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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.
Nice list. It is good to keep perspective, and the world is often as messy or complex as we make it to be.
The goal of having simplicity in one’s financial affairs is a good one. Unfortunately, in the US, the more successful you are in your working life, the more assets you accumulate, the more complexity increases for you. Our tax code is extremely complex. Worse, there is no general consensus, as Australia has, which would allow a national pension scheme to be developed. Nor, do we have any societal agreement on how to deal with healthcare, eldercare, or anything else.
I don’t think that’s universally true. While we don’t have a single-payer setup like Oz and many other countries, between ACA (healthcare) and Medicare (elder care) we do offer coverage to a large swath of the population that doesn’t have health insurance coverage through their employer. (and FWIW, when I lived in Oz it was a two-tiered (or more) system for healthcare. Everyone was covered with a basic plan, but you could buy higher level plans to get access to a wider (aka better) selection of providers).
As for pensions, many people do have access to some form of DC plan, which admittedly is not as good as Super, but it’s better than nothing. The trouble is many people don’t take full advantage of it while they’re young and working – they’re too busy spending on the next nicer car or next bigger house when they could be plowing as much as possible into some type of DC plan.
“But I am firmly convinced that simple is better than complex.”
Absolutely correct.
Although my past and numerous efforts at trying to make that point have, alas, failed miserably.