Spend less. Invest. Insure. That’s it.
We know about funky junky food, trendy diets, and how to lose weight instantly! We also know they are not sustainable or just don’t work. It’s because the basic principles are being ignored.
There are equally funky junky, trendy financial equivalents: the free lunch, message board fueled speculation, insurance sold as an investment, options trading, the come-hither call of meme stonks, leverage, blah, blah. As with nutrition, basic principles are being ignored.
Last week, Josh Brown, the Reformed Broker, put down a great piece titled How David Beats Goliath in Real Life. It’s about what the winners do. They’re not doing everything all the time, but certainly doing a few in any given moment. These are the qualities of nutritious personal finance. Here’s what the winners do:
· Invest time and energy in their work, and enjoy free time with family and friends.
· Decide what it means to succeed, then spend time with people who have already succeeded.
· Read books and articles that force in-depth, critical thinking instead of social media feeds. They don’t get gaslit by billionaires on Twitter who don’t even know or care about them.
· Focus on what they can control– how much they save and spend– and then allocate the rest to investing.
· Take advantage of tax-deferred accounts whenever possible.
· Diversify broadly and have the humility to accept the inherent unpredictability of the future.
· Don’t pay excessive fees or buy stuff based on internet hype, newsletter drivel, or the predictions of charlatans.
· Avoid wasting time on provocative political arguments and conspiracy theories. They're usually out in their communities doing valuable work.
· Understand the Paradox of Dumb Money, i.e., the moment it realizes it is the dumb money, it ceases to be the dumb money.
· Don’t tie themselves to meaningless standards like 30-day returns, quarterly performance, ranking vs peers, over- and underweights relative to an index and so on. None of that matters. No one outside of finance cares.
· Care about their own financial situation, not what they think someone thinks of them, or what their neighbors seem to be doing. Wealth is what you don't see and there are no incentives for claiming firepower.
· Know that their game has a high probability of success.
So, we present ourselves as financial dieticians, like this short video describes. Let us know how we can help.
Jim Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315
Harry does a great job of explaining important details as well as providing the numbers.
The Finance Buff
