In 1929, the American stock market crashed and accelerated the beginning of the Great Depression.
Imagine how folks who lived through that time felt about the economy. Then imagine the stories they’d tell their children about the stock market.
It’s not hard to guess why someone who’s been burned may adopt the belief that the stock market is gambling.
And yet, there’s a cost to holding on to outdated beliefs. I call it financial baggage.
Baggage turns into beliefs; beliefs turn into investing decisions.
My mom lost most of her 401K in 2000, then again in 2008. It was traumatizing. She told me that the stock market was just a gambling machine and to avoid it at all costs.
Well into my working years, I avoided trading individual stocks—even in companies I believed in. I missed out on some generational companies like Google, Amazon and Microsoft. The baggage transfer was complete*.
Financial baggage tends to make sense at the time that one experiences trauma. But unchecked, it can become an invisible burden for those who shoulder it going forward.
“My generation experienced different risks and constraints, which shaped our worldview with money. That worldview may be outdated for the context you now live in.”— Said No One Ever.
Ironically, generational advice may not lead to generational wealth.
Financial baggage is defense. How to play offense instead
Baggage is backwards-looking and helps avoid risk. “Hindsight is 20/20,” but it also blinds us from seeing the current financial landscape, rife with new opportunities and risks.
Now, I don’t blame my mom for any of this financial baggage. She already gave me the biggest gift of all. It was my responsibility to see what baggage she might have had, and to decide if I wanted to carry any of that going forward.
Some questions I asked myself in this process:
- What beliefs do I hold about money, finance and investing?
- How did I develop these beliefs?
- Do these beliefs need to be updated or removed?
- What do I want to bring to the next generation?
We should be vigilant about how others’ financial histories influence how we behave with money. We should be even more vigilant about the baggage we might bring to others.
Do you carry any financial baggage? Share with me.