As my second last post of the year, I wanted to share some of the things I learned this year about personal finance and life. It sure has been a crazy year with a lot of learning experiences to be sure.

• Personal finance lessons are life lessons and vice versa. People tend to separate their “money life” from their “non-money life” but they intersect. The lessons you learn in personal finance and the same lessons to be taken in life. For example, I learned this year the virtue of patience. As I wrote yesterday I jumped in early twice in the market- the second time buying BCE after the deal was first announced as potentially being off- when waiting a few more weeks would have made me better off.
• You judge people in bad times and not good times. This is one of my favorite sayings in life but it rang so true this year. I made a comment to my business partner this week that “people have sure gotten dumb the last two months.” A lot of people have done stupid things as the economy worsens but, money comes and goes, character is enduring- and people remember what you did when the times got tough. If you want a real life example, Bear Stearns was the only large institution not to participate in a mini-bailout in the 1990’s when a financial institution went down (the name alludes me right now…). When it was recently in trouble, many on Wall Street were happy to see them in trouble. Karma. Pure karma.
• The tyranny of the “expert” opinion is leading us to ruin. Remember when the experts said oil would hit $200/barrel? Those same experts now say oil will trade for $30/barrel…which, means given the accuracy of their predictions, we’ll see $100/barrel of oil soon enough! As my friend, who works on the trading floor said, most experts have spent their entire lives in glass towers forgetting the human side of finance and don’t really understand how a business runs outside the financial statements. They got us into this mess and we are still listening to them for advice? My financial advisor actually tells me not to listen to stock recommendations his own firm gives! He readily admits the experts’ agenda is to get you to buy something.
• Cash flow sure does ease the pain of declining net worth. I probably took a 20% haircut in my net worth this year but doubled my dividend income. I panic about the former but the latter makes me relax a little. Cash flow, not pure appreciation, is a key to personal investing. Better to be cash flow rich than asset rich without the cash flow.
• The more complicated something is, the more likely it will blow up. I have seen enough business ideas and investment products to last me a life-time (you know people make good money being lice pickers for schools? Who knew!). The ones that work are simple and elegant.