1. “Wealth is not about having a lot of money; it’s about having a lot of options.” Chris Rock.
“The only thing money gives you, is the freedom of not worrying about money.” Johnny Carson.
The best thing about having money is having good choices in life. An essential challenge if you are poor is having terrible choices. Having terrible choices feeds back in a self-reinforcing negative way. People who think that the best thing about wealth is that it allows you to have material things are, well, bonkers.
How far this faulty thinking can go is best illustrated by a story. A successful businessman parked his brand-new Porsche in front of his office so his colleagues could see it. As he stepped out of the new car, a truck passed too close and ripped off the door on the driver’s side. A bystander dialed 911 and within a few minutes a policeman arrived. Before the officer could ask any questions, the business man began screaming hysterically that his new Porsche was now completely totaled. It was only after a half hour of ranting that the officer was able to talk to the man. “I can’t believe how materialistic you are,” the police officer said. “You are so focused on your possessions that you don’t notice anything else.” The businessman was clearly offended: “How can you say such a thing?” The policeman replied: “Don’t you know that your left arm is missing from the elbow down? It must have been torn off by that truck.” “My God!” screamed the man. “My Rolex!”
2. “If you’re an average layperson, your grasp of high finance consists of knowing your ATM code.” Dave Barry.
The average person is an idiot when it comes to spending and investing money. There is no getting around this fact and sugarcoating the problem does not help anyone. The skills that allowed humans to survive in a more primitive world do not naturally provide the skills necessary for a human to prosper as a consumer or investor in a modern word. In other words, evolution did not equip humans to spend and invest wisely.
The good news is: you can learn to spend and invest better since it can be trained response. The bad news is: the need to train yourself never ends, requires hard work and is contrary to the desire of most humans to enjoy present moment consumption. People who have not trained themselves to be investors need help. The best sort of help is self-help in the form of reading and paying attention. Yes, you may be able to find a trustworthy advisor to help you but you still must work and educate yourself and find an adviser who adds value – and then properly take their advice.
Unfortunately, most people don’t even know where to begin. So the result is predictable. As just one example, on the savings side of the house: Adults under age 35 (millennials) currently have a savings rate of negative 2%, according to Moody’s Analytics. That compares with a positive savings rate of about 3% for those age 35 to 44, 6% for those 45 to 54, and 13% for those 55 and older.” Bankrate reports that “26 percent of Americans have no emergency savings and 41 percent say their ‘top financial priority’ is simply staying current with their expenses or getting caught up on their bills.”
3. “About 15 years ago, I saw an Oprah show where she said, ‘Always be the only person who can sign your checks.” At the time, I had no money. I was at Second City in Chicago. I came to New York in 1997 to work on Saturday Night Live. I realized I have no head for business. And it would have been very easy for me to let someone take control of my money – for me to say, ‘Here, sign my checks…whatever.’ But that line from Oprah has always been a reminder. Today, as much as it makes me super sleepy, I have to pay a lot of attention when my business manager talks to me about money. He talks to me about taxes, and I get really, really sleepy. But I listen.” Tina Fey.
I’m old enough to have seen misplaced trust go wrong many times. A classic example happens when a child is managing money for a parent and spends it on themselves in ways that the parent is unaware of (e.g., gambling, travel, toys). The person who breaks trust will often try to justify the spending by saying to themselves that they will pay it back with interest. Systems that promote trust are fundamental to commerce. For example, the invention of the cash register was an important development in spreading commerce. Another system for not having your life ruined by someone who breaks your trust is “signing your own checks.”
4. “A fool and his money are soon partying.” Steven Wright
“Cocaine is God’s way of saying that you’re making too much money.” Robin Williams.
I’m unfortunately old enough to have seen people literally kill themselves because they had too much money and took their love of stimulating substances to an early grave. The number of lives and families I have seen ruined by alcoholism is too big to count. I’m not saying don’t drink, but I am saying you should be very careful – especially if you have a family history of alcoholism. Chris Rock points out that substance abuse can dissipate money fast: “Wealth is passed down from generation to generation. You can’t get rid of wealth. Rich is some shit you can lose with a crazy summer and a drug habit.” ......MORE
HT: The Reformed Broker
