#41 3 Habits to Help You Make Smart Money Choices [Podcast]

You'd think that with all the great information and tools available today that making smart money choices would be easy. The fact is, it's harder than ever before. We live in a world designed to get us to "buy now" or "avoid that." These messages are designed by savvy marketers to get us to take action when most of the time doing nothing is the best course to take.

Listen to the Podcast Here

Recently I fell prey to one of these "buy now" messages and made a really poor money choice. Two weeks ago, I was in Charlotte working on a project when an e-mail arrived announcing the closing of registration for a $2,000 training program. It was a program I really wanted to take (I'm a sucker for learning), but I'd already determined I didn't have the time or the budget this year. The e-mail offer included extra valuable resources if I registered before the deadline. I fell for it. In the middle of my meeting, while focused on the task at hand, I clicked on the link and bought it. What a sucker.

Later that night, as I was driving home from the airport, I literally pulled over on the freeway and requested a refund.

In this episode, I outline 3 habits that will help you (and me!!!) make smarter money choices. They are simple and organized around the acronym R.A.W. Think R.A.W.

Plan Well Segment

“We no longer live life. We consume it.” Vicki Robin

The next time you feel the pull of a marketing message, remember R.A.W.

  • Remember to review your 1-year financial priorities every week. This will keep your "why" top of mind.

  • Avoid marketing messages. Don't browse in stores or online, unsubscribe from sales e-mails.

  • Work your plan. Have a plan for how you make money decisions and stick to it. It can save you.

Invest Wisely Segment

Economist Paul Samuelson reminds us, “investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas or Wall Street."

The next time you feel the urge to react to market news, remember R.A.W.

  • Remember why you are investing. Your purpose for investing should drive your decisions.

  • Avoid market messages. Financial media does not help you invest wisely. Avoid it.

  • Work your investment plan. Have an investment plan based on facts and stick to it. It can save you.

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The Retirement Answer Man Episode #41

Hey! I got the music right! I was worried with all the logistics of this after taking a week off for Thanksgiving. Well, welcome! My name is Roger Whitney. I am the Retirement Answer Man. I’m so glad you joined me today.

This is the show dedicated to helping you find that balance between living well today without sacrificing your tomorrow. Wouldn’t that be great to do? To maximize your life right now and still feel comfortable that tomorrow’s going to be okay. I’m telling you, if you plan well and invest wisely in your life, you can do that. I truly believe you can do that if you have good processes in place and that’s what we talk about here on this show.

Well, in our Plan Well segment, we’re going to talk about temptation during this holiday season and how you can work to avoid temptation, how you cannot be lead into temptation so you can plan well throughout the holiday season.

In our Invest Wisely segment, I’m going to give you a rallying cry. It’s going to be, “Don’t just do something! Stand there!” It’s how it’s better to do nothing more often than not when you’re trying to invest wisely for your retirement. We always want to do something. Well, sometimes, we just need to stand there.

That’s what we’re going to talk about in our Plan Well and Invest Wisely segment.

This week, I uploaded a new worksheet to the Retirement Toolbox. It’s called “Choosing Beneficiaries for Your IRA.” That’s going to be under the Give tab. During December, we generally like to review the beneficiary designations for our retirement accounts or 401k accounts – any accounts that have a beneficiary designation option.

You want to make sure that primary beneficiary is still accurate because that can change over time whether it’s because of divorce or death or some other reason so you want to make sure you have the primary beneficiary named correctly.

And then, you definitely want to make sure that you have contingent beneficiaries listed. Now, I’ll tell you, more often than not, I’d say nine times out of ten, nine times out of ten, there are no contingent beneficiaries listed, and that’s extremely important. You can cause some tax nightmares for whoever happens to inherit those assets if you don’t have one. Even if you know that your primary beneficiary is still the person, the right person, I suggest that you go back and review all your beneficiary designations to make sure you have some contingent beneficiaries listed as well. In fact, I’ll have to do a Plan Well segment on that one week.

But, if you’d like a worksheet or an outline on choosing beneficiaries for your IRA, you can get that totally for free at rogerwhitney.com. Just sign up for the Retirement Toolbox and you can find that under the Give tab along with over 20 worksheets and checklists to help you plan well and invest wisely in your life.

