Things Poor People Will Never Understand

Earlier this month, I saw an interesting headline reading "11 Things Poor People Will Never Understand About The World" that I expected to be a fascinating read, expecting it to twist the known habits that financially grounded individuals make that we have read thousands of times. Unfortunately, the majority of that article focused on the secret world of the rich, e.g. concierge services, renting celebrities, opting in or out of Forbes' wealthiest lists, without touching much (if at all) on where the financially illiterate population fail.

It inspired me to think of a few examples on my own that would more accurately live up to the headline.

*Know Thyself*

It is a cliché, but I watched a video from How Money Works on YouTube that concluded with a message about the importance of understanding your capabilities, your capacity and your limitations when it comes to professional and personal success. This aspect of "know thyself" is often ignored, especially in a social media world of generalized information perpetuating hustle culture and the power of positive thinking. It recaptured my common saying that "personal finance is personal." Yes, there are common grounds and a couple truisms (such as the more money you save and/or the more money you make equals the more money you will have).

For all the good that the power of positivity has brought certain people, there are cautionary tales severed from the mantra where people took on too much or set out to do the truly impossible. No amount of confidence will allow humans to fly. Likewise, all the logistics pointing to epic failures like Fyrefest, WeWork, Theranos or (most recently) OceanGate are insurmountable for that whole "fake it 'til you make it" ideology.

Individually, when an unprepared or incapable person seeks a life of wealth as the driver and enters a school of medicine to be a surgeon, that person is more likely to fall far short of their plan and end up deeply indebted in school loans. Comparatively, an average student who kept pace with the median income throughout a career and followed the recommended 15% savings into a basic index fund could end up in a better place, simply because they understood their own limitations without having to learn it through expensive lessons.

*Life is NOT Short*

This one harkens back to the 1999 film Magnolia where the wealthy but dying Earl Partridge (played by Jason Robards) lamented these words to his estranged son, Frank T.J. Mackey (portrayed by Tom Cruise). Time is a neutralizing currency, where everyone is entitled to the same 24 hours a day, irrespective of their wealth (or lack thereof), their age, or their individual traits. 

My generation was hounded with "Life is short" so heavily that I feel many received the wrong message. If life were short, then it would be much easier to endure discomfort when the promise of resting in peace is right around the corner. But "life is short" is too simple to be a truism. There are some people living every day as if it were their last who become exhausted and defeated. It would be like training for a marathon by learning to sprint. Life is not as short as this overused cliché may have promised some people, and those people need to prepare properly for life as a marathon.

*Sacrificing > Suffering*

Piggybacking off the prior message, not all discomfort is endured the same. There is a big difference between sacrificing and suffering. To borrow from Dave Ramsey, "Adults devise a plan and follow it; children do what feels good." That planning can be the difference between making sacrifices to build a better life and suffering through life's challenges. The quintessential book on this topic for many could be the 2002 classic "A Purpose-Driven Life" by Rick Warren.

This message was taught to most children in my generation through ants and a grasshopper. Ants spent their sunny days stockpiling necessities for a rainy day whereas the grasshopper capre diemed the day, spending the time doing what felt good. When the seasons changed, the sacrifices that the ants had made bypassed the suffering that the grasshopper endured. 

*Status Quo is NOT Static*

Personally, this one has driven me crazy when I hear my financially instable friends make plans that only resolves their current struggles. One of my favorite 1995 films was The Last Supper where the antagonist (at least, an antagonist to the main characters, but they were not the stereotypical protagonists) empathized with the struggles of the main characters by simply relating, "Life gets harder every day." I do not know where this message was lost on others, but so many people fail to realize the reality of emergencies or that struggles are inevitable. That whole "Why Do Bad Things Happen to Good People?" query is another thing that drives me crazy personally. As humans being, how is anyone too good for bad things? 

Alas, I love to say "Life only gets easier when you try harder." For the uninitiated, they might misunderstand that advise as personal slander. Like a guilty man disputing his weapon of choice in court. It is not to say that those without an easy life have not tried hard nor that life improves with a little more effort. My words were construed to be understood that life will only get easier when you constantly put forth more effort than life is hard.

*All Plans Require Maintenance*

Admittedly, this one could have been tied into the non-static status quo above, but I felt the reality that all plans requiring maintenance is an overlooked lesson worthy of a separate entry. This message could be a chorus at every business school. Business schools teach students a large array of metrics to monitor the evolution of plans and how to keep them from falling off the rails, even if it requires redirecting the plans to "stake where the puck will be." Those lessons also apply to life with very little modification.

