I’ve watched more than once a family fighting after the death of a loved one. Often these fights stem from disagreements over who gets what. These items may have little monetary value, but hold a strong, emotional significance. These emotions can trump all else and cause families to go their separate ways.
Sometimes we hold onto investments for out of emotional attachment, too. I’ve seen a widowed spouse hold onto a portfolio of individual stocks that are completely inappropriate for his or her financial situation just because the deceased spouse had purchased them. People will also hold onto company stock that is completely inappropriate for their financial situation because they work for the company or perhaps their business was bought out by a new company. Whatever the reason, it’s emotion driving the decision, not logic.
Ask the Question
Part of this problem stems from not being clear about why you own certain investments. Getting very clear about the why will help you make important decisions about how and what you own. To start, you need to have meaningful conversations about money. A financial advisor friend of mine refers to one such conversation as the Overnight Test. Ask yourself what you would do if someone came in and sold all of your investments overnight. The next morning you wake up and you’re left with 100% cash in your account. You can repurchase the same investments at no cost. Would you build the same portfolio? Does that portfolio fit your unique financial goals?
Financial decisions are always better when they are made in the context of your unique goals in life. The Overnight Test may be a good way to determine if you own things for emotional reasons or if you own them because they match up with your unique set of values.
This article is the second in a series called Money Conversations.