All right. Well, before we get started, let’s have that all-important disclosure, and that disclosure is only you know your financial situation so consider this podcast, my blog, really anything you read on the internet as helpful hints and education because none of us know anything about you and you shouldn’t take advice from people that don’t know you. Didn’t your mother tell you that? So, before you make any decisions, make sure you talk to the people that do know – whether that’s your financial advisor, your legal advisor, or your tax advisor. That’s just not a great legal disclosure, that’s not just common sense. That’s a fundamental principle about planning well in your life.

Okay. Let’s go to our Plan Well segment.

Now, in my show notes, I was actually going to do a different Plan Well segment and add a new segment called Roger’s Money Mistakes – that could be a whole new podcast because I make lots of money mistakes – but I decided to put this under the Plan Well segment just for consistency’s sake.

I’m going to give you a little confession here. About a week and a half ago, I was in Charlotte in a conference room. Prior to that, I had been evaluating this online training program and I was really attracted to it. It had a lot of things that I wanted to learn and it wasn’t cheap. It was like, $2,000. These things get expensive and there was a time limit on when you could register for this training. While I was in this conference room in Charlotte, it was coming up on that deadline and I had already decided that I didn’t have the time and I didn’t have the attention or money in the budget to pay for this training right now so I said, “Okay. I’m going to do this maybe another time,” and I had made that decision and put it to bed.

Well, I’m sitting in this conference room and I’m working on my computer. There were some colleagues working on a project and I had my email program opened and I get pinged with a notification that I got this new email. I click on the email and it’s about this training program and it’s saying, “Hey, man! Training program is going to close here in two days! It’s awesome!” And then, they said, “Oh, by the way, because we’re right at the deadline, if you sign up before the deadline, you’re going to get these four extra items!” and they listed them off and all the feature benefits and I’m like, “Ooh! Wow! I’m not just going to get that great training I wanted, I’m going to get those four awesome benefits!”

So, literally – this is embarrassing – literally, while I’m in this meeting, I click on the tab, I enter my information, and I buy this $2,000 training program and continue on with my meeting, totally on the fly after I had already decided during my normal state of mind that it wasn’t the time nor the place for me to be doing this. Seriously, what am I doing? I would never tell a client to do that! I would beat them up a little bit if they did.

So, temptation is everywhere nowadays and we’ve got to work to avoid those if we want to plan well in our lives. Luckily, that night, I flew home back to Fort Worth from Charlotte, and I’m driving home and I’m talking to a friend of mine who’s in an accountability group with me and I’m feeling a little bit remorseful and I’m feeling a little embarrassed for myself like, “What the heck am I doing? I’m a smarter guy than that.” Literally, after my conversation with him, I pulled over on the highway, got online and undid everything and got my money back and didn’t buy the training. Thank goodness I had enough humility to say, “Man, what an idiot I was,” and undo this temptation that I had succumbed to.

But we’re here in the holiday season so we’re in the midst of temptation central. You’ve got the sparkling lights. Everything looks beautiful if you go out to the stores. You’ve got commercials 24/7. If you’re on any emails – if you’re on the Amazon email or anything else – you’re getting emails nonstop about Cyber Monday, Black Friday, sales, sales, sales – all these temptations to get you to buy. This is when they make most of their money because most of us fall for all the temptations.

So, if you’re going to plan well in your life – not just during the holiday season – how are you and I going to avoid or work to avoid a lot of these temptations? Because, if we don’t, we’re just going to end up buying a bunch of stuff and spending money that could be better allocated to things that we intentionally want to be doing or that we care about in our life.

What I want to give you is three habits that you can work to cultivate to help avoid this temptation. I created them in an acronym “RAW” so let’s go through those:

Habit number one is to systematically remember your one-year financial priorities. Typically, in January, I set one-year financial priorities and I review my three-year and five-year priorities and that’s exactly what I do with clients. We always have longer term priorities but we always set one-year priorities, that way we can have something that’s very close up that we can shoot for.

Remember your one-year priorities and review them every week.

