09 Sep 2021 Can You DIY Your Finances?
On Tuesday at lunch time, I walked into a store in North Hills called Bonobos (or, per their own signage, BONOBOS). Now, this BONOBOS place is ostensibly a store for men, a place you could purchase, for example, a white dress shirt. The mistaken notion that this was a store where I could purchase a white dress shirt—a notion I hope I will be forgiven for having—was what brought me in, but as I was browsing what I falsely assumed to be shirts that were for sale, a kind gentleman made me aware that this store was not actually a store at all. It was simply a place to try things on? I think? And then order and have things shipped to your house? Honestly, I don’t know.
On a much greater scale, this is essentially the everyday experience of many people seeking financial advice. They have a basic if not fully formed idea of what they’re looking for—they want to mitigate risks, get organized, reduce anxiety, and do their best to plan for an uncertain future—but they don’t know where or how to get that. And what they most often run into are situations where individuals and institutions appear to be providing the advice, but really it’s an elaborate bait and switch. From bogus bank accounts to expensive and unnecessary permanent life insurance policies to social media influencers giving away advice for “free,” it’s frighteningly easy to walk into the financial equivalent of a BONOBOS and walk out either empty handed and embarrassed or waiting on a shipment of clothes you didn’t really want to begin with.
But to add insult to injury, even those who might pride themselves in avoiding these bait and switches are by no means getting it all right in their finances. This fascinating study about those who “freak out” and sell most of their equity holdings in a panic found that those who are male, or over the age of 45, or married, or with multiple dependents were all more likely to freak out than average. And do you know which demographic was most likely to freak out? Those who self-identified as being highly knowledgeable and experienced in investment matters!! The people who should know that panicked selling is a terrible idea are the very people who are most likely to do just that!
My point is this: The world is complicated. The financial parts of it can be especially complicated. And given our unavoidable ignorance, or overconfidence, or sometimes both at the same time, we will inevitably run into situations that limit our ability to act prudently, which is to know the good thing to do and then to actually do it. Sometimes the first part–knowing the good thing to do—is the hardest part. Sometimes acting on that knowledge is the hardest part. But prudence requires both, discernment and action, and both is what we do. If that sounds like something you would value, please let us know.