When you were a kid, you probably thought being an adult was all about staying up late and not doing your homework.
But now that you're an adult, you know that there's a lot more to it than that.
Going to work, household responsibilities, paying the bills – and having your finances in order. And it's easy to get down on yourself when you don't have your finances where you think they should be.
But we all have different definitions of success and different ways of measuring how far we've come.
If you think about it, most Australians are living paycheck to paycheck and have a level of bad debt. When you realize that most Australians can't pay an unexpected bill of $400 or more, you'll realize that you're probably better off than you thought you were.
Today, I'm going to have a chat with Brett Warren about why so many Australians are bad with money.
Here's a number of reasons why we are so bad with money?
- The Dunning-Kruger effect. People's lack of understanding about basic things prevents them from making good decisions.
- For every $1 raise you receive, your desires rise by $2 or more.
- You spend lots of money on material stuff to impress other people without realizing those other people couldn't care less about you.
- You have never been able to predict what the market will do next. This doesn't deter you from trying to predict what the market will do next.
- You get upset when you hear on TV that the government is running a deficit. It doesn't bother you that you heard this on a TV you bought on a credit card in a home you purchased with a no-money-down mortgage.
- The single largest expense you'll pay in life is interest. You'll spend more money on interest than food, vacations, cars, school, clothes, dinners out, and all forms of entertainment.
- You're thrilled that the credit card you're paying 22% interest on offers 1% cashback on all purchases.
- You work in a stressful job in order to make enough money to have a stress-free life. You don't see the irony in this.
- You're a pessimist in a world where far more people wake up in the morning trying to make things better than wake up thinking we're all doomed.
- You try to keep up with the Joneses without realizing the Joneses are buried in debt and can probably never retire.
- You associate all of your financial successes with skill and all of your financial failures with bad luck.
- Rather than admitting and learning from your mistakes, you ignore them, bury them, make excuses for them, and blame them on others.
- You say you'll be greedy when others are fearful, then seek the fatal position when the market falls 2%.
- You let confirmation bias take control of your mind by only seeking out information from sources that agree with your pre-existing beliefs.
- You think you're too young to start saving for retirement when every day that passes makes compound interest a little bit less effective.
- You're investing for the next 50 years but get stressed when the market has a bad day.
- You don't respect the idea that "do nothing" are two of the most powerful words in investing.
- You feel especially smart after last year's market rally without realizing that you had nothing to do with it.
- You seek advice from a doctor to manage your health, an accountant to do your taxes, a lawyer to manage your legal problems, a plumber to fix your plumbing, a contractor to build your house, a trainer to help you exercise, a dentist to fix your teeth, and a pilot to fly when you travel. Then, with no experience, you go about investing willy nilly, all by yourself.
- You think financial news is published because it has useful information you need to know. In reality, it's published only because the publisher knows you'll read it.
Bonus Points:
- You forget that the single most valuable asset you have as an investor is time. A 20-year-old has an asset Warren Buffett couldn't dream about.
- You nodded along to all of these points without realizing I'm talking about you.
Links and Resources:
Michael Yardney
Brett Warren - Metropole Property Strategists
Metropole's Strategic Property Plan – to help both beginning and experienced investors
Join us at Wealth Retreat in November 2020 – find out more here
Shownotes plus more here: 20 reasons you're awful with money with Brett Warren
Some of our favourite quotes from the show:
"The concept here is that once you earn more, you tend not to save it." –Michael Yardney
"One of the reasons we're no good at money, one of the reasons we're scared of making investments or decisions is because of all the negativity out there." –Michael Yardney
"We are all irrational with money. We all drive around with one foot on the accelerator and one foot on the brake." –Michael Yardney
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