It’s hard to review long-term goals every week but one-year priorities can help be that ground wire to, “Okay. What am I trying to accomplish here financially?” If it’s paying down debt, if it’s putting money aside for your emergency fund, or paying for Johnny’s tuition in the fall, that one-year priority, you should review that. It doesn’t mean you have to have some big meeting but you can have it as a reminder on your phone or your task management system just to read it and remind yourself – “This is what I told myself was important to me,” or, “This is what we told ourselves was important to us as a family.” That’s a very simple thing to do.

The A in the RAW is the smart way – it’s just to avoid it. Avoid the temptation. There is a reason in the Lord’s Prayer it says, “Lead me not into temptation,” because we are weak people. Okay. Yeah, I’m sure some of you say, “I’m not weak! I have self-discipline!” I have a lot of self-discipline but, you know what, I am a sucker when they catch me at the wrong time – when I’m distracted or I’m weak or I’m whatever.

We succumb to temptations. We’re humans! Whether it’s bicycles, baby dolls, whatever your temptation is, we all have those temptations and the markets – the marketing machines – are extremely scientific at exploiting those temptations and things that we are susceptible to so, a lot of the time, it’s best to avoid them.

What I did after my wonderful training experiences, I started to unsubscribe to a lot of the emails that were training-oriented that I knew would be marketing me things systematically over time. I just said, “You know what, I have done a lot of training this year because I have some things I’m trying to accomplish but no mas – no mas!”

I started to unsubscribe to those emails so I didn’t get pinged. I didn’t allow their voice to come into my head to even tempt me with things that I’m naturally attracted to – which is learning and ideas and being curious. I just removed 90 percent of all those temptations from even hitting my mailbox – that’s something you could do.

Now, offline, you can do a lot of the same things.

Another example is when my wife goes shopping, a lot of times I’ll go with her even though I’m not shopping for anything. I’m a hunter; I go in and I want to buy. I don’t browse and I think a lot of men are that way. But, a lot of times, she wants to go because she needs a new sweater or she needs something so I’ll go with her. Tell me, do you find this? Send me a tweet or an email if you find this as well. I’ll be sitting at home, I’ll have nothing then, “Oh, yeah, I need to think about buying something like this.” But, if I go to the store, even if I’m just accompanying my wife or my daughter, I’ll see something and say, “Wow! I could really use that.” “Oh! It’s on sale!” All of a sudden, I see these things and I’m like, “Yeah, I could use that. I’ve always wanted one of those.” Of course, ten minutes ago, I never thought of it. Again, it’s that temptation.

Not going to the stores nearly as much or going in and hunting and killing rather than browsing is a way to avoid a lot of those temptations. I guess the basic one is, “Don’t go grocery shopping when you’re hungry,” right? Because you’ll be tempted to buy everything because you’re so hungry.

The A in RAW is just simply to avoid the temptations as much as possible and to eliminate those messages from even coming into your consciousness is a good way to do that as well.

And then, lastly, the W in that RAW acronym is to stay tied to the planning process that you have set up. Now, if you don’t have a planning process to how you make decisions on your budget, on your net worth statement, on the risks in your life and the giving and the estate planning, if you don’t have one, subscribe to this podcast right now because that’s what we talk about – how to put together the little conversations, the frameworks so you can have the right discussions. So, subscribe to this podcast right now if you don’t already have one.

If you do – I hope you do – if you have some process for how you make financial decisions, stay tied to that. Let that be your framework for how you make these decisions. In a consumer standpoint, it could simply be: If I’m going to buy anything over X amount of dollars, I’m going to wait seven days.

Let’s say it’s $500, “If I’m going to buy anything over $500, that should be a much more intentional decision than buying a latte.” If I’m going to buy a $2,000 software training, I’m going to think about it. I don’t care how great the offer is, I’m going to think about it for at least seven days or whatever time frame you put just to pull you away from that in-the-moment temptation to give you some perspective so you can go back and remember what your priorities are and look at your balance sheet and whether you can actually afford to do it or not.

That’s the W in the RAW – work the plan that you have in process.

