Timely Advice

Words for my retirement investment friends to ponder this week.

 

Undervalued Financial Advice

There’s a lot of overvalued financial advice out there these days.Don’t drink lattes or you’ll never be able to save for retirement.

You should make your own toothpaste to save more money.

Just follow my simple system to get the highest interest rate on your savings account.

There’s nothing wrong with cutting back, being frugal with your money, or maximizing interest earned on your savings. But these are all tactics that will, at best, offer small financial payoffs. Most people will see larger gains focusing on the big picture.

With the big picture in mind, here are four pieces of undervalued financial advice:

1. Avoid the allure of more. On this week’s Armchair Expert, Ted Danson told Dax Shepard about his relationship with money following his huge payday from the success of Cheers (which remains a top 5 sitcom of all-time):

You start getting chunks of money you’ve never gotten before. And you were quite happy without it  — I was. I was quite content with whatever and then lots of money came my way and I was like, “Oh I don’t want to lose this and I wonder if I could get more.”

Most of us will never have Sam Malone money but it’s a good lesson that no matter how much money you make there will always be the temptation to want more of it. This can be an unhealthy obsession when it leads to out of control lifestyle inflation.

2. Envy is more expensive than gratitude. A recent survey asked people from around the globe, “All things considered, do you think the world is getting better or worse, or neither getting better nor worse?”. Just 6% of U.S. respondents and 4% of Germans thought things are getting better.

Oxford’s Max Roser published a piece in response to these results that show no generation has ever had higher living standards — education, health, literacy, freedom, education, etc. — than we do today.

Nonfiction released a report this week called The Secret Financial Lives of Americans. More than half of their respondents admit to having cried because they didn’t have enough money. This might make sense for the poor and lower middle class but that number was 41% for people who earn $200,000 or more.

Maybe the entire 41% live in Silicon Valley or New York City but I’m guessing this has more to do with our financial envy of the dreaded Jones down the block than anything. Envy has a stronger hold on our relationship with money than most people realize and these feelings often trump our ability to be grateful for what we already have.

We don’t compare ourselves to our ancestors, we compare ourselves to our neighbors1

3. Time and health matter more than wealth. Cornelius Vanderbilt’s son William was far and away the richest person in the world after doubling the inheritance given to him by his late father in just 6 years. But the burden of wealth brought him nothing but anxiety. He spent all of his time managing his substantial wealth through the family’s businesses, which meant he had no time to enjoy his money or take care of his body.

He once said of a neighbor who didn’t have as much money, “He isn’t worth a hundredth part as much as I am, but he has more of the real pleasures of life than I have. His house is as comfortable as mine, even if it didn’t cost so much; his team is about as good as mine; his opera box is next to mine; his health is better than mine, and he will probably outlive me. And he can trust his friends.”

William also told his nephew, “What’s the use, Sam, of having all this money if you cannot enjoy it? My wealth is no comfort to me if I have not good health behind it.”

All the money in the world doesn’t matter if you don’t have the time or the health to enjoy it.

4. Stay married. It makes sense intuitively, but research shows people who get married and stay married tend to build more wealth than people who don’t get married or end up divorced.

A study by National Bureau of Economic Research found the median married household of retirement age had 10 times the savings as the typical single household. Based on his work from studying thousands of millionaires, Thomas Stanley, author of The Millionaire Next Door, found that millionaire couples have less than one-third the divorce rate of non-millionaire couples.

And researchers from Ohio University found that people who get divorced experience an average drop in wealth of 77%. They found wealth started to decline four years before a divorce so staying in a toxic marriage to avoid financial ruin is probably not sustainable either because you stop planning ahead for the future.

No one goes into a marriage with the assumption it’s not going to work out. But there is something to be said for your levels of happiness, stress, and wealth by finding a financially compatible spouse.

Further Reading:
The 3 Levels of Wealth

1Or even worse — celebrities and social media personalities.

 

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