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Like many HD readers, I really enjoy the writing of Morgan Housel. He recently wrote
“You should obsess over risks that do permanent damage and care little about risks that do temporary harm, but the opposite is more common.”
This tapped into a train of thought that I’ve been on recently – focussing on the important stuff. Or, as on old boss of mine use to say, “The main thing, is that the main thing, is the main thing”.
We live in a messy, complex world.
When I use my web browser, it lists a multitude of news stories that are all jostling to be seen as the most urgent, critical, vital. When I check on my favourite finance blogs, there is lots of expert analysis and advice. The links from these blogs also have lots more analysis and advice. Often this is consistent, sometimes it isn’t.
Most importantly, this torrent of news and advice is so often focused on minutia.
• Choosing one particular type of account rather than another because of a tax advantage.
• How to find “optimisation” in your asset allocation – how often should I rebalance, how should asset allocations change with age etc.
• How to maximise your credit score.
• What will happen to various investment options in the next day, week, month or year.
It seems to me that pursuing these many and various personal finance quests probably does two things – leads to mental exhaustion, and has little impact on reaching a comfortable financial life.
I have come to the view that as human beings we are likely better off keeping a very short list of important things that we devote our time and effort to.
With absolutely no claim for these to be correct, I’ll offer some of mine.
In business:
– Keep our staff happy and safe
– Focus on our customers and their satisfaction
– Focus on the big items of revenue and expense, rather than “nickel and dime” items.
For our personal finances:
– Be sufficiently frugal so there is always something left over
– Put every single dollar to work – either paying down debt or invested into simple, low cost funds
– Stay committed to the long term, ignoring any short term oscillations
This approach has served us well. Our priorities won’t be for everyone, and I’m certainly not smart enough or qualified enough to offer them as advice to anyone else.
But I am firmly convinced that simple is better than complex.
As my German professor used to say, “Take care of the little things and the big things will take care of themselves.”
Greg, thanks for a thought-provoking article. I think Housel is a good writer, boiling things down to their essence. But I also think we should remember Einstein’s admonition that “Everything should be made as simple as possible, but not simpler“. This has been interpreted as trying to find the balance between clarity and accuracy.
I really like your personal finance list of important things .As you write “We live in a messy, complex world.” It can be a challenge to find that balance in our complex world. Your 2nd point – using every dollar – reminded me of a situation some 30 years ago when a friend and colleague enlisted me to figure out what to do with “excess” paychecks. He was considering further investing or paying off his mortgage. It made for some interesting discussions and helped me develop some of my thoughts on personal financial planning.
One of my favorite quotes.
Good list. No improvement from me.
More than a quarter of a century ago I accompanied my then 11 year old teen daughter and another youth softball pitcher to a skills and motivation camp held in Tifton, GA. The Higher Ground camp was founded by a man named Bobby Simpson who annually cobbled together a volunteer group of past softball players, some college coaches and assistant coaches for a two day camp for girls age 9 and up.
Back then I had also umpired youth softball and volunteered at that one camp to call balls and strikes because they needed a warm body to help. My tangible reward for doing so was a T-shirt emblazoned with the organization motto’s of “Doing Better Everyday” and “The main thing, is the main thing, is the main thing”.
Funny to me how learning to approach problem solving and practicing those necessary skills have come from unexpected sources during my life be them on a dusty field in Georgia surrounded by peanut farms or reading a blog where the writer shares what has worked well in their life.
Count me on team simple.
Great contribution,
The Pareto Principle, or the 80/20 rule, is the perfect lens for this. Your article perfectly captures how 80% of financial success comes from just 20% of your actions, a concept that’s universal no matter if you’re an Aussie, American, or Brit
.