A few weeks ago I was on an airplane when the person sitting next to me struck up a conversation. My goal of the flight was to get a few posts outlined, but this person was nice enough so I thought why not. As the conversation progressed, they brought up these exotic personal finance strategies.
I listened, but as the conversation continued, my overwhelming thought was you have to keep money simple.
Mark Twain and Simplicity. Or Is It a Proverb? Or Pascal?
Mark Twain is often credited with a quote I really like: “I would have written a shorter letter, but I did not have the time.” Upon further research, it seems that this quote is actually more of a proverb.
Some attribute it to Pascal, who according to Uscourts.gov, wrote a similar quote: “I have made this longer than usual because I have not had time to make it shorter.”
This is beside the point though. What is said in these quotes is the real point–it’s about simplicity and the time it takes to reach simplicity. Anyone can do a bunch of research and come up with dozens of ideas.
But it’s a special person who can do the research and come up with one or two core ideas that actually work. The same thing can be said for money–it’s one thing to research dozens of theories, it’s another thing to effectively put a few things into practice.
The Simplest Form
Which is why I like to put money concepts into their simplest form. Want to save and invest more, then automate. Feel like you need to focus on investing more every month? Pay yourself first.
Having issues getting out of debt? Get hyper-focused and use one of the debt payoff strategies outlined in this post I wrote.
For each issue, there is a simple answer that has worked for decades, and I believe will continue to work for a long time.
Don’t Overcomplicate
There’s a reason I named my website and book Cash Uncomplicated. I believe that the less complicated you can make a subject, the better. And when it comes to money, I think this is especially true.
Keeping Money Simple Equals Action
Keeping money simple equals action. Simple actions are easy to commit to and follow through with. Here are some examples:
- Automating your money in one simple step: Set up your account to automatically pull money at the start of the month.
- Pay off consumer debt by keeping things simple and picking a debt-payoff strategy.
- Invest in a retirement account by setting it up once and making automated monthly contributions.
When you break it down, these things are not hard to do. You just have to do them and stick to it.
Too Much Complexity Equals Inaction
Conversely, too much complexity leads to inaction. When things get too complex, most people give up and stop what they’re doing. For example, if someone asked you to put a twenty dollar bill into a jar every month, most people could do that.
However, if someone asked you to go to the bank, get twenty dollars in pennies, then go buy a large jug to put the pennies in every month, you’re probably not going to do that.
Too many steps with too much complexity and the juice isn’t worth the squeeze. This is why you want to set up your money situation to be as simple as possible.
Take One or Two Actions
If you’re not sure where to start with money, do one or two things. The last thing you want to do is overwhelm yourself with ten different strategies or tasks to perform. Keep it to one or two things to get you going.
For example, if you’re wanting to invest and you know your employer offers a match, take the step to talk with your employer about how to set up the account and get the match. Then when you have sufficient info, get things set up.
You took two actions but got really big results, and your account with a company match is set up for years to come. When you complete these steps, you can move onto something else. As you go, things will start to make more sense and you’ll build confidence to keep moving forward.
Watch Out For the Shiny Objects
In investing, there are a lot of shiny objects. They look great from a distance, almost irresistible. New crypto coins that are going to solve all the world’s problems, various tax strategies, hiring your kids as employees for the tax breaks, etc. The list goes on and on.
This is not to say these investments, or strategies are not good. I have no doubt that there are people who have done well hiring their kids as employees and finding other creative tax strategies. What I am saying is to be careful of the shiny objects.
Pursuing too many shiny objects leads to lack of focus and eventually, lack of action. It’s better to focus on one or two things, get good at those, and then move on to new things.
Imagine talking to someone who tells you about a specific real estate strategy. They mention that they’ve done dozens of deals this way and have built up a multi-million dollar portfolio over the past ten years. I think most people would be all ears with this person.
Now imagine talking to someone who mentions being interested in real estate. They haven’t done a deal yet but that’s because they’ve been researching the newest crypto coins and AI tech companies. Once they’re done with the research, they are going to save up money to buy real estate or maybe start a business.
Not many people are going to listen to the second person because they are unfocused and always chasing the next shiny object. While the first person dedicated herself to her craft and is actually making things happen. Same goes for you and the shiny objects.
Ignore the Noise
Similar to not following the next shiny object, it’s important to ignore the noise. There is so much information available, much of which is sensationalized to get clicks and ratings.
Watch a cable news network and it looks like the sky is falling on the stock market. The next day there is a boom again and everything is peachy. Up, down, up, down. To become a successful investor, you have to ignore the noise because they throw you off your game.
Unless you’re a highly skilled day trader, pulling money in and out of the market is a recipe for disaster.
Take Advice Only From Wise People
Be very careful of who you take advice from. No offense to your Uncle Bobby, but if he has struggled his whole life financially, I’m not taking his investing advice. Nor am I taking advice from the neighbor who has over $50,000 in consumer debt and struggles to live paycheck to paycheck.
Only take financial advice from wise people who have succeeded with their money. Like the doctor who retired at age 50 from her real estate portfolio, or the retired school teacher who has been investing since his 20’s and has accumulated a nest egg of a couple million to go along with his pension.
These are examples of financially successful people who are worth listening to. Be careful of advice from those who are not in a position you want to be.
Conclusion
When it comes to money and personal finance, think as simply as possible. If there’s a concept you don’t understand, try and simplify it until you do. If you can’t simplify it, you shouldn’t be investing in it.
Likewise, if someone comes to you with an investment, or an opportunity that seems really complicated, either move on or have them explain it to you until it makes sense in its simplest form. Don’t worry about looking “stupid”, because chances are, it’s probably not a good fit for you.
Keep money as simple as possible and things are much more likely to work out for you.
How do you keep money simple?
