Money Is Everything … Until You Master It. Then It’s Nothing at All.

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20 Responses

  1. Yes, all of this! Money makes the world go around, but being obsessed with it or ignoring it makes for a difficult life. I choose to master my finances on a daily basis and that ensures that I’m not worrying about it on a daily basis. It’s a great trade off. Fantastic post Joe with words that the world needs to hear!

  2. Arrgo says:

    Good stuff here Joe and all very true! From what I see most people are their own worst enemy when it comes to money. But when you break it all down its not really that complicated. Come up with a plan or system, stick with it, and fine tune as you go. And good comment about not letting money become the focal point of your life. Its important and has its place but you dont want to obsess over it. Dont let your net worth become your self worth. There is more to life than money.

  3. Part of this is that the financial services spends millions and millions of dollars trying to convince everyone that managing your money is too complicated for the individual investor, which is why you need the help of a professional advisor (for a small 1% fee of course!). Continuing your food analogy, it’s like when you see charts showing you that the government spends $5 million a year advertising good nutritional habits and the food industry spends $3 billion encouraging you to eat chips and drink soda (made up numbers, but you get the point). It’s not a fair fight. Once lawyers figure out that they’re being fleeced, they usually get pretty pissed and then figure out how to do it themselves. As you said, it’s not that difficult – particularly not for someone that’s already spent 3 years in law school earning a JD.

    • Joe Freedom says:

      Right on. And these are the stories that turn out GOOD (i.e., the ones that figure out they are being fleeced and get pissed and that motivates them to do it themselves). There are others that fall prey to elite-status thinking–the mindset that Buffett talks about when he says that modest-means people tend to take his advice and invest in low-cost index funds while the high-income crowd never does. The thinking goes “well, I’m a bigshot Biglaw partner making seven figures a year, surely I can get a higher return than all those saps investing in cheap-o funds with Vanguard.” Then they put their money with a high-cost hedge fund and never quite figure out how to determine whether they are or are not consistently keeping pace with the market after fees. I recently had a conversation with an ex-colleague who had always been a shrewd DIY-er, and I was shocked to hear that he had moved to a wealth-management firm. When I asked why he said that they could give him access to desirable hedge funds and private equity. This is a guy that has now been making seven figures for probably 7 years or so, and my conclusion is that he finally gave in to the elite-status mindset. And hey, maybe he wins the lottery and ends up in that very small group of investors that can consistently beat the market after fees going the ultra-active route.

  4. m says:

    I agree with Biglaw, on the idea that people try to make money management seem complicated. There are non-intuitive terms, lots of acronyms (IRAs, 529s, , ETFs, etc.) and lots of emotions around money. But the funny thing is, once you get a system (at work, I’d say a “process”) going, its pretty darn easy. And most of it can be setup such that its automatic.

    For me, I look at our finances, and question what is there to do on them? I track my spending monthly, do an occasional re-balance, and then just go for a bike ride.

    But people are drawn to things that are expensive, thinking they must be better. Wine is my favorite example. A great dinner party is to have 8-10 guests over and have everyone bring a bottle of wine with pre-set (randomly assigned) max prices (ie, $8, $12, $20 or $40)….then do a blind tasting. You’ll be amazed at the outcome!

    • Joe Freedom says:

      Yep. Money management is the paradigm of an industry that has experienced massive success by convincing the public that the subject matter is too complicated for them to deal with on their own. Once you cut through the acronyms and technical terminology and learn the basics of the tax landscape, you should be able to largely set it and forget it. Every once in a while there is a sea change–like say the recent tax legislation that may change some planning and strategy for some individuals–but other than those limited occasions, it should be kept simple (and largely forgotten after a solid plan is put in place).

  5. Xrayvsn says:

    Physicians are known for being awful with finances. Many years of education and none having to do with finance. As such, we are therefore huge targets for “financial advisors” as it is easy pickings for them dealing with these high income individuals.

    When I first started investing during residency my financial advisor (recommended by my CPA) put me in front-loaded high expense ratio mutual funds. It was only after I started self-educating that I discovered that I was getting fleeced and changed to index fund investing.

    Most people complain that they don’t have enough time to do manage their money. The simple fact is that by reading a finance book which can be done in less than a day, you can save yourself 100s of thousands of dollars. There is no better ROI than that.

  6. S.G. says:

    Sounds like you need to introduce your first friend to your third friend.

  7. Steveark says:

    I think the whistling past the graveyard analogy explains it more than anything else. Take exercise for instance, despite your discipline with a treadmill (Why not run outside for Pete’s sake, treadmills are soul sucking torture machines!) there are thousands of couch potatoes consuming nothing but fast food that will outlive you by twenty years or more. And there are thousands of people who do nothing to take care of their finances that will, either by earning more than they can spend or by some inheritance or other windfall, end up dwarfing your net worth. People like to assume that things like health and wealth will work out on their own and there is plenty of anecdotal evidence to support that theory if you only look at the few that prosper in spite of their behavior. Personally I run my 18 miles and do hours of other exercise each week and have my assets invested in a well diversified low fee portfolio because I do not consider myself to be lucky enough to rely on the kindness of fate. Good post, great advice.

  8. Lisa says:

    Great post! It aligns with my own money-management philosophy – do whatever it takes just so you don’t have to think about it as much anymore. I will say for anecdote #3, that I’m not going to go out of my way to find a financial adviser who is shy and afraid to put himself out there. I already get enough calls from the pushy people – I have no idea if the quiet guy is better and I feel like I have some familiarity with the people who hound me. Sad but true.

  9. Jon Sharpe says:

    Well said Joe! It still amazes me how many intelligent folks completely disregard their financial lives and just assume things will work out “like they’re supposed to.” My daughter just started college this year and you wouldn’t believe how many of her friends’ families are taking on six-figure debt to put their kids through school. In this day and age, college expenses should not come as a surprise to anyone!

    I couldn’t agree more with your comment about mastering money. Once you have a process in place, there’s actually nothing to do. If you’re doing it right, it’s boring and you have no money worries.

    After 17 years in consumer marketing, human psychology still continues to amaze me!

    • Joe Freedom says:

      Thanks Jon. Yes, as is probably obvious from the focus of my writings here, the psychology part of money is what fascinates me most! We make it so much more difficult than it needs to be.

  10. Janelle says:

    Would love to know your nerdy introverted friends contact info as I’m looking for a RIA and am an introverted nerd myself. That’s why I haven’t found an advisor I can trust yet. They either push mutual funds with high fees or know less than I do about finances which isn’t saying all that much as I’m a new investor.

    • Joe Freedom says:

      Hi Janelle. My first reaction when people talk about hiring an advisor (fiduciary RIA or otherwise), especially in the context of seeking help with investments, is to tell them they don’t need to. A lot of money is made by people that successfully convince others that investing is a super-complex game where you have to pay pros to get it right. I think that’s total BS, and I’ve written about it here and in other places on this site. And JL Collins wrote a book about the very simple approach to investing that should work for most of us (see my review of that book here). Three funds is really all that you need (domestic equity, foreign equity, and domestic bond). But I do understand that some people will be more comfortable working with an advisor (and may benefit from having someone there to help them stay the course when the seas get choppy). The individual I discuss in this post has since moved to a larger advisory firm (because he couldn’t generate enough business on his own), and I don’t think I’d recommend him today in light of the different standards that he works under at that firm. But I do know some others in various parts of the country that are worth their fees, so if you want some ideas send me a note through the contact form. Joe

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