Relationship with Money
A blog that knows money is more than numbers
31 | Patient Investing, Part 3 of 7: The Pilot Has Turned On The "Fasten Seatbelt" Sign
Investing in a manner that you believe in and in which you have a baseline understanding knowing that, regardless of strategy or plan, the only guarantees are that someone will always outperform you and that how you behave during the inevitable unsettling times will be the biggest determining factor in your lifetime returns. Owning businesses tends to increase potential returns, diversification tends to make the ride smoother, long horizons tend to increase the probability of positive returns, and above-average patience is a superpower.
No matter your level of belief, depth of understanding, or specific strategy, the unsettling times are guaranteed to happen.
Nobody, literally not a single person, experiences investment growth, or any kind of growth, without taking some steps backwards along the way.
Your ability to stay the course and remain invested during the periods where you are below your most recent personal high-water mark are the second most important skill you'll have to hone to be a successful investor.
One part is numbers - the best days actually come in the worst times. The depths of the Great Depression, Black Monday, the Financial Crisis, and the COVID-19 Pandemic are where the best days are found. See here.
If you miss out on those days, the implications are brutal. See for yourself...
No change in strategy or hack is making up for that gap. That is only one 20-year period, but all the other 20-year periods look the same. It doesn't matter what you did in practice, what type of equipment you're using, or what tricks your coach told you, if you can't stay in the game when it is the hardest to play, you will lose.
The numbers are easy to see. The trickier part is the psychological side - trusting simplicity instead of increasing complexity.
Doing nothing or "gritting it out", seems too easy to be right. I think this confuses "simple" and "easy".
You know what's easy...
"I think I'll wait until everything seems like it's under control and then I'll invest."
"I think I'll invest in CDs or I-Bonds to get a guaranteed interest rate."
"I think I'll switch my investments to something else because that will make me feel like I've done something productive amidst the chaos."
You know what's simple, but hard to actually do...
Have the discipline to keep enough cash in the bank to provide some cushion to navigate the unsettling times.
Have the wherewithal to acknowledge that the unsettling times are going to happen, but it's impossible to know exactly when they will happen.
Have the self control to not look at CNBC, social media, or your investment statement if that is what is necessary to keep you from making a reckless decision during unsettling times.
Have the courage to have a conversation with someone else before those unsettling times push you to the brink.
As I often like to say, if it seems hard to do, then that's probably a sign that it's the secret to success.
Additional Reading
Fees vs. Fines by Morgan Housel
Is market timing worth it during periods of intense volatility? by Jack Manley
Time the Market Game by Personal Finance Club (don't fall for Jeremy's context-less bio)
30 | Patient Investing, Part 2 of 7: The "Other People"
Investing in a manner that you believe in and in which you have a baseline understanding knowing that, regardless of strategy or plan, the only guarantees are that someone will always outperform you and that how you behave during the inevitable unsettling times will be the biggest determining factor in your lifetime returns. Owning businesses tends to increase potential returns, diversification tends to make the ride smoother, long horizons tend to increase the probability of positive returns, and above-average patience is a superpower.
Whether it's a day, a year, a decade, or a lifetime - someone, somewhere will always beat your investment returns.
If we can't establish this as gospel, then we'll be second-guessing ourselves to the grave.
Some people will actually outperform, while others will only claim it.
But it's a guarantee that you’ll never know who’s for real and who’s faking it.
Either way, your ability to ignore both groups is how you'll become a good investor yourself.
Once you're cared for some basics, intentional ignorance leads to extraordinary returns.
Whether we're talking about one day, one year, one decade or one lifetime - someone, somewhere will always have an investment strategy that performs better than yours.
As Elon would say and do, "let that sink in!"
If we can't establish this as an investing gospel, then it's going to be a long lifetime of second-guessing, social comparison, and useless woulda-shoulda-couldas.
Some people will legitimately outperform and others will claim to have outperformed when they actually haven't. It's close to a guarantee that you'll never know who's for real and who's faking it.
