The financial life of Sex In The City star Sarah Jessica Parker was featured in this Sunday's New York Times. The former Annie's journey from real-life welfare child to real-life millionaire hasn't solved all of her financial problems. The demons that still plague her -- her emotional reaction to money -- are common to all investors. Investing Foolishly can help ease worries about tomorrow.
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A recent case in point: In last Sunday's New York Times, Geraldine Fabrikant wrote an in-depth story on the financial state of child-actress-turned-savvy-sex-in-the-city-expert Sarah Jessica Parker. Fabrikant details the star's journey from welfare child to millionaire, and the demons that still haunt Ms. Parker. Millionaire or not, issues of emotional security in financial matters are quite common to all investors and are thus worthy of Foolish examination.
Stigmatized by poverty as a child, Ms. Parker received free school lunches, and often had to make do without ordinary take-it-for-granted pleasures like birthday presents, telephones, and even electricity. As a result of her upbringing, she always lives in a one-step-away-from-poverty state of mind, even though there's no basis for such fear, with an investment portfolio worth upwards of $4 million.
Because she distrusts her ability manage her own money, Ms. Parker, like millions of others, relies on professional accountants and money managers to handle her investments. Considering how much she worries about money, it's ironic that she trusts someone else to manage her portfolio. That can only perpetuate her anxiety about her financial situation since, bottom line, she never knows exactly what her bottom line is.
Her advisors have put 30-40% of her investment portfolio in tax-free bonds, and the rest in "various stocks and mutual funds" which are handled by outside firms. Sure, she trusts her advisors; but it's hard to have peace of mind when you don't really know where you stand. And, while professionals may be managing her money, who's managing her emotions?
All of us have unconscious attitudes toward money and investing that we picked up long, long ago. If your parents believed that "money is the root of all evil," or "no matter how hard I work, there'll never be enough money," your investing success will always be hampered by these thoughts -- they'll become self-fulfilling prophecies.
Spend a minute reflecting on your childhood dinner conversations about money -- earning it, spending it, and investing it. Are these thoughts helping you become financially successful or holding your back? If they're holding you back, becoming aware of that is the way to begin to neutralize the effect.
Once you realize where that little voice of negativity is coming from, you can change the message. For instance, if your parents said "No matter how hard I work, there'll never be enough money," begin training that voice to say, "If I work hard, I always have enough money." Send a new, positive message to yourself. When you feel that you can control your income, you will feel better about putting some of it into investments.
Perhaps you have negative thoughts specific to investing. Have these thoughts ever crossed your mind? "Whenever I buy a stock, it's guaranteed to tank." Or "I always find out about a company when it's too late." We may be at least halfway joking, but be careful because such attitudes may be passed on to your children someday.
Becoming aware of the unconscious attitudes you have toward money and investing can help any investor make more rational decisions. You can start to relieve some of your anxiety right now by resolving to become an educated investor. Have you visited the Fool's School lately? Taking a quick review of the first three of the 13 Steps to Investing Foolishly is good for new and experienced investors alike, as a way to make sure your financial priorities are in order -- and stay that way.
If you know where you stand, where you are going, and how you plan to get there, vague fears of what could go wrong tend to fade away. As Ms. Parker sang on Broadway many years ago as Annie, the sun will come out tomorrow. As long as you invest Foolishly.
"I watch the market," says Ms. Parker, "and Matthew [Broderick, her husband] and I have these conversations like, 'Should we get out?'"
As Foolish investors, we know that it's more profitable to spend time learning about financial matters than worrying about the market. Financial education is the best antidote for financial insecurity. Come to think of it, we Fools have more conversations focusing on when we should get in, as we're always looking for opportunities to find great companies at reasonable prices.