‘Self-Reliance’ revisited

In his essay, “Self Reliance,” Ralph Waldo Emerson wrote something dear to the heart of all financial advisers: “The voyage of the best ship is a zigzag line of a hundred tacks. See the line from a sufficient distance, and it straightened itself to the average tendency.” As far as we know, Emerson didn’t give much financial advice, but it’s worth noting that “Self Reliance” was composed in the midst of a lengthy and devastating economic depression that followed the burst of a massive speculative bubble in 1837.I believe the historical consequences, then and now, are remarkably similar, as people struggle to make sense of uncertain times. The understandable focus on the here and now can lead to unwise long-term decisions. I call it personal investment atrophy.The reasons for delayed savings and investment often appear perfectly rational. There’s little doubt that the 9/11 terrorist attacks or the Haitian earthquake exert a psychological impact — in other words, live for today because tomorrow may not happen. Mortality tables, based in mathematics, show a more rational story, of course.There’s also the very human trait of, “Why should I delay gratification because I deserve it today – I can always save later.” We’ve seen a lot of this from my generation, who believe that they can always do it tomorrow. The problem is that tomorrow comes very fast.Many boomers’ balance sheets may reflect the tipping point of a consumer-focused economy that embraced attitudes of entitlement and instant gratification.It appears that short-sightedness permeates much of our culture. Our general inability to appreciate much more than 30 seconds of history limits our ability to prepare using historical knowledge as a guide. With each passing year as a culture, we reflect on history less and less. In comparison, I think Asian societies have a much deeper sense and connection with times past and are far more patient as a result.I sense many of our peers need a better grasp and control of investment planning, no matter what their income level. Unlike prior generations before and after World War II, financial literacy has become less of an important part of our social fabric. Credit and debit cards do not allow us to feel connected to our money — unlike the school child in the 1950s and 1960s who would open up a passbook savings account and deposit their own dimes, quarters or dollar bills.We’ve lost the learning that comes from a tactile connection with money.Finally, there’s what I call the “nanny state comfort blanket.” We improperly assume that big government will come to the rescue and take care of us. For example, the popular and costly programs of Medicare and Social Security for older generations have assumed far greater importance than originally proposed. Social Security was passed in the 1930s, and it was intended to join with personal savings and pensions to provide for financial security. When Medicare was passed in the 1960s, it was never meant to be the sole source of health care.We have lost sight of basic planning concepts, which are as reliable as the tack of a sailing ship. My favorite is the power of compound interest, which was lost in the get-rich-quick schemes of the recent past, but the basic math is undeniable.If Emerson were writing today, it’s possible he might say “be true to compound interest for it will be true to you.”It all comes back to self-reliance.Tom Sedoric is managing director-investments of The Sedoric Group of Wells Fargo Advisors in Portsmouth. The opinions represent those of the writer, and not necessarily those of Wells Fargo Advisors.