Either way, your ability to ignore and completely block out the "other people", especially when they have allegedly outperformed you, is likely the most important skill you'll have to hone to be a successful investor.
We used to live in a world where access to information and knowledge was limited, so it made sense to go searching for better options. Some people legitimately had access to things that others didn't, so the hunt might have made sense.
The world has changed and you have access to all the information and knowledge that you could possibly need. The problem now is that it's impossible to know which information and knowledge is actually useful. Speculating about the "success" that others are experiencing is only gas on the information-overload fire.
The hunt was worthwhile when scarcity of information was the issue. The hunt is pointless, even destructive, now that abundance of information is the issue.
In a world of abundance, the competitive advantage is some combination of a mental filter that can keep the useless information from ever hitting the radar and the ability to throw on blinders so you don't get spooked when something inevitably makes it through.
Additional Reading
Hope is not an investment strategy by Carl Richards
FOMO: The Worst Financial Trait by Morgan Housel
“The market has spoken” by Seth Godin
29 | Patient Investing, Part 1 of 7: Believe
Investing in a manner that you believe in and in which you have a baseline understanding knowing that, regardless of strategy or plan, the only guarantees are that someone will always outperform you and that how you behave during the inevitable unsettling times will be the biggest determining factor in your lifetime returns. Owning businesses tends to increase potential returns, diversification tends to make the ride smoother, long horizons tend to increase the probability of positive returns, and above-average patience is a superpower.
There is no "right" way to invest.
If you don't believe me, go read this book, or at least it's summary, and then come back.
There are infinite options and choices when it comes to investing and not a single one of them will work for the long haul without some level of personal conviction and belief.
There is a spectrum of belief - some people will personally know the ins and outs of their beliefs and may even have experienced something tangible that led them to believe. Others will have heard testimonies from trusted family, friends, or colleagues that have led them to believe.
In The Psychology of Money, Morgan Housel says, "Manage your money in a way that helps you sleep at night. Some people won't sleep well unless they're earning the highest returns; others will only get a good rest if they're conservatively invested."
I'd add that some people will sleep better owning index funds, some will sleep better owning actively-managed funds, some will sleep better owning individual stocks, some will sleep better owning real estate, some people will sleep better owning their own business, and some will sleep better in a mixture of many things.
Regardless of what you believe, I think the deepest form of belief is being agnostic to benchmarks and "other people" - 100% belief that the way you are invested will allow you to live the life you most desire to lead.
This doesn't happen overnight, but it can happen over time and it is worth pursuing over time because the freedom that comes from the next dollar of financial wealth pales in comparison to the freedom that comes from the ability to say "no" to the next shiny investment or to ignore what all the "other people" are doing.
The "baseline understanding" is a touch trickier because there is a risk of getting buried in the weeds.
With that said, part of belief is a high level understanding of what you are trying to believe in - even if it is only the broad strokes.
The knowledge that investment returns are only possible if you are willing to stomach investment losses is part of understanding.
The ability to acknowledge when a specific type of investment or strategy is too complex for you to trust is part of understanding.
The ability to see investing as being an owner and participating in the progress of humanity instead of viewing it as a slot machine that randomly creates winners and losers is critical to understanding.
Belief and baseline understanding ensure that we are prepared for the two guarantees of investing...
Additional Reading
Forget beating some index, instead focus on your financial goals by Carl Richards
Internal vs. External Benchmarks by Morgan Housel
My 'Too Hard' Pile Is Pretty Big by Christine Benz
28 | I Have a Dream
I have a dream that our collective relationships with money will radically transform as a result of having transparent conversations about our finances.
It won't start on the upper end of the wealth spectrum. The stakes will feel too high for it to start there.
It will begin somewhere down the wealth spectrum as people realize that the tips, tricks, and investment products don't actually move the needle like they have been led to believe.
One person will share their finances with another person and realize that their shoulders sit a little lower, their mind races a little slower, and their anxiety about the future dissipates ever so slightly.
