197 | No Antidotes

There are no trade secrets.

Or silver bullets.

Or wizards behind the curtain.

The trouble is that we keep hoping a special investment or slick tool or fancy calculation will set us free.

But these things aren’t the antidote for all our uneasy feelings about money.

They're just saturating the market and our minds and leaving us without a clue of how to apply them to our lives.

It's not the best product, tool, or calculation, that we need.

We need help putting a stake in the ground, taking a couple steps, reflecting on what happened, and then repeating that cycle...

Forever.

196 | Would You Manage Investments?

I don't manage investments.

Of course, I give advice on investments - advice that rivals (and beats!) folks that manage investments.

But I don't manage investments.

If I manage investments, the investment strategy becomes a golden calf.

If I manage investments, the cost of advice skyrockets as you save.

If I manage investments, you pay way more or way less than your neighbor will pay.

If I manage investments, we're going to spend a lot of time doing things that can be done for us for free.

If I manage investments, inevitably I'll only help the wealthiest get wealthier.

If I manage investments, I limit who I can help before they've even raised their hand.

If I manage investments, I ignore what actually changes people's relationship with money.

Now that I’ve laid it all out, would you manage investments?

195 | Financially Savvy

Some people think it’s making a lot of money.

Some would say it's being frugal.

Others would consider someone who gave an in-depth market update or saved you taxes savvy.

I’m convinced that financial savvy is nothing more than knowing how to spend less than you make through various seasons of life and circumstances...

And then being able to tell the story of why you spent more than you made in the seasons that it inevitably happens.

The first part, "spending less than you make", is proof to ourselves that we know how to live within our means.

The second part, "being able to tell the story", is proof to ourselves that we're tuned into why money is going out the door and where it's going.

Once you've figured out the first part, you've mastered the technical side of finance.

But mastering the second part, is where we begin to refine the relationship that we have with money.

Once you can do both, you're savvy.

194 | Flipping the Script

Details obscure.

Complexity confuses.

Tactics tempt.

Perfection paralyzes.

Taboo intimidates.

Certainty eludes.

And "more" often misses the mark.

While…

Zooming out brings clarity.

Simplicity fosters understanding.

Clarifying "why" establishes purpose.

Tradeoffs trigger action.

Transparency combats fear.

Resilience is often in reach.

And "better" tends to deliver.

193 | The Spending Tracking Spectrum: Final Reminders

If a level isn't serving you, then move back to a previous level.

Move between levels as seasons of life change.

Or stay at one level forever.

Do what feels good to you as long as you're moving up the hierarchy of insight.

From data, "here is the list of things we paid for".

To information, "here are some themes of our spending".

To knowledge, "this spending moves the needle the most, so it should get the most attention".

To understanding, "this is why we spent the way we did and we would or wouldn't do it again."

To wisdom, "our spending reflects who we want to be, or it doesn't, so we will change it."

Because if we aren't spending well, what's the point of making and saving money in the first place?

192 | The Spending Tracking Spectrum: Level 5

We'll call this the "Buffet Level" because you can get whatever you want and your plate can be unique to you.

Within the categories of Level 4, you can make all the subcategories your heart (or stomach!) desires.

But we have to be careful - most "budgeting" efforts come to die at Level 5 because we treat it like Level 1.

“We need to budget better.”

“If we just had a budget, then I’d know what I could spend, and I’d do it.”

“How does our spending compare to other people?”

So we find ourselves diving in at Level 5 before we've perfected the other four.

And then we get discouraged because we "fail" or we accumulate a ton of data that never turns into wisdom.

Which leads to hopelessness and finger-pointing and a host of other things.

Which leaves us with a trunk full of emotionally-charged spending baggage...forever.

But if we proceed with care, after perfecting the other four levels, then the freedom of Level 5 can be real.

A freedom that makes it easy to pivot because you're grounded in reality.

A sneakier freedom from choosing to spend less in one area, so you don't have to spend less in every area.

And sometimes even a freedom that comes from seeing that you're spending as well as you can in a particular season.