Now, I imagine you’re guessing right now that, after my story, I have the segment the way it is because I’m really just talking to myself but I’m going to guess, if I have these issues, I’m going to guess you do. I know all my clients do and I have all the same wants and desires they have so I struggle with this in my life as well, especially during this holiday season. There’s so much temptation around because this is when they make all the money and we need to work to make sure that we make intentional purchases rather than emotional ones.

Now, in our Invest Wisely segment, it’s going to mirror a little bit of this Plan Well segment. I want to talk about why investing is all about delayed gratification and why we need to put systems in place to make sure that we can stay the course in our investment strategy and to actually reap whatever potential rewards there are in stocks and bonds and commodities or whatever your investment vehicles are – even real estate. Because, what ends up happening, and I think this is more and more, for the same reasons as consumerism is, there’s all these temptations to do stuff. There’s all these amplifications of our fear and greed that says, “Wow! We need to do something!” when, most of the time, we just need to say, “Don’t just do something. Stand there! Just stand there! Do nothing!”

Investing, if you’re doing it prudently, that’s 90 percent of the time the answer: just do nothing. Just be patient because investing wisely takes time for the fruits and the returns to come. The smaller the time horizon, the more risk you ultimately take in terms of capital loss.

Economist Paul Samuelson says, “Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas or Wall Street.”

Investing really is simple and easy. Anyone can do it. Anybody can do it. It’s pretty simple and easy. The problem is that, to do it successfully, you need to be disciplined and it needs to be like watching paint dry or grass grow. Now, compare that to watching a Jim Cramer show and “Booyah! Buy, buy, buy! Sell, sell, sell!” and all these things. Now, compare that. Try to be a prude investor that is long-term and watching paint dry when you’re watching messages like Jim Cramer’s show – and I’m not picking on Jim Cramer, it’s really all the financial media and I’ve talked about that before. These are the facts.

The facts show that time and proper allocation are the most important factors in determining investor’s success. We had a segment on this a few months ago that showed how the average investor drastically underperformed the actual things they were investing in and some of that had to do with taxes, some of that had to do with expenses, but a lot of it had to do with too much activity by investors and advisors as well of buying and selling things too much rather than just doing nothing.

It’s hard. I’m a financial advisor and I’m on my own journey to refining the process that I use for myself and with my clients and it’s hard. It doesn’t matter whether you’re a professional or not. We’re all wired the same way.

The key is to limit the variables in your investment process to things you actually have some control over. We’ve talked about that in other podcasts and we’ll do that in the future. But, for the purposes of today, how can we apply this RAW acronym to investing wisely? Well, let’s go back to it.

Remember, RAW?

The R was what? Remember – remember your family’s priorities. Keep that top of mind. Now, in the Plan Well segment, we talked about those one-year priorities that you set as a family. In the Invest Wisely segment, it’s going to be, “Why are we investing in the first place?” I tend to take the position of, “If I can achieve everything I want as a family without taking any investment risk, why would I? Why would I take investment risk and risk my capital in the markets or in real estate and maybe incur losses if I can achieve everything I need to achieve without taking any investment risk and just sitting it in cash? Why would I ever do that?” That’s the important starting point.

Now, realistically, 99 percent of us have to take some type of investment risk because you’ve got inflation, you’ve got taxes, you have lifestyles that we want to live that we can’t just build enough cash to sustain. You know, we’re living so long so most of us have to take some type of investment risk so you need to know what you’re trying to achieve with your investment dollars. It’s not just to invest just because I have excess money so I’m going to throw it in to something to do better than, you know, the money market. That’s not a good reason to invest.

We really need to have crystal clear why we’re investing so that can be our ground wire as to how we design our investment strategy. If we don’t do that, then we’re definitely going to be at the whim to all the temptations of fear and greed on the short term. The R is remember why we’re investing – what we’re trying to accomplish in terms of how much risk we need to take.

The A is, again, avoid. Just like in the Plan Well segment, we’re trying to avoid marketing messages; we’re basically trying to do the same thing. I’ll call it market messages because, nowadays, just like in consumerism, we have financial media that is feeding our fears when things are fearful and feeding our greed when things are optimistic and going well – whether it’s CNBC or Jim Cramer or Barons or the Nightly News. Generally, what happens is whatever is trending in that direction, they encourage you. They reflect how we’re feeling – our optimism and our pessimism.