Some things will feel vulnerable to share and it will be best to acknowledge that reality before they are shared.
Some things will be backed by deep conviction and appropriate pride and it will be a good thing to acknowledge this before they are shared too.
Everyone has a belief about money that could use some tweaking and a belief about money that could inspire others.
It will feel a lot like playing a card game and getting to see the hand of the player sitting beside you - much easier to play the game, appreciate different strategies, take on the right amount of risk, and have a better understanding of what needs to happen to succeed.
Financial services commercials promising peace of mind, security, and contentment will feel a bit emptier than before because it will be obvious that the promises on the TV pale in comparison to what has been experienced firsthand.
These conversations will inevitably provide gentle accountability for the most financially wealthy to keep from hoarding and inspiration for the less wealthy to slowly build to a sustainable level of financial wealth - both sides actively creeping closer to a clearer understanding of "enough".
Slowly it will creep up the wealth spectrum because the life-changing impact will be palpable and everyone will begin to realize that the same emotions and mental gymnastics happen regardless of a person's actual level of financial wealth.
Collectively, we'll begin to realize that it was never about the actual numbers, but only our underlying relationships with money.
27 | Homebuying Series: The Features Always Sound Good
The features always sound good - a two-car garage, ample storage space, beautiful landscaping, extra bedrooms, etc. will sound convenient and comfortable to many people.
Zillow is going to highlight each of these wonderful features too.
In a sneaky way, this begs us to use the "features" to establish our preferences instead of establishing our preferences to evaluate the "features".
"This house has a beautiful front porch that might increase the chance we meet some neighbors" is wildly different from "We desire to rub shoulders with our neighbors on a daily basis, so we will look for a house that has a front porch”.
“This house has a large yard that will give our kids a chance to play outside" is wildly different from "We want our children to learn to play and enjoy outdoor spaces, so we will look for houses with large yards”.
"This house has tons of storage space that will be great to have in case we need it" is wildly different from "We need extra space to store things that are critical to our current and future well-being, so we will look for a house that has plenty of storage space”.
This might seem like splitting hairs, but when the house in reality is inevitably different from what it was in theory, the difference in intention dramatically impacts the odds of experiencing lasting contentment or lingering regret.
Simon Sinek says it in relation to business, but I think it applies to the modern-day homebuying experience too...
When you have a clear sense of your "why", you tend to ignore all the distracting features. When you have a fuzzy sense of your "why", you tend to obsess over all the features.
26 | Homebuying Series: The Discipline of Renting
I once heard someone say, "There are two forms of pain: discipline and regret. You get to pick one!"
To be clear, if we're searching for a home to purchase, "privilege" is a more accurate descriptor than "pain". With that said, I think the discipline/regret concept still applies to renting before buying in a new city.
Both times we have moved, we've rented for 9 to 12 months before landing in our first home in a "new" city. Ironically, my wife and I actually grew up in the two cities where we have moved!
I've heard other friends take a similar approach and say things like...
"I never knew that neighborhood existed and I grew up in this city."
"We've been able to see where our closest community actually lives and decide to find a home closer to them."
"We realized that there are a few wonderful neighborhoods that put a lot less strain on our finances than where we were initially looking."
As painful as it is to delay feeling settled in a home, this "pain" pales in comparison to settling in the wrong home.
As painful as it is to "move twice", this "pain" pales in comparison to moving once and second-guessing your decision until you move again.
As painful as it is to live in a "less-than-ideal neighborhood" for a year or two, this "pain" pales in comparison to locking in a mortgage in the wrong neighborhood.
As painful as it is to meet people while living in a temporary location, this "pain" pales in comparison to having your home limit who you will meet.
As painful as it is to "throw money down the drain" with a rent payment, this "pain" pales in comparison to building equity in a home that doesn't match the life you want to lead.
Because of the taboo nature of money and our feelings towards money, I suspect there are plenty of people who feel the regret side of all of these examples, but struggle to name it and certainly struggle to share it.
Renting doesn’t mean you can’t afford a home and I don't think it means your unsettled either.
