06-27-2023
Today, TheStreet.com ran the article attached below.
Dave Ramsey Reveals the Biggest Factor of Success in Personal Finance According to Ramsey, this is just how it is. (June 27, 2023, Thestreet.com)
Excerpts:
“Personal finance is only 20 percent head knowledge,” he explains. “The other 80 percent — the bulk of the issue — is behavior. And it’s our behaviors with money that can get us into the biggest trouble or lead us [to] the biggest successes.”
His most recent tip is a broader observation about handling money — and you might be shocked to read that Ramsey says using your brain is only a quarter of the battle. That’s right, turn off that noodle and worry about how you’re going to tackle what Ramsey says is the biggest hurdle to financial independence.
I thought it was funny how the author thinks 20% is a quarter of the battle.
Control of Emotions, control of behavior. That has been the overriding philosophy for my clients since I realized it about 12 years into the business, 26 years ago. I had no way to keep clients invested. Myself included. I sold because I was afraid. I bought when I was excited. When I googled some information for making a decision, I worded it such that I would come up with the answers I wanted to back up my impulses. If my brain was screaming “GET OUT!” I may google “Why is XYZ going bankrupt?” then pick a depressing headline. If I was excited to buy I may google “what is the future potential for XYZ,” then pick an exciting headline.
I don’t know a lot about Dave Ramsey, other than I know a lot of people who have been helped getting out of debt and saving through him. I assumed the behavioral piece would have been there all along. I immediately thought someone may have given him my book, (Mindful Money-how to overcome the number one obstacle to investment success: your brain.) You never know. If it was that, I would be glad. He can help so many people with the truth of how the wealthy got that way.
I think that controlling behavior is 90% of the battle for all of us. If you had tons of knowledge and poor emotional control and behavior, you would be broke. If you had almost no financial knowledge and perfect behavior you would become wealthy.
You or an advisor or robo advisor can pick investments. The only problem with the online “robo” advisors is they can’t say “you’re psychotic” for wanting to take your money out of the market at the bottom. I wouldn’t say that either, because it’s too harsh, but I have a lot of synonyms at the ready. The computer also can’t explain why there is no other way than staying put for the long run, and how that decision can create wealth for you and generations to come. It can’t tell you why one or more of the picks suck and encourage you about the investments that have tripled. You can’t ask yourself or the robot questions. If you do, they will immediately ask you if you want to join the premium version for only $XX.99 a month. Finally, the robo advisor won’t tell you to avoid listening to every stock tip you hear from your barber’s uncle who got it from his plumber’s cousin.
Next time I will be picking through the Biden tax plan for 2024.
See you soon,
Craig
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