Frugality now for future benefits - opinion

It’s Hanukkah and many are adding inches to their waistlines from eating Sufganiyot with every conceivable filling, latkes and sfinj. Aside from healthy eating, Hanukkah has produced tremendous wealth for the lucky few who have made a small fortune playing dreidel. 

While the holiday has only just begun, I have been inundated with phone calls from people looking to invest their riches. Well, that may not be true, but whether you clean up playing dreidel (and I am not talking about chocolate coins!) or you have generous in-laws intent on stuffing your pockets with cash, the question is what to do with the newfound bonanza.

What would you do if you came into a bunch of money? Travel, buy a new car, and maybe give a little charity. For many it’s all about short-term improvement in their standard of living.

Advice from Marshawn Lynch

A few years ago, I wrote about Seattle Seahawks running back Marshawn Lynch who came out of retirement to help the team at the end of the season and in the playoffs. After losing in the playoffs, he gave some insightful financial advice. He did a great job of investing his money in his playing career and set himself up financially for life.

His advice was given to younger players. “I’m done being on the other side of retirement, and it’s good when you get over there and you can do what the “bleep” you want to,” he said. “Start taking care of y’all mentals, y’all bodies and y’all chicken. So when you’re ready to walk away, you walk away and you be able to do what you want to do.”

For those of us who have been living in Israel for a long time and think that chicken is something we eat, the loose translation of what he said is, “Protect your mind, your body, and your money, so when it’s time to retire, you can do whatever you feel like doing.”

He’s giving this advice to football players who are notorious for squandering all their money. Sports Illustrated reported that, “78% of NFL players also go bankrupt or are under financial stress within two years of retirement and 60% of NBA players are broke within five years of leaving the sport.” I admit I don’t have the stats from dreidel windfall winners! 

Lynch’s advice struck a chord with me, as I firmly believe that it equally applies to those who come into to a sudden windfall, often from inheriting a large sum of money. Over the years I have had numerous meetings with individuals that have received an inheritance. When I start asking about plans for money, saving and investing for the long-term is nowhere close to being the first answer given.

Alessandro Martinello, of Lund University, studied the habits of those that received a sudden inheritance. He wrote, “First, we show that heirs respond to a sudden, salient, and sizable increase in available financial resources by decreasing their saving efforts in the ten years after inheriting, and that the net worth of the heirs converges back towards the path established before parental death. Overall, only about a third of the initial increase in net worth remains nine years after parental death.”

Most people just blow the money on material goods. As we know, material possessions may bring very short-term elation, but over the medium and long-term does little for increasing happiness.

Don’t get me wrong, there is nothing wrong with spending some money on material things, it’s just you shouldn’t get carried away. Here are some tips on how to deal with receiving a lot of “chicken.”

As I have written many times, I often recommend to those who suddenly come into a large amount of money to wait two-three months before making any decisions. This helps diminish impulsivity. Then make a game plan. Figure out what it is that you want to do both long and short-term with the money. Make sure your goals are realistic, based on the amount of money that you received. It may be beneficial to speak with a financial adviser as they can help direct you and draw on their experience to make sure you are headed in the right direction.

After defining your goals and needs, it’s time to implement an investment strategy that will help you achieve whatever it is that you want to accomplish. Keep it simple. Too often I see people get involved in all kinds of investment schemes which they have no business investing in. Deposits in Ukrainian banks, gold mines in Africa, and oil pipelines are just a sampling of what I have heard. Paying off your mortgage should be a priority.

Be “mental” with your “chicken.” Why sacrifice long-term financial security for instant gratification? Heed the sage advice of Marshawn, and you can have a comfortable financial future.

May all the families of the fallen be comforted. May the hostages be released. May the injured have a speedy recovery. May our dear soldiers be safe and protected.

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.i