In a sneaky way, renting buys time, options, and flexibility that ensure we're making decisions about our money instead of money (and our home purchase!) making our decisions for us.
25 | Homebuying Series: Wealth Is What You Don’t See
An excerpt from The Psychology of Money by Morgan Housel...
We should be careful to define the difference between wealthy and rich. It is more than semantics. Not knowing the difference is a source of countless poor money decisions.
Rich is a current income. Someone driving a $100,000 car is almost certainly rich, because even if they purchased the car with debt you need a certain level of income to afford the monthly payment. Same with those who live in big homes. It’s not hard to spot rich people. They often go out of their way to make themselves known.
But wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later. Its value lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.
Diet and exercise offer a useful analogy. Losing weight is notoriously hard, even among those putting in the work of vigorous exercise. In his book The Body, Bill Bryson explains why:
"One study in America found that people overestimate the number of calories they burned in a workout by a factor of four. They also then consumed, on average, about twice as many calories as they had just burned off … the fact is, you can quickly undo a lot of exercise by eating a lot of food, and most of us do."
Exercise is like being rich. You think, “I did the work and I now deserve to treat myself to a big meal.” Wealth is turning down that treat meal and actually burning net calories. It’s hard, and requires self-control. But it creates a gap between what you could do and what you choose to do that accrues to you over time.
The problem for many of us is that it is easy to find rich role models. It’s harder to find wealthy ones because by definition their success is more hidden.
There are, of course, wealthy people who also spend a lot of money on stuff. But even in those cases what we see is their richness, not their wealth. We see the cars they chose to buy and perhaps the school they choose to send their kids to. We don’t see the savings, retirement accounts, or investment portfolios. We see the homes they bought, not the homes they could have bought had they stretched themselves thin.
The danger here is that I think most people, deep down, want to be wealthy. They want freedom and flexibility, which is what financial assets not yet spent can give you. But it is so ingrained in us that to have money is to spend money that we don’t get to see the restraint it takes to actually be wealthy. And since we can’t see it, it’s hard to learn about it.
People are good at learning by imitation. But the hidden nature of wealth makes it hard to imitate others and learn from their ways.
The world is filled with people who look modest but are actually wealthy and people who look rich who live at the razor’s edge of insolvency. Keep this in mind when quickly judging others’ success and setting your own goals.
24 | Homebuying Series: Zillow is Not Your Friend
Comedy is both useful and funny because it says things that can be incredibly challenging to say without humor.
Thanks to Saturday Night Live, the following video probably communicates enough on its own. Please note this video could be offensive to some people and perceived as NSFW.
Browsing Zillow, particularly if you’re not actually on a house hunt or haven’t defined what you’re looking for, is a slippery slope when it comes to our collective relationships with money and contentment.
Browser beware!
23 | Homebuying Series: Hospitality 101
My wife came across this incredible reflection on using a home and caring for others.
When someone leaves your home, will they feel better or worse about themselves?
This feels like a good litmus test for whether your home is an avenue for friendship or a barrier to friendship.
22 | Homebuying Series: Trading Floor Space for Friendship
“If you have a crisis in your life, you'll notice something. It won't be your Twitter followers who come to sit with you. It won't be your Facebook friends who help you turn it round. It'll be your flesh and blood friends who you have deep and nuanced and textured, face-to-face relationships with, and there's a study I learned about from Bill McKibben, the environmental writer, that I think tells us a lot about this. It looked at the number of close friends the average American believes they can call on in a crisis.That number has been declining steadily since the 1950s. The amount of floor space an individual has in their home has been steadily increasing, and I think that's like a metaphor for the choice we've made as a culture. We've traded floorspace for friends, we've traded stuff for connections, and the result is we are one of the loneliest societies there has ever been.” -Excerpt from this Ted Talk by Johann Hari
This felt heavy the first time I heard it, but if you look around, I think you might notice it too.
There are a bunch of big homes and there are a bunch of lonely people.