I was laughing this week because I saw a headline – I think it was at marketwatch.com – that said, “Oil expert predicts that oil is going to go to $30 a barrel.” Now, if you haven’t been paying attention, oil has been plummeting in price to well under $100 and this expert was saying that oil could go to $30 a barrel. Wow. I think it touched there briefly a few years ago but, beyond that, I don’t remember the last time it was at $30 a barrel and this is what we’re hearing about a lot in the financial press. If you’re paying attention, you’re like, “Wow! Oil is plummeting! I need to get out of energy stocks.”

Now, do you remember when energy and oil prices were well above $100? Close to $140 a barrel and we had books coming out called Peak Oil. Do you remember the term “peak oil” where they were saying we’re going to run out of natural resources real soon and everybody was freaked out? And, “Wow! We better buy these energy companies because they’re going to make a killing because prices are going to go up, up, and up.” That really wasn’t so long ago, was it? Now, we have the exact opposite and that’s what they’re promoting – you better get out of the energy stocks.

You need to avoid these market messages because they’re just going to reflect what’s going on. It used to be hedge funds were the greatest thing so a lot of people bought hedge funds and now they’re saying, “Oh, you shouldn’t buy hedge funds. They’re too expensive and they underperform,” and everything else. I saw an article again this week that said private equity is what you should be buying. We should buy private equity funds because they’re going to do much better than the markets.

All of these “market” messages basically give us temptations. “Wow. We need to be doing something.” If Jim Cramer is yelling, “Buy, buy, buy! Sell, sell, sell!” and throwing his chicken around or whatever props he has, “I should be doing something. I can’t just stand here. I need to be doing something!” When, in fact, to invest wisely, you shouldn’t do something. You should just stand there most of the time.

The A in the acronym is to avoid market messages. Bluntly, if you’re truly investing long term, you should not be paying attention to the market on a daily basis, on a weekly basis, on a monthly basis, maybe not even on a quarterly basis. You should just avoid all market messages because that’s all noise and all it’s going to do is tempt you to fiddle with your portfolio and that’s what normal investors do and you don’t want to be normal if you want to invest wisely and take care of your family.

Now, the W in our RAW acronym for Invest Wisely is going to work the process that you have. Now, just like in your planning process, your investment process should be based on research and facts and followed religiously. Before you make any investment decision, you should refer to your investment process. If you work your process, that will help you avoid a lot of the temptations. If you put all of those together to invest wisely, if you remember why you’re investing, what you’re actually trying to accomplish with these investing dollars, if you work to avoid all the short-term messages that we’re inundated with, and then, if you have a very prudent investing process in place and you have – in my vernacular – scheduled little conversations so you only address your investment portfolio in one of those conversations it’s scheduled for and that conversation has an agenda or a process that was thought out beforehand, that can help you avoid a lot of the temptations so that, while everybody’s running around doing something, you can just stand there and then you can really be positioned, if you’re doing it prudently, to take advantage of the capital markets and investing truly can be like watching paint dry which is what it should be.

You know, if you look at Warren Buffet and Charlie Munger, they basically say the same thing. Investing is a very long-term proposition. The problem is most of us just don’t have the self-discipline to stay the course. We keep fiddling.

I guess the theme for today is don’t be led into temptation. Most of the time, you just need to stand there and do nothing. I think that will help us plan well and invest wisely so we can achieve the things that we care about most which is retiring and being able to balance living well today and still feeling comfortable that we’re not sacrificing our tomorrow.

I want to thank you so much for joining me today. I’ll tell you, I was really sad that I didn’t do a Thanksgiving Edition. I was traveling with my family to Minneapolis. You know, it was 3 degrees up there? It was 3 degrees on Thanksgiving Day! Made it back to Texas, it was 70 when I got home. So, I’m really happy to be back. I’m not going to take a break over Christmas so I will be here whether you are or not. If you don’t listen before the new year, I want to hope that you have a wonderful Christmas, a happy holiday, a happy Hanukkah, a happy whatever it is that you celebrate.

Thank you so much for listening! This show is all about you and helping you plan well and invest wisely in your life.

This is Roger Whitney, wishing you well.



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