While the whole Dave Ramsey mantra of adults making plans is undoubtedly true, the unspoken understanding about plans is that they rarely pan out as initially envisioned. Plans consistently require modifications, renewed strategies and other testing. Just as the status quo will always change, planning to restore the status quo is only a temporary fix. Eventually (and probably sooner than later), the status quo will be disrupted again. By planning to maintain status quo, you are limiting your room for growth. Financial success is grounded in growth. Just as we invest our excess savings to grow, we as people must find time for plans to grow professionally and personally, lest time passes us by.

*Waiting to Next Year Is an Insurmountable Financial Mistake*

I used to work in the call centers of a financial service provider overseeing employee retirement plans. A big part of our job was to explain these accounts to the participants, so they taught us exactly what to do with these accounts. Even still, an embarrassing number of employees did not invest in the company's employee retirement plan (myself included for many months). Despite this, I managed to explain to active participants how to invest. I had one memorable caller who asked me a common question, "when is the best time to invest." I am still proud of myself with my response, "Now. The best time to invest is always now. No one will ever know the ideal time to start investing, so it is more important to just start now so that you are already investing when the ideal time to invest occurs." 

When I teach Junior Achievement to high school seniors, one of the ideas in relation to investing that I reiterate is "if you wait until next year to start investing, you will never be as rich as you would be if you started today." This notion is the basis of compounding, which I describe as "the one exception to the rule that if it seems to good to be true, it is."

*Ignore your wealth*

I was thinking about this idea very recently. One of the secrets to my personal success was not a strategic forethought, but I only discovered its benefits as an afterthought. I surrounded myself with "starving artist" types, and the amount of money it saved me is incalculable. As life advice, this message would fail. No one should select their social circle by hanging out with poor people intentionality. In my case, I was drawn to the artist-type and lifestyle. Hanging out with local musicians and working with a local wrestling troupe were how I spent my late-20s and 30s. It was what I wanted to do and where I wanted to be. That said, the fact that my friends could not afford extravagant outings became a huge financial benefit for me. Ironically, most of the time I would spend the least at dinner, even though I unquestionably had the highest means within the group. In essence, we think of the "starving artist" as one who do not earn enough to afford big meals, but really, spending more than enough to keep you nourished is a spending choice, not a matter of income.

The message that could be useful advice here is to separate your wealth from your active accounts. I remember reading an article online from CNN or Newsweek after the Enron collapse of firsthand accounts of people who lost everything in its wake. The couple whose mistakes were apparent to all but them were the pair who said, "We did everything right. We only invested what we could afford to lose, and we made sure it was in a separate account." Whew, good for them! "But once we had accumulated a large sum, we started living a lifestyle that reflected it." To quote Charlie Brown, "AUGH!!" The ideas of only investing what you can afford to lose and living a lifestyle that reflect your wealth are mutually exclusive; you cannot have it both ways! 

The idea of "stealth wealth" has permeated the personal finance landscape so well that it now has that alliterate rhythmic reference. It is the notion that the most efficient way to have your money work hard for you is to leave that money alone to continue working. Micromanagers have a bad wrap in the workplace. Apply those criticisms to how you manage your finance. Hire the most efficient employees and just get out of their way. Invest in great investment vehicles, and just let them take you where you planned to go.

Worst Financial Advice

There is an old saying, which is not applicable to finance, "The road to Hell is paved with good intentions." The adage warns that having good intentions will not automatically synch up with the execution or results. Accordingly, there several piece of financial advice that make me laugh because when applied incorrectly or timed poorly, these nuggets of advice are better left unheard.

1. "Buy low; sell high"

Not all advice is equal

At best, this phrase is a simple answer for “how do you make money in the market?” As advice, it is virtually useless since it gives no meaningful instruction. At worst, the end result is constantly selling your winners to buy perennial losers.

2. "Never invest in something you don't understand"

If you learn by doing (as everyone does), then this advice leaves you nowhere to begin. You cannot understand the market or investments without being in them, which leaves nowhere to start. Even the most successful investors in the world understand how little sense the movement of the stock markets make.

3. "Time is money"

Neither is a renewable nor unlimited resource. There are certainly situations by which “time is money” is a reasonably adequate adage, but it is neither universally true nor good advice. Out of context and in the wrong minds, this phrase creates more confusion than clarity.

4. "Hope is not a strategy"

This can be a snarky response to hearing someone say “Here’s hoping.” Except, hope comes after putting a strategy in place, so this phrase can turn a wannabe soothsayer from a smartass into a dumbass quickly when used abundantly.