I don't believe this is a condemnation of big homes and I don't believe home size explains loneliness.
I do think it is a call to acknowledge that floor space does not correlate with quantity or depth of relationships and that the allure of a bigger home isn't always what it's cracked up to be.
A pastor friend of mine has observed a similar patter in countless families "searching for more space". Moves away from a specific neighborhood or community in search of square footage that have led to some mixture of increased loneliness, anxiety, and regret.
Because I want to be clear, I'll say it again - I don't believe this means big homes are bad and small homes are good, but double or triple checking our priorities with a home decision feels uber-critical.
If floor space is the primary driver behind a home decision, it might be a red flag worth noticing.
Instead of laboring over the ideal amount of floor space and how you'll use it, maybe time is better spent evaluating whether your home is an avenue for friendship or a barrier to friendship.
21 | Homebuying Series: 1 decision that makes 1,000 decisions
I first came across the concept of "1 decision that makes 1,000 decisions" reading the book Essentialism: The Disciplined Pursuit of Less by Greg McKeown.
I think there are at least two sides to this concept when it comes to buying a home.
The first side is related to relationships.
The proximity and convenience of interacting with neighbors is hard to beat and hard to avoid.
Whether you’re leaving in the morning, coming home in the evening, going for a walk, playing at the local park, or sitting on your porch, you’re going to see one another living ordinary, daily life.
Your neighbors will rub off on you in more ways than you can imagine – how they interact with you and others, how they spend money, where they go to school, and on and on.
Locking in one decision on a home is like locking in 1,000 decisions on who will influence your ordinary, daily life.
The second side is related to financial freedom and flexibility.
A house is one of a few big-ticket spending items that actually moves the needle on household cash flow.
For every $50,000 spent on a home, there are 10,000 lattes or 500 date nights or 100 UNC-Duke games or 50 weekend getaways or 5 trips of a lifetime that could be pursued instead.
I realize I am not accounting for financing a house over 30 years or the interest paid or the tax deduction. Please forgive me.
I don’t think that changes the point – one $50,000 decision on a home can be responsible for an abundance or scarcity mindset on 1,000 other decisions that add the color to life.
20 | Homebuying Series: The Myth of the “Perfect” Home
I don’t think it is possible to find a perfect home. I think homes begin to feel special, unique, and have hints of “perfection” after you have lived in them for many years and decades.
The attributes of a “perfect” home are not the features of the structure – the Instagram-able kitchen or master bath or the landscaped yard.
Beyond a relatively basic level of size and comfort, the attributes of a “perfect” home are only the memories that are created and the relationships that are nurtured within the home.
Social media, magazines, and people around us lead us to believe that the features enhance or accentuate memories and relationships, but I just don’t think that’s true.
If it were true, the people with the nicest homes would have the best memories, the healthiest relationships, and the most contentment. I don’t think it takes long to notice that this isn’t the case.
Think about it for yourself - are your fondest life memories and most formative experiences a result of the luxuriousness of the physical location where they happened?
19 | Are You Saying It's Going to Keep Growing?
In a past conversation, I was helping someone get their feet back under them after a significant life crisis.
We spent a few months building a relationship and slowly organizing all the pieces of their personal financial situation.
Eventually, we got to the point that we needed to talk about investments.
Sadly, our team's canned investment conversation had a lot of financial jargon - equity allocation, cost basis, unrealized gains and losses, emerging market exposure, credit risk, fund manager, etc.
Even more sadly, the conversation included a PDF document that had more numbers than you would hope to see in a lifetime much less in a single hour.
After chatting through the detailed investment plan, we opened it up to questions to be sure we were all on the same page.
Question #1...
"I don't want to ask a stupid question, but are you saying it [the investment account] is going to keep growing?"
Not a joke - that really was the first question.
Chuckle all you want, but I have found there are no stupid questions when it comes to money.
Everyone, I mean EVERYONE, has the same questions whether they are willing to ask them or not and those questions are almost always of the "what-does-this-mean-for-my-life" variety and not the "can-you-clarify-what-you-mean-by-downside-capture" variety.
