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I have learned much in 40 years of financial planning. One of the most important discoveries I have made is that when we get stuck thinking about how something could have been different, we face a choice — we either hold on or move on. I would like to make a strong case for moving on.
You are anxious that your investments were worth more at the start of last year than this year — hold on or move on? Your marriage ended in divorce and financially you have suffered a seemingly worse setback than your ex — hold on or move on? You were caught up in the real estate craze and bought something you hate — hold on or move on?
Figure out how to move on.
Things may be different than what you hoped or expected, but holding on to something that is either gone or a mistake usually makes it worse. Holding on is a self-imposed exile from moving on. Explore how you ended up where you did, but don’t establish a permanent residence there.
Moving on is challenging because you give up hope of changing the past. But moving on frees up your future.
We may confuse reversible with irreversible decisions. Reversible decisions may cost you something, but you can change them. Let’s say you bought a stock on a friend’s tip that has since cratered. Many people will spout the quintessential hold-on sentence — I will sell it when I get back to even. Why? Usually it is because the loss feels painful to take or you don’t want to admit a mistake. But the cost of holding on may be worse. You are wasting a loss that can be used on your taxes and you are invested in something that may not do as well as a different investment. If you are still reluctant, you could switch into something similar, grab the tax loss and still participate in a possible rebound. Move on.
If you bought a home that you hate, figure out how to move on. You need a plan because there can be financial ramifications, but holding on has a high psychological cost. Treat mistakes as failed experiments and review them, but don’t ruminate on them.
I would be a much worse planner if I hadn’t learned and moved on from my own share of mistakes, but they were an education. And I believe in education, so I moved on.
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