5. "If you do what you love, you'll never work a day in your life"

There is a small but important difference between this phrase and "If you love what you do, you'll never work a day in your life." The latter can be great advice for the right people. But the former advice could ensure financial ruin. If you grow up following this advice with poor execution, then it might as well be a cautionary tale, "if you only do what you love, then you'll never work a day in your life," because you are unproductive, selfish &/or immature. As Dave Ramsey (a man who seemingly loves what he does) loves to say, “Adults devise a plan and follow it; children do what feels good.”

BOOK REVIEW: "Everyday Millionaires" (2019)

I have listened to more Ramsey Solutions programming this year than I have throughout the rest of my life combined. As such, I have heard their constant references to the 10,000 millionaire survey that they conducted recently, rattling off numerous statistics repeatedly each week. It made me wonder whether the book "Everyday Millionaires" had more information than the same statistics provided on the show.

Specifically, I was curious whether introverts had an advantage in becoming millionaires. If "being weird" or rejecting the habit of "buying things that you do not really want with money that you do not really have to impress people that you do not really like" were keys to becoming a millionaire, then it seemed as though a disproportionate percent of millionaires might be introverts. To my delight, this answer was in the book and the numbers were very close. Of the 10,000 millionaires that they surveyed, 53% identified as introverts and 47% identified as extroverts (p.90). Granted, I was unable to ascertain whether this distinction aligned with Meyers-Briggs definitions of the terms or if it was self-reported. Regardless, it was interesting to get my answer, and I was surprised that it was so close!

The rest of the book is a quick read, especially for loyal listeners since they have heard most of it already or know where the material is going. Chris Hogan is a natural salesman, so his energy was a bit dialed down by the written word, but his pitch remains the same. There were some questionable promises made, such as paying off the house equates to a life of no more bills and not owing anything to anyone anything ever again (monthly utilities would still be due in a paid-off house, not to mention taxes, which he somewhat preemptively addressed while dismissing the fantasy that "financial freedom" alleviates a person from paying attention to their finances. (p.213-214).

Regardless, here are 20 of the most interesting quotes or other tidbits that I took away from reading over the past week:

(1) "I'm okay missing out on potential gains that could bring probable pain" (in short, the focus of an investment should be on its probable reward, not potential reward) (p.47)

(2) "If there's one thing I've learned from the millionaires we studied, it is that shortcuts are for suckers. The long road may not get you there as quickly as you ant, but it will get you there" (in short, if you don't work hard for your money, your money won't work hard for you) (p.58)

(3) "I know from experience that more (money) does not equal better (money), if you are not ready for it" (p.79)

(4) "Psychologist Rollo May once said, 'The opposite of courage is not cowardice, it's conformity'." (p.88)

(5) "Some people need to imagine a villain working against them to excuse their own failings or lack of motivation." They cannot (or won't) say, 'it's my fault I'm not winning' so they parrot the same tired old phrases they might have heard from their parents. There's a problem with this fallback position though. You'll never make any progress as long as you're making excuses." (p.89)

(6) There's a difference between "someone saying, "It can't be done" (and) someone saying, "You can't do it." (p.105) 

(7) Don't hide your mistakes, or hide from your mistakes (p.107, paraphrased)

(8) "In fact, 98% of (millionaires) say they actively integrate feedback from other people. Despite their success, they know they always have more to learn, and they look to a supportive network to teach them new things and encourage them along the way." (p.111)  

(9) "Sometimes I didn't need marching orders; I just needed encouragement" (p.112)

(10) "When you plan for obstacles, they don't shake your confidence or interrupt your progress when they happen." (p.114)

(11) "Millionaire-minded people don't let the unknown scare them off. Instead, 94% of the millionaires we studied say they're willing to try difficult (tasks) to get new results." (p.116)

(12) "Understand that a goal is simply a promise you make to yourself." (p.161)

(13) "Work brings a profit, but mere talk leads only to poverty" (Proverbs 14:23) (p.170)

(14) "In total, the ability to work hard gives you an advantage, builds your confidence, allows you to experience gratitude, leads to self-improvement, and makes you intentional in all other areas." (p.175)

(15) "We found that 96% are always trying to learn new things. They want to find new ways to do their jobs better (because) as you get better at your job, you produce greater results." (p.177)

(16) "Millionaires don't find time; they make time." (p.179)

(17) "Consistency requires planning, preparation, patience and passion." (p.192)

(18) (Millionaires) "are simple, humble, happy people who you would never know were millionaires" (p.213)

(19) "It turns out that, once you can afford to buy whatever you want, you may not want to anymore." (p.224)

(20) "When you help someone else," Thomas said, "you forget about your own problems" (p.229)