Shame on me for being part of a presentation that was so complex that someone had to clarify whether we hoped the investments would continue to grow!
Frankly, I think this specific conversation was just one exceptionally good example of what happens a million times a month in a typical annual investment review.
I think some people feel obligated to nod along and "track with the conversation" because it's their responsibility to "keep up with the finances" and make their family's biggest financial decisions. The nitty-gritty investment details must be part of this job description...right?!?
I think others are checked out within a couple of minutes or before the conversation even starts because it doesn't make any sense and certainly has nothing to do with their day-to-day experience with money. The nitty-gritty investment details are way too complex...I guess we'll never be "good with money"?!?
Either way, I don't think the investment review does much to address the uneasy and overwhelmed feeling that comes when most people think about money - that feeling might even be more acute than it was before the meeting started.
For too long, investments have served as a gatekeeper to real financial advice. Investments are important, but they are a fraction of our relationship with money.
When it comes to investments, I think it's OK if all you really want to know is that we're hoping they'll continue to grow.
18 | Barometer on Burnout Risk
Burnout is dangerous.
Some of the consequences are obvious and easy to measure - the potential loss of an income stream, the stress caused by an infinite email stream, or the persistent feeling of overwhelm as you start another day.
Some of the consequences are deceptive and maybe impossible to measure - the impact of bitterness towards your colleagues, apathy towards your work, or future options slowly falling off the table.
Acknowledging it's dangerous is a start. Keeping tabs on it seems like an integral skill.
It's hard to measure, because it's the kind of line you can't see until you've crossed it.
Counting down to the weekend every Monday morning feels like burn-out risk is trending higher.
Pleasure reading about "work" topics during free time feels like burn-out risk is trending lower.
When you find yourself saying "I deserve this" as you sign off and head on vacation it might be trending higher.
These aren't the kinds of things that get fixed overnight, but they can change over years.
It's easy to think a 10% raise is the highest impact thing you can do for your finances.
It's easy to measure. It's easy to see when it hits the bank account. It might be in your control. Like ibuprofen, it relieves pain...temporarily.
A 10% reduction in burnout risk is a whole different category.
You might feel it immediately or maybe you won't.
It's certainly not hitting a traditional bank account.
But...it might help you discover something that you hope you get to do forever or breathe life into a stale routine or provide the opportunity to connect with family and friends that hasn't existed before.
You’ll never be able to measure any of these things, but maybe that’s a sign that they’re worth it.
Additional Reading:
"You Better Love This" by Morgan Housel
"Mexican Fisherman and the Investment Banker" by Unknown Author
17 | UNC vs. Duke and The Agony of Defeat
The losses drain the emotional tank more than the wins fill it up. Professional psychologists call it "loss aversion".
What a twisted psychological reality. That's not how it's supposed to work...right!?!
Enter the 2022 Final Four.
In my years at UNC-Chapel Hill and even after, I can remember speculating with friends on the possibility of one day meeting Duke in the NCAA Tournament...
Can you imagine the stakes and the environment? Can you imagine the bragging rights if we won? Can you imagine having the upper hand in the rivalry forever?
Sure enough in March of 2022, Duke beat Arkansas on Saturday and the Tar Heels beat St. Peter's on Sunday and CBS flashed the bracket onto the screen - UNC vs. Duke in the National Semifinals on April 2, 2022.
Within minutes of the final buzzer that Sunday night, the feelings of theoretical excitement and possibility pivoted almost instantly to...
What if we lose? Have the stakes grown too large? Will any game after this one ever mean anything?
If you think my feelings were unique, think again. Here is the Wall Street Journal's take on it.
Remember what we said at the start - the losses drain the emotional tank more than the wins fill it up.
We're not saying the losses count differently than the wins, they just have an out-sized emotional impact.
The emotions as a Tar Heel fan aren't very different from those as an investor.
The gains feel good when they happen, but the emotional high pales in comparison to the pit in your stomach when the losses start to add up.
