Today’s topic does not fit in nice and tidy together. This will be more of a potluck style Thoughts On Money. I want to address three topics that have come up a handful of times recently. All are worthy of discussion, but none of them as a standalone would justify a dedicated article. Jeopardy calls this the Potpourri category, a collection of the miscellaneous.
We will cover:
- The importance of running your race.
- The need to take inventory.
- The underappreciated value of liquidity.
And off we go…
Run Your Race
A good financial planning process looks something like this. You start by itemizing your resources (assets & liabilities) so you are aware of what you have. Next, you take note of what your spending needs are and what sources of income you have (cash flow). Once you know the resources and the needs, you build out an investment strategy to fulfill those current (or future) expenses.
An oversimplified version, but you get the basic process and purpose. What you didn’t hear me say is that you “strive for the highest possible returns” or that “you prioritize out performing your neighbor.” Of course I didn’t say those things, because that’s not what a prudent financial plan focuses on. Yet, many investors will struggle with performance anxiety and comparative disappointment. That anxiety and disappointment will often lead an investor to go recraft their portfolio. The problem is that the portfolio must be designed to fulfill the needs of the financial plan, not those other nebulous objectives birthed from greed and jealousy.
This is one of those areas where the truth will set you free. So, here’s some potentially hard truths for you:
- When you are diversified, something in your portfolio WILL disappoint you.
- There will ALWAYS be a strategy that does better, so you need to be ok with good results rather than best results.
- You need to stick with a strategy and that means some seasons will be harder to endure than others.
It’s not easy. It takes discipline. Eventually it’ll be part of your DNA, and then it becomes like an investing superpower.
Use Warren Buffett as an example, I’m sure he hasn’t lost an ounce of sleep over the last 6-months, and these are the results of his portfolio versus the market:
*SOURCE: Google, October 15, 2025
That’s nearly a 30% performance gap in a 6 month period. Why? We are in the middle of an A.I. craze that resembles the mania of the late 90’s. This isn’t foreign ground for Mr. Buffett, in 1999 his portfolio was down nearly 20% while the dot-come crazed market was up over 20% in 1999.
You’ve got to run your race.
Taking Inventory
If you’ve ever worked in retail you know what a drag taking inventory can be. To basically go out and reconcile what’s on the shelves with what’s in the books. It’s both tedious and important at the same time.
The reality is, over time there can be a drift between what’s out there on the storefront and what’s accounted for in the systems. So, you need to have this regular process of reconciliation.
Your personal finances need this same reconciliation process. You might have an idea in your head of what your balance sheet looks like, but when you slow down to take inventory you start to recall these dormant or orphaned accounts that exist out there. 401(k) plans from past employers, a savings account from your hometown bank, an old insurance policy you are no longer funding, etc. etc. etc.
I don’t love taking inventory, but when doing this exercise with a new client or friend, I do take great pleasure in helping them organize and simplify things. I get the same feeling when I clean up the junk drawer at our house every 6-months or so.
During this process you want to consolidate things as much as you can. You want to get rid of any unneeded redundancy. You want to make sure all accounts are titled in a manner that matches the desires you’ve laid out in your estate plan. You want to get a count on your total cash holdings and maybe even move some superfluous cash holdings into your investment portfolio if you’ve already met your emergency reserves targets. You want to ask yourself “why do I own/need this?” and make sure that everything from an insurance policy to a savings bond still belongs as part of your portfolio/plan.
Again, a tedious process but an important one. The longer you’ve gone without doing this the more impactful of a result the exercise will be. Going forward, make sure you are taking inventory at least once a year.
Understanding Liquidity
Liquidity is one of those finance terms that often gets lost in translation. What we are really talking about here is access. Think about liquidity as how easily can I access my money.
Visuals are always helpful, so imagine one of those old piggy banks that the only way to get your money out is to smash the pig. This is a nice accountability feature, but can also be overly restrictive. You got excited about saving and you started squirreling away every dime, dollar, and penny in that pig. Then, your friends all decide to go out for ice cream one day when you realize your pockets are empty. You have a liquidity crisis, you’ve either gotta smash that pig or borrow from a friend. It’s a frustrating position to be in because you have money and you’ve been such a diligent saver – you’ve done everything right – but you have an access issue.
Now, what does this look like in the real world? An investor gets gung ho about paying off their home because they feel like their mortgage rate is a bit high. Then an emergency or need arises and they realize that most of their balance sheet is the equity in their home. They are house rich and cash poor.
I’ll use myself as an example. I often get pretty enthusiastic about different financial planning tools and accounts, and try to maximize these opportunities for our family’s financial plan. When the kids were born I got excited about 529 plans and how you can amplify the compounding tax benefits by making large contributions at young ages. A good idea and the right heart behind it. Yet, our family was growing and when it came time for us to buy a larger home I realized that I was heavy handed on 529 savings and retirement savings but I had almost not enough liquidity for our next down payment.
Liquidity isn’t always a top of mind consideration, but it needs to be. This is why I create portfolios with liquidity redundancy, I layer allocations of cash, high-quality bonds, access to lines of credit, and cash flow producing assets to help drive more liquidity if a need arises. Why? Because a need always arises.
Run a simple liquidity test on your own balance sheet. Ask yourself, “If I needed $X today, where would I get it from?” When you realize the value of liquidity you will be ok with holding a bit more cash, deferring that mortgage payoff aspiration, or slowing down the pace of that 529 funding. Feeling like you are in a liquidity pinch is simply the worst feeling, especially when you know that you were being prudent and diligent but you just accidentally created an access issue.
Hodgepodge
Yes, today’s topics didn’t fit seamlessly together. Yet, the overarching theme was clear: practical advice for improving your financial life.
Maybe not all three were applicable for you, but hopefully one or two of these topics did hit close to home. I know even as I was writing, I was thinking about my own financial life and different tweaks and adjustments I need to make.
That’s the funny thing about personal finance, there isn’t the “one golden rule” to help solve all of your financial woes. Personal finances is a lifelong journey of tinkering and improving. An old boss use to always tell me, “It’s not about doing this or that, it’s about doing this AND that.” In personal finance, you need to be all about this-and-that.
The Golden Gate Bridge is probably THE representative image for California. It’s said that this beautiful landmark will forever be a work in progress. The corrosive effect of the salty air means that the bridge will be in a constant state of maintenance. You might not know it by looking at it, but somewhere on that bridge someone is painting or fixing something constantly. And so it will be with your financial life as well 🙂
To this end we work…
