I firmly believe that above-average wealth is largely a result of luck. If we fail to recognize our lucky financial breaks, we risk confusing our abilities with good economic times. This overconfidence can lead to poor decisions and increase the likelihood of financial ruin.

Since starting Financial Samurai in 2009, I’ve witnessed fortunes rise and fall. Time and again, hubris during good times proved to be people’s undoing. I experienced it firsthand in 2007 when I assumed my income would keep climbing. That misplaced confidence led me to purchase a vacation condo in Lake Tahoe, tying up 30% of my net worth in an asset I didn’t need. Over the next three years, the condo’s value collapsed by 50%. Oops!

Times are great again, and nearly every asset class has performed well in recent years. It’s tempting to chase even greater returns to ride the bull market higher. If you choose to

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