The losses are part of the game. Unavoidable, painful, and hard to predict exactly how they will feel when they happen.
Recognizing that the feelings are inherent to the experience is the only way you can have enough courage, patience, and perseverance to play and eventually win the game.
Yes, the Tar Heels won the game, 81-77. To this day, it is probably the best game I have ever watched. You can watch the final three and a half minutes here if you'd like.
With that said, the Tar Heels have lost plenty of other games that have stung. Following those losses, there's been some amount of sulking, but there have also been conversations with fellow Tar Heels to acknowledge the feelings, highlight the silver linings, dream about where we go from here, and strategize about how we’ll win the next one.
I think that’s a pretty good blueprint for how to handle investment losses too.
16 | The Clear "Why"
This post is Part 3 of 3 of the “Clarifying Our 'Why' Instead of Searching for Tactics” series.
It might seem like I’m suggesting being reckless and oblivious to tactics - that couldn’t be further from the case.
The tactics matter but only to the degree that we've decided that we're committed to what we're trying to accomplish.
The specific way you finance a home or home improvement pales in comparison to the impact of choosing a specific neighborhood, honing in on a specific price point, or tying up a lot of flexibility into a down payment or ongoing mortgage payment.
The specific accounts you use to save will have minimal to no impact unless you're simultaneously saving enough to keep your lifestyle expectations in check.
The specific investments you use will have minimal to no impact unless you're able to stay invested when you see someone else outperform or another bubble begin to burst.
Without clear "Whys", the tactics - every single one of them - are sirens on a rocky shore tempting us to get distracted from the things that actually matter to us.
Clear "Whys" ensure that we remember why we are using money in the first place.
Clear "Whys" allow us to see something else that looks awesome on the surface and acknowledge that we don't have all the context or knowledge to realize that it's not as cool as it may seem.
Clear "Whys" allow us to step into an uncertain future knowing that some decisions may have bad outcomes, but that doesn't mean they were bad decisions.
Clear "Whys" allow us to recognize when a specific vocation or career trajectory is no longer aligned with what we desire at our core.
Clear "Whys" allow us to tweak our spending when our most deeply held desires are in jeopardy of not being accomplished.
Clear "Whys" ensure that we are making decisions about our money instead of having money (and tactics!) make our decisions for us.
15 | Thanks, But No Thanks, Maslow!
This post is Part 2 of 3 of the “Clarifying Our 'Why' Instead of Searching for Tactics” series.
You might be tempted to say, "Those are the basic tactics, there have to be more sophisticated tactics that are the real secret."
Nope.
The next set of tactics is even more discouraging because there is plenty of writing about them not being quite as impactful as they seem on the surface.
Tax-loss harvesting. Useful in some specific cases, certainly not all cases. See here. Sorry, Wealthfront.
Asset location. Theoretically useful, but a bit clunky and overrated when it comes to optics and logistics. See here. Thank you, Betterment.
Roth dollars instead of taxable dollars. Phenomenal benefit that is worth pursuing, but not a unicorn. See here.
Unique investment options. This is probably my favorite, because a link isn't even necessary. The average 401(k) offers between 8 and 12 fund options. There are around 10,000 mutual funds or exchange-traded funds (ETFs) in the United States. If the specific investment option was that important, don't you think we would have worked harder as a society to get the average person access to more than 0.001% of available funds for their largest bucket of traditional investments? The specific investment option certainly isn't the secret.
The endless search for tactics feels like it has to be a more productive use of time than trusting relatively simple rules of thumb and getting clearer on why we're building financial wealth in the first place.
I think the problem is that underneath the search for tactics is the underlying assumption that "more" is always better. "More" will fix everything, but "more" comes up empty when it is done without purpose.
Our typical use of next-level tactics is akin to leaping up Maslow's hierarchy of needs pyramid before we've addressed the basic physiological needs of food, shelter, and water.