Of course, Level 5 is not the holy grail of tracking spending, but only one point on a spectrum of spending well.

191 | The Spending Tracking Spectrum: Level 4

We'll call this the "Storytelling Level" because there's finally enough detail to tell a compelling story about where our money goes.

This level sharpens the focus of Level 3 without the unwieldiness of Level 5.

And it's an ideal landing spot if you want to be more intentional.

The outcome will be something like...

I spent $6,500 this month – $800 was taxes, $900 was giving, $100 was professional fees, $500 was medical, $1,500 was fixed home costs, $300 was utilities, $300 was car, $500 was variable home costs, $900 was food, $300 was kids, $200 was gifts, $100 was fun, and $100 was travel.

Of course it's more effort than Level 3 - because of the categories.

But it's also more informative than Level 3 - because of the categories.

The tiny bit of categorizing pushes us to reflect on contentment, not just viability.

Because we're capturing the character of spending, not just the amount.

This is the first level where the money story in our head begins to interact with the money story on paper.

Which can affirm where we're heading or help turn us around.

190 | The Spending Tracking Spectrum: Level 3

We’ll call this the “Rudy Level” because we’ve moved from watching from the sidelines to playing the game.

There's a chance you might need some "walk-on" energy to make the leap to this level too.

This is the first level with groups, but it's only three - enough to help us acknowledge what we can and can’t control without torpedoing our efforts.

The outcome will be something like…

I spent $6,500 this month – $1,500 was income dependent, $2,800 was less discretionary, and $2,200 was more discretionary.

The first group is spending that increases when you make more money.

For us, these are taxes, giving, and professional fees.

You don't need to beat yourself up when you make more money, you're more generous, or you invest in your career.

The second group is spending that's fairly set in stone or would be painful to change in a big way.

For us, these are medical, some home costs (mortgage, property taxes, and home insurance), utilities, and car.

A handful of decisions in these groups tend to cement lifestyle expectations. And another handful are just a result of how the cookie crumbles.

The third group is spending that is the simplest to change and where most of the color of life resides.

For us, these are all the other home costs, food, kids, gifts, fun, and travel.

Often, these are small, but common purchases. And they tend to differ the most from year to year as preferences and seasons of life change.

At this level, we're more focused than Level 1 and 2 without the effort of Level 4 and 5 - a fine place to land if you’re trying to make sense of ballooning spending.

189 | The Spending Tracking Spectrum: Level 2

We’ll call this the “Fisherman Level” because we’re only talking about the big ones.

Glance through the transactions from Level 1 and begin to note the largest ones.

The outcome will be something like…

I spent $6,500 this month – $1,500 was the mortgage, $500 was a car repair, $800 were flights for a weekend trip, so everything else was $3,700.

Allow your natural curiosity to govern how far you go, but know that the risk here is getting lost in the weeds.

As you glance, you’ll start to appreciate what’s actually moving the needle and slowly whittle down the black hole of "everything else".

Going forward, notice how the total changes. Notice the individual items you've highlighted in prior months. Even notice how “everything else” is changing each month too.

For most people, this is as far as the venture needs to go because further adventure will lead to injury.

188 | The Spending Tracking Spectrum: Level 1

We'll call this the "Caveman Level" because there is so little to track that it could go on a rock wall.

Add up the withdrawals from any active bank accounts (this will inevitably include what you paid towards any credit cards) for the past month.

The outcome will be something like...

I spent $6,500 this month.

Notice whether it feels like a number that is larger or smaller than you expected.

If you’re feeling wild, glance at some of the bigger transactions and ask yourself, “Would I spend it again under the same circumstances?”.

Remembering that "under the same circumstances" is not the same as "based on what I know now".

Pat yourself on the back because Level 1 is a higher level of tracking than most people.

Repeat this for as many months as it takes for it to feel easy and constructive.

If this is the highest level you reach, it still counts as tracking your spending.

187 | The Spending Tracking Spectrum: Richard's Rules

Having no system for tracking spending tends to "work" for two groups of people:

• Those with income that dramatically exceeds their spending, OR
• People who are resigned to being perpetually stressed out about finances.

