Even Jay-Z Has Investing Regrets — Why That’s Not Always A Bad Thing

November 09, 2017

“I could have bought a place in Dumbo before it was Dumbo for like 2 million. That same building today is worth 25 million. Guess how I’m feelin’?” — The Story of O.J., by Jay Z

Have you ever heard someone rave about their investment successes? They tell you how they got in that stock when it was worth nothing or how they sold out of the market just before the bottom fell out. It is easy to point to your successes in life, but I think failures teach the best lessons. Here Jay-Z gives us a glimpse of some of that pain. He speaks of an opportunity to buy a property in Brooklyn and passing on it. Now that property is worth more than 10 times what he would have paid for it.

Financial mistakes can be good for you

I am a strong believer that the lessons learned from financial mistakes are the best. You can be told a million times that it is a good idea to have a diversified portfolio but nothing gets your attention like going through a downturn with the wrong mix.

It definitely doesn’t feel good to lose like that, but if you can bear to examine those mistakes you will walk away with information that will put on the right side of opportunity the next time. Here is how to mine those investment mistakes to take away those gems of wisdom for future reference.

Making the most of money mishaps

Perform an autopsy on the mistake. Instead of kicking yourself over missing out on an opportunity or beating yourself up over buying something that did not perform, take a moment to think about what led you into that decision in the first place.

Was I being narrow minded or stubborn?
Were my priorities in a wrong place?
Did I not take the time to implement some basic rules into my investment decision?

My big investing lesson

When I look back on my own investment history, one big lesson I learned is that you cannot take advantage of an opportunity if you do not have the resources. I started in the financial planning business at end of the dot com boom. Coming out that recession I had a decent grasp on some of the brands that would thrive over the next decade because of my age.

What I didn’t have at the time was the savings to make truly meaningful moves on those opportunities. I was not in a financial crisis, but I was not prepared to sink capital into my own convictions. Because of that I missed on several great investment opportunities.

My lesson there was clear. I had to have my financial house together in order to take advantage of great opportunities when they come up.

Learning from others’ mistakes

While making your own mistakes is the most likely way to keep you from repeating them, there’s still value in examining what others, like Jay-Z, have to say about their own financial regrets. If you have a friend, a family member, or just someone you admire, ask them what lessons they have learned from their investment failures. I find the wisest people are the most gracious when sharing about this topic. They want others to know that success is not an easy road.

Warren Buffett, considered one of the greatest investors ever, essentially publishes his investment failures in his annual shareholder meeting. There are articles and podcasts dedicated to just that.

So now the secret is out: if you have made an investment mistake you are in very good company (assuming you consider Jay-Z and Warren Buffett to be good company!). The key is taking the lesson — your long term success is based on what you will do with your learnings.

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On Conspicuous Consumption: How Jay-Z’s 4:44 Album Gets It Right

October 26, 2017

When hip hop artist Jay-Z released his most critically acclaimed album 4:44, it was praised not only for its transparency, but also because of its economic messages. It’s no secret that pop music does not have the best track record of promoting good financial decisions. And with a few exceptions, hip-hop is the worst offender. You can even find a song like “Money Ain’t a Thang” in Jay-Z’s old catalog.

Essentially that is what has driven the buzz about this project — Jay-Z goes counter to the braggadocio of his youth and gives a little sage advice on areas we could all stand to work on. Here’s what I mean.

“Ya’ll on the ‘Gram holding money to your ear. There’s a disconnect, we don’t call that money over here” – The Story of O.J., by Jay-Z

Calling out conspicuous consumption

In “The Story of O.J.,” he raps, “Ya’ll on the ‘Gram holding money to your ear. There’s a disconnect, we don’t call that money over here,” which is referring to the “money phone” phenomenon. If you are not sure what that is, search the term “money phone” and you will find countless images of people holding stacks of cash to their ear. It is a show-off maneuver that is supposed to convey that money is calling the person.

You may not have hundreds of dollars to your ear while posting it to Instagram, but it doesn’t take much to fall into the trap of conspicuous consumption — the desire to have the newest car, the swankiest house and even the newest iPhone — which can actually result in a circumstance that puts you further away from having the wealth you’re looking to represent in the first place.

The problem with conspicuous consumption

Conspicuous consumption says you don’t belong. Many try to increase their consumption level in order to raise their status among others and be a part of the “in crowd,” but it has been my experience that such conspicuous consumption often highlights the insecurity of the person.

In my years of working with truly affluent clients, one thing I gleaned is that it is very difficult to convince someone who is actually wealthy enough to have that status that an outsider belongs there. It is like being a traveler to a foreign country. The natives know tourists when they see one and affluent people know who is affluent and who isn’t, regardless of consumption levels. Gaudy shows of wealth tend to confirm a person’s status as lower; it doesn’t improve it.

Conspicuous consumption could be a symptom to a deeper concern — and it never ends. Outward displays of wealth can result in sabotaging your journey to building your actual wealth. Wealth is a relative concept and when we fall into “Keeping up with Joneses,” it can be a never-ending spiral. When you see someone with that new phone or in that nice car, it is likely that that person could be judging themselves against someone in an even nicer car.

The real way to measure your wealth

Here at Financial Finesse we have come up with a definition of financial wellness that is objective and has very little to do with what you own. Through our work with millions of Americans, we’ve defined that true financial wellness is:

A state of being where an individual has achieved the following:

Minimal financial stress
Living below their means with no high interest debt
An adequate emergency savings fund
Income and assets are protected from loss
And an ongoing plan to reach future financial goals

So for example, if you use debt to get those extra things that might make you look wealthier (or more financially well), you could find yourself cutting back on your lifestyle later to pay off the things you thought you would make your life better today. By making good financial choices now, you set yourself up for more of the things you like later, without sacrificing your future.

This is not say you cannot enjoy nice things — financial health does not mean you must quench your sense of style. I have my own penchant for Italian loafers and German cars, but I also recognize I really only need one black pair and one brown pair of loafers. I also purchased my Audi used and it has been paid off for several years now. There’s a balance.

Next time you feel like you need to buy something that would compromise your ability to reach that state of financial wellness, take a self-assessment — ask yourself if the things you want are the things you really want and not just for PDC (public displays of consumption.) Be authentically you, but keep your financial future in mind.