In the case of personal finances, the base of the pyramid isn't sophisticated tactics, hacks, or tricks. I think the basic physiological needs equivalent is a clear "why".
14 | The Solution You're (Not) Missing
This post is Part 1 of 3 of the “Clarifying Our 'Why' Instead of Searching for Tactics” series.
It's easy to think that success with money is a matter of finding the right tactics.
A perfect combination of all the proper tips and tricks organized and assembled to achieve financial nirvana.
Google certainly contains sound tactical advice.
"How much cash should I have in my emergency fund?". See here.
"Which debt should I pay down first?". See here.
"How much should I be saving?". See here.
"Should I use a Traditional IRA or a Roth IRA?". See here.
"How should I invest my money?". See here.
All the answers are there. All the answers are sound (except the last one that is comically misleading!), but they don't seem to resolve that uncertain feeling in your gut when it comes to money.
Tactics certainly don't address how the way we generate income impacts the way we spend our time.
Tactics don't clarify how the way we spend constantly changes our baseline expectations and experience of life.
Tactics don't ensure that what we have set aside is accessible and wise to use the moment it's needed.
Tactics don't come anywhere close to helping us have more patience or less FOMO when we're investing.
There are plenty of other things that tactics don't do, but it's hard to remember this when tactics are constantly marketed as the solution that you're missing.
13 | Do You Trust Me?
In a recent conversation, my wife and I were reflecting on the realities of dividing roles within our household.
In this particular season, my work generates the majority of our household income and my wife's work is caring for our three young children.
Both roles are integral to how our family functions every single day. Both roles also require a high level of trust that the other person is playing their role to the best of their abilities.
One tension that always exists is how the breadwinner spends time at work, particularly on days that are challenging on the home front.
Some days I get home later than expected. Some days I go out to lunch with co-workers who fortunately are also close friends - the balance of work and fun can get pretty blurry. Some days I am still processing the day while we're sitting at the dinner table as a family.
The temptation is to believe that the breadwinner wastes time or prioritizes the wrong things or actively chooses to be at work instead of at home.
As we reflected, I was grateful for the trust and benefit of the doubt that is extended to me and realized that the exact same tension exists with our household spending.
In our particular case, my wife spends the majority of our household dollars. Not because she is a big spender, but because in this season she keeps our home life functioning.
Some days $500 gets spent at Costco. Some days a flurry of Amazon packages land on our doorstep. Some days there is a new lamp or picture frame or storage bin in a corner of the house.
The temptation is to believe that the spender wastes dollars or prioritizes the wrong things or actively chooses to spend instead of save.
The temptations are eerily similar. The accountability demanded and trust required are the exact same regardless of your role.
Do you trust me?
12 | A Shortcut to Financial Literacy
Here's an idea for a way to improve financial literacy quickly.
Make it easier to be literate with a mandatory cover page for all bank and investment statements.
Disclose, polish, detail, and market the heck out of every additional page, but give me one sheet that allows for apples-to-apples comparisons across firm, account type, and product type.
Here it is...
Date Range
Beginning Balance
Contributions
Withdrawals
Dividends
Interest
Fees (broken out by investment fees, advice fees, and added features fees)
Gain or loss
Ending Balance
Portion that is cash
Portion that is accessible today
Portion that is accessible in 1 year
Portion that is accessible in 5 years
Portion that is accessible in 10 years
That's it.
Many will argue that more detail is necessary - it's not.
I don't want a percentage return calculation - you spend dollars, not percentages.
I don't want asset allocation, cost basis, realized or unrealized gains on the cover sheet.
Leave the overwhelming and disorienting details for Page 2+.
I just want dollar amounts assigning responsibility where it belongs.
Simplicity that someone with a high school diploma could understand and use to compare to the next statement.
Instead of continuing to make rules that increase complexity and overhead, give us a single sheet that will weed out bad players fast.
No nonsense, no deflecting, just clarity and a buck that stops on Page 1.
The capability is there at every financial services firm. People to audit it every so often are there too.
Let's get started. Then let's apply the same idea to debt.