For the first group, the level of income tends to address concerns of viability, but not necessarily contentment.

For the second group, the experience is as peaceful and predictable as driving a car with a broken fuel gauge.

But tracking spending is not the same as budgeting. It's less emotional and more practical.

A few basic rules can allow you to track without losing your mind...or a relationship.

Richard’s Rules

1. Start with Level 1 and only proceed to the next level once you feel like a master of the current level.
2. Never skip a level - most frustration comes from trying Level 4 or 5 when Level 1 or 2 is all you need.
3. If you progress to a level and become overwhelmed, then return to your prior level knowing that you've found the bookkeeping equivalent of your favorite cozy sweatshirt.

Richard's Reminders

• Any tracking tool will work – usually the hunt for the best tool is a clever way to procrastinate, AND
• Reflecting on...monthly spending is mostly useless, annual spending is interesting, and multiple years begins to tell a story.

186 | The Spending Tracking Spectrum

"We need to budget better."

"If we just had a budget, then I'd know what I could spend, and I'd do it."

"How does our spending compare to other people?"

If I had a nickel, for the number of times I've heard those phrases...

But I don't think any of them are the answer.

They are too black and white. Too arbitrary. Too disconnected from reality. Too one-size-fits-all. Too lifeless.

Not only is spending well hard to do, but bad spending tends to undermine all the effort that went into acquiring the funds in the first place.

So, of course, it's a never-ending search for an answer - for everyone.

We can speculate for a long time, but without a doubt, a large part of the answer comes down to some system of tracking, not so you can budget, but so you can reflect.

Because tracking and reflection are the only way to address the two sides of the spending coin - viability and contentment.

But we must be careful and intentional with how we go about it.

Because for some people, tracking spending is the thing that sets them free.

And for others, it's the thing that stops them in their tracks…forever.

Tell me there's nuance without telling me there's nuance.

And where there is nuance, there is a spectrum.

And as long as you're on the spectrum then you can spend well.

185 | Unlocking Golden Handcuffs

If you spend all your income, then those handcuffs are solid gold, and the key is going to be hard to find.

But if you've been able to spend less than you've made, the key is probably in your pocket.

Financially, the key isn't much more than building up some cash, and pursuing a level of income that comes close to covering your spending (no dramatic lifestyle cuts needed, but probably no big additions for a brief period too!).

A few break-even years never killed anyone, particularly when you move from something you've grown to hate into something that's closer to what you love.

Emotionally, it's going to be recalibrating to account balances that feel more like a glassy lake than an ocean that keeps delivering wave after wave of new funds with each payroll run.

And that's going to be the hard part - the feeling, not the funds - especially in a world that likes metrics and struggles with intangibles.

But if you cringe at the work you do.

Or the culture of your company is deteriorating.

Or your remote work arrangement has been pulled out from under you.

There's a pretty good chance that a few break-even years will do less harm than trying to gut it out with your hands behind your back.

184 | Spokes and Hubs

Investment management. Insurance products. Tax planning.

These are the spokes that our industry has turned into hubs of our relationship with money.

By marketing them. By charging for them. By discussing them ad nauseam. By making them more complicated than they ever needed to be.

When you try to make a spoke the hub, the bike won’t go.

That’s why we still struggle to answer the timeless, nagging questions…

What counts as progress?

Am I being responsible?

Am I doing this the right way?

How will I know when I have enough?

What does financial independence feel like?

We can answer these questions when we continually revisit where we’ve been, where we are, and where we’re trying to go.

We need the right hub, so the spokes can be spokes.

183 | A Couple Questions on Second Homes

We all think a second home is about the numbers, but that’s maybe 10% or 20% of the conversation.

A larger chunk of the conversation revolves around the people in your life and your calendar.

How will it impact your existing community?

And I’m not referring to all the people you’ll be able to host, but more so the relationships at risk of being diluted.

Two locations inevitably mean two communities which means both will never be as deep as one community would be.

How will it impact the way you spend your time?

