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The year long trend of high inflation and rising interest rates continued this month. As much as we would all like the magic bullet to fix these issues, there is not a lot that we can do. These systemic issues continue to impact all asset classes and those who invest in them.
What we can control is our own behavior. So this month’s selections provide a heavy dose of behavioral finance.
Dive in to find resources that will help you ride out tough periods like we have been experiencing by addressing your own behavioral biases, developing rules that work through all economic conditions, and determining how much is “enough” for you.
Jonathan Clements has been writing about personal finance for decades. During that time, he has encountered never ending arguments that he calls Tiresome Debates.
These debates attempt to answer questions that don’t have right answers because they depend on an unknowable future and applying individual values. Nonetheless, as you plan for retirement, you undoubtedly will encounter all three. I highly recommend this article to everyone in this audience.
Money is Emotional
Personal finance is relatively simple. Yet many people can not bridge the gap between knowing what to do and actually doing those things. The following discussion was directed to financial advisors trying to overcome these challenges with clients, but the discussion is extremely applicable to all of us. From Michael Kitces’ Financial Advisor Success Podcast: Unblocking Clients Who Keep Not Implementing By Exploring Their Financial Psychology, With Ed Coambs.
This month, Netflix released the documentary Get Smart With Money. I was drawn in by a few of the documentaries “financial coaches” who I was familiar with: Pete Adeney (aka. Mr. Money Mustache, Tiffany Aliche, and Paula Pant.
I had read a few negative reviews prior to watching, including one from the Guardian (I’m purposefully not linking to this critique because I so disagree) that used the sub-header: “This documentary’s solutions to its participants’ jeopardy-free first-world problems are incredibly basic. If you have any knowledge of money-saving advice, you know them already.”
While some of the advice is basic, the fact is that most people do not have this knowledge. So it was great seeing it featured in a Netflix documentary.
Even more importantly, this documentary captures how emotional money is with all four of the subjects, each of whom had extremely different circumstances.
I recommend checking it out, and I’m curious to hear what you think. You can watch the trailer here:
What Are Your Behavioral Biases?
Marcus Lu breaks down 50 Cognitive Biases in the Modern World in easy to understand infographics. Check it out and think about which ones you are particularly susceptible to.
Learning From Others
Derek Tharp writes Why Checklist-Style Financial Planning Works: What Advisors Can Learn from Dave Ramsey’s Baby Steps. I am not a big fan of Dave Ramsey’s investing advice, the planning assumptions he uses, or the way he passes judgement on others.
However, he has a loyal following and has undoubtedly helped countless people improve their finances, including multiple members of my own family. So to dismiss his advice outright is to risk throwing the baby out with the bathwater.
I love this article that focuses on what Ramsey does well, simplifying finances in a way that leads to action. The principle of taking lessons from others that apply to you while discarding those that don’t to “create your own adventure” was my basic premise behind the Choose FI book.
Who Isn’t Emotional About Money? Insurance companies.
They are able to use actuarial tables and spread risk across large populations in ways that individuals often can’t. Still, we can learn from them as Adam Grossman shares, writing Money When Needed.
Grossman’s article expands on a principle I recently covered: bond duration.
Caring For A Friend
We often focus most, if not all, of our attention on the financial impacts of personal finance decisions, such as long-term care. This next article was an interesting look at the equally, if not more, complex emotional aspects of being a caretaker. Connie Zweig writes Caregiving for a Lifelong Friend.
Traveling….And Spending Less In the Process
With continued high inflation, we’re all looking for ways to spend less on things we value. I haven’t written about credit card rewards in recent months because I haven’t seen many new promotions that had me excited.
This month, I noticed two of my favorite travel rewards cards increased their sign-up bonuses.
Capital One Venture Rewards Credit Card is now offering a one-time bonus of 75,000 Miles once you spend $4,000 on purchases within 3 months from account opening.
These miles are worth $750 and are very versatile for travel purchases like car, campervan, and airbnb rentals for which it is otherwise hard to accumulate travel rewards. They can also be used to pay for any other travel expense booked on the card. This card has a $95 annual fee.
The Marriott Bonvoy Boundless® Credit Card also has an increased bonus. For a limited time, you will earn 100,000 Bonus Points after spending $3,000 on purchases in your first 3 months from account opening with the Marriott Bonvoy Boundless® Credit Card. This is nearly double the standard sign-up offer. This card also has a $95 annual fee.
Caring For the Planet….And Spending Less In the Process
Beth Nelson explains how taking action to save energy, which has the double benefit of being good for the environment and your wallet by saving energy costs, can now save you even more. She writes, Inflation Reduction Act: Tax Credits for Homeowners.
Patagonia founder Yvon Chouniard has long advocated for environmental causes. This month, he put his money where his mouth is in a big way.
Chouniard announced that he has given away 100% of his company, reportedly valued at over $3 billion, to a trust which ensures the company will continue to operate according to his values. You can read the details about his decision and his intended impacts here.
In an extremely concise and oversimplified summary, Chouniard determined he personally has enough. And he decided what he wants his legacy to be: to use the business he created to do more good in the world.
This action is extremely rare in our society, where the focus is almost always on more. More money. More power. More prestige. More ego.
The timing of the move was particularly pertinent to me. I’ve been thinking alot about these topics while reading John Bogle’s book, Enough: The Measures of Money, Business, and Life.
If these topics are on your mind, I can’t recommend this book highly enough. If these are topics you are not thinking about, I recommend Bogle’s book even more highly.
Have a great month!
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[Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning. After achieving financial independence, Chris began writing about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence. Chris also does financial planning with individuals and couples at Abundo Wealth, a low-cost, advice-only financial planning firm with the mission of making quality financial advice available to populations for whom it was previously inaccessible. Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He has spoken at events including the Bogleheads and the American Institute of Certified Public Accountants annual conferences. Blog inquiries can be sent to firstname.lastname@example.org. Financial planning inquiries can be sent to email@example.com]
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