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“I NEVER MEMORIZE anything I can look up.” Albert Einstein, it seems, said this or something similar. I first heard the quote in my freshman physics class. The teacher asked a student to recite a formula. The student’s response: “I never memorize anything I can look up.”
I’ve adopted the same philosophy. My wife loves to point out that I don’t remember the names of streets in our neighborhood. But I don’t need to know them. I don’t live on those streets. I never provide directions to anyone who wants to go down those streets. Why fill my brain with unnecessary facts?
We humans make decisions on a daily basis that require remembering certain facts: your name, address, Social Security number, mother’s maiden name. You could look these up, but it’s more efficient to memorize them since they’re required on a frequent basis.
But what about other facts? I have a terrible memory. I know this, and it doesn’t bother me. I write down the facts that I think I’ll need, and I know where to find them. Consider my cell phone, which I keep in my car. I don’t remember the number, but I can look it up when I need it.
While president, Barack Obama owned only blue and gray business suits, so he wouldn’t have to give much thought to what he’d wear on any given day and hence make yet another decision. I understand this logic.
Many people are familiar with KISS, short for keep it simple, stupid. Keeping things simple means my days are simpler—and there’s less chance that I or my wife will make mistakes.
For instance, I use the same mutual fund for my Roth account as my wife uses. My theory is that, when I die and my wife consolidates our accounts, she’ll consolidate my Roth with hers, and not make the mistake of mixing traditional IRA dollars with Roth dollars and thus pay unnecessary taxes. Let’s hope my plan works.
My wife and I have all our retirement monies with the same mutual fund company. As with my Roth, I have just one mutual fund in my traditional IRA. I like simple and, again, I believe it’ll be easier for my wife after I die.
We also use just one brick-and-mortar bank and one online bank for our joint accounts. That’s it. We could have more, but why? If I thought I was brilliant in moving money around, I’d invest more time in making financial moves.
But instead, I invest my time in trying to understand where I might trip up. Buying or selling usually involves trading costs, so fewer trades mean fewer costs. Maybe I’m leaving money on the table, but at least I’m not losing money. That’s more important to me than trying to make more.
I have a degree in mathematics, but I’m lousy at arithmetic. If I want to be sure I’m correct when I add or subtract, I need to use a calculator. I know this. I have the tool to get the job done. It’s simple and cheap, I know where to find it—and, when I need math answers, it allows me to look them up. Simple.
Great insights! Can be applied to so much in life. Thank you.
“If I thought I was brilliant in moving money around, I’d invest more time in making financial moves.”
Remember research has shown that more times than not the less you do, other than occasional rebalancing, the better the returns.
Excellent. Glad to know there are others out there just like me! Thank you.
A person who knows and accepts their limitations. I’d rather challenge myself though and stay interested in everything.
Good points! As I have gotten involved with financial investments and other financial moving parts of all kinds, I have learned that keeping things SIMPLE is an attribute that receives far too little attention…in all respects…portfolio, trusts (or avoding them if possible), estate planning, beneficiaries, etc., etc. Someone has to deal with the mess of complexity when we are gone!! Anybody can come up with a complicated financial plan. A simple financial plan that is still effective is far more preferrable.
We have a simple revocable trust to keep it simple for our children, rather having them have to go through the black hole which is probate.
Having slowly succeeded in swallowing my pride over my recent inability to balance my checkbook without a calculator, I too have steadily simplified my financial life over the years. Except for a few stocks and ETFs in my Schwab IRA, I don’t even invest anymore. My primary SEP-IRA is in the robo-investment company Betterment, which spreads the money among a dozen Vanguard ETFs per my current safety formula. All I do is adjust the risk level a bit.
What I won’t do is put all our retirement money in one company. My wife’s SEP is in another robo-investor, Wealthfront, and I have the Schwab account on the side. Why not concentrate it? Because… what happens if something goes wrong with one company and we can’t access the money for a while?
It may seem like a largely irrational concern, but it actually happened to me, not once but twice, just a few months apart. In late 1990 the collapse of the Rhode Island banking system (triggered by an embezzlement scandal) and the subsequent failure of the underlying deposit insurance system sealed up my account. The funds were “safe” but completely inaccessible. For two friggin’ years.
So how to pay my mortgage, car loan and bills? I sought to withdraw funds from my universal life policy — which, just a couple of months later, was gone as well, a collateral victim of the Executive Life collapse in California.
Long story short, my underwater house (home values had plummeted 35% in a week) was scheduled for foreclosure and I was planning for personal bankruptcy when… my dad died suddenly. While managing my grief, I used my small inheritance to sell the house, pay off the mortgage lender and outstanding bills, and rent a trailer to leave Rhode Island as fast as I could go.
I will never put all my eggs in one financial basket, no matter how secure the basket. My gut won’t let me.
I agree. I remember my mom telling me the story about how they were homeless after the bank closed (with all their money) during the depression and they couldn’t pay their mortgage. Till the day she died she couldn’t keep all her money in any one bank. I’m all for keeping things simple, but I believe such generalities have to be nuanced. My retirement funds are spread across 3 financial institutions. My heirs know that, so it’ll be simple enough to handle when I pass. It’s free, doing my taxes is essentially no harder, RMD distributions are a breeze, and I sleep better knowing any one of those institutions can close and I’ll be okay until it gets resolved.
Your concern resonates with me. For a long time I kept five years’ worth of expenses in a bond ladder of 5 year Treasury Notes directly with the U.S. Treasury (in our TreasuryDirect account ) for this very reason. However TreasuryDirect is not a particularly user-friendly portal and it is a “complication” that I decided was not worth the effort. The internet says that as of December 31, 2023, Vanguard has 50 million investors. If something at a macro level happens to Vanguard that makes my investments inaccessible for more than a short amount of time (not smart enough to predict what this might be: hackers? fraud? something else?) I’d be in a boat with 50 million other people and there would be a good chance that the Federal Reserve, the SEC, Congress or somebody else would force a fix pretty quickly. And I suppose my individual investments at Vanguard could be stolen somehow, but this could happen whether I have them all at Vanguard or split amoung several different companies.
Simplicity is wonderful. Your comments on arithmetic reminded me of a story by Isaac Asimov titled “Feeling of Power” published in 1958. In this future, because of calculator use people had totally forgotten how to do mathematics.
I had a tax client who would come in with about 20 or so K1 forms; investments in things like oil drilling or real estate trusts. Seems every time he visited his financial advisor he’d leave the office with a new investment, while the advisor earned a nice commission. I didn’t like preparing that return any less than his beneficiaries are going to like sorting all that stuff out.
Now that my wife and I are retired and getting older I completely agree with the KISS approach for finances. I have spread our IRAs (regular and Roth) among two Vanguard bond funds (Total Bond Market Index, Short Term Treasury Index) and one Vanguard Stock fund (Total World Stock Index). I’d love to do the same thing with our taxable investments (which are currently invested in several different Vanguard stock index funds), but don’t want to incur the capital gains taxes that would be triggered to move them into different funds. I, like you David, realize that we may be leaving money on the table, but at our point in life I think simplicity has value that outweighs trying to squeeze the last few dollars from our investments. In the event of my death (or mental inability to continue to handle our investments) I want my wife to be able to easily manage our finances. And upon her death I want our children to be able to figure things out fairly easily. I note, however, that this “simplification” process has taken some time and perseverance to put into action. “KISS” isn’t necessarily “simple” to do.
I love the simplicity of your retirement-account portfolio — very similar to what I’m aiming to build.