have substantial savings for retirement, and fewer concerns. Don’t get me wrong, I appreciate nice things. We just need to make sure we aren’t sacrificing our long-term success for short-term luxuries.
Always drink upstream from the herd
Everyone seems to have ideas about everything. Turn on any news channel, ask any friend, and they likely have at least a few suggestions for you on any given topic. Change the topic, and all the sudden they go from an engineer to a chef to an investment expert to an estate planner. And of course, they have all taken time to consider your values, your goals, your particular assets, and how they all fit into your financial plan, right?
Seek wise, qualified, and appropriate guidance. I wouldn’t want my financial advisor diagnosing my medical needs, and I wouldn’t look to my physician for financial lessons and direction on my investments.
Most of us don’t wear spurs on a daily basis, or maybe ever. However, these are timeless financial lessons that apply to everyone. If these premises generate any thoughts for you about your personal situation and you would like to discuss further, please reach out to a CapSouth advisor.
By: Scott McDowall, CFP®/Wealth Advisor
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Investment advisory services are offered through CapSouth Partners, Inc, dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting, or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice.