And I’m not referring to all the ways you’ll get to use the new home, but the existing activities and hobbies that will be cannibalized by the new venue.

Even with a time traveling machine, activities in the pre-second home life are going to be squeezed into tighter windows or struck from the calendar regardless of our best efforts to preserve them.

Whether we like it or not, a second home tends to be an either/or more than a both/and.

Not inherently good or bad - just helpful to know when you’re thinking about buying.

182 | Creating Space

Everything you need is at your fingertips…

Good questions to reflect on.

Endless lists of pros and cons compiled by strangers.

And all the potential tactics your heart could desire.

But access to these things isn’t valuable.

The value is in creating space to actually reflect on the questions, in order to personalize the pros and cons, which inevitably clarifies if any tactics are needed.

Too often, we chase tactics based on someone else’s pros and cons without creating the space to reflect on the question.

181 | The Primary Question of Each Recession

The stock market is a lot like humans - it’s not big on uncertainty.

When the future feels less certain, the stock market and its underlying businesses tend to decrease in value.

When the future feels more certain, they tend to increase in value.

Of course it's this way because “the stock market” is only the sum of humans’ perceived uncertainty about the well-being of the world’s businesses.

Most of the time, one person’s uncertainty is offset by another person’s certainty, so we get negligible changes in the value of the entire market.

But one or twice a decade, there are single questions that make almost everyone feel uncertain…

2022 - Were we too optimistic about our rebound from COVID?

2020 – How many people are going to die from COVID?

2008 – How many people made a bet on or were debtors to a bad mortgage?

2002 – How many companies do not have a viable business model?

Nearly 100% of the market decline in each of these seasons could be tied to our collective inability to answer these questions.

And the subsequent market rebounds happened as the answers to these questions became less squishy.

Not by coincidence, none of these questions had a thing to do with the next president, a change to tax code, or a Federal Reserve interest rate adjustment.

The next recession will likely be the next time we have an unanswerable question, it’s just hard to know the question before it’s asked.

180 | Perpetually Uncommitted

The holy grail in investing is a level of commitment that can see beyond benchmarks, novel products, and market forecasts.

A basic understanding and set of beliefs that underpin the way you've decided to invest that slowly reduces your desire to evaluate or even acknowledge alternatives.

Not like an ostrich with its head in the sand, but more like a spouse that stops evaluating candidates for marriage once they've said, "I do."

There's a freedom that comes from commitment.

And an anxious prison that comes from the endless search for something else.

Seeing a headline about the highest performing stock of the year - an invitation to de-commit.

Catching a bad market cycle in your first year with an advisor - an invitation to de-commit.

Presuming that someone's elevated lifestyle choices are a direct result of their investment savviness - an invitation to de-commit.

Seeing your account lag a benchmark, a friend, or a faulty expectation - an invitation to de-commit.

Just like a relationship, once we commit, there is peace of mind, freedom from second-guessing, grace for mishaps and disappointment, and compounding that begins to surpass all expectations.

That sounds like a good outcome.

179 | “He/She Takes Care of the Money”

So, you experience no financial stress?

No second guessing?

No disappointment?

No disorientation while searching for "enough"?

That feels unlikely.

There is no such thing as one person "taking care of the money".

Maybe one person is more curious - or feels more obligated - to engage in investment shop talk.

But if you spend money, then you are on the "care" team.

There's really no way around it, because our entire financial life is organized around a single, recurring experience.

To be able to spend money now or sometime down the road.

178 | Why So Serious?

The secrets to being good with money aren’t much more than…

Income that gets more fun to generate with each passing year.

Spending as much as you can on things you love and as little as possible on things you don’t.

Saving often enough to prove to yourself that you know how to live within your means.

Investing that cares for some basic principles and then is really patient.

Beyond that it’s mostly emotions, personal circumstances, and dealing with an uncertain future.

None of that requires a conference room. A market update. An investment product pitch. A special type of account. An insurance premium. Or a conversation that makes you feel lost.

We have made this whole money thing more serious than it needs to be.