By: Laura Walton AFC®
Morgan Housel writes for the Motley Fool and Wall Street Journal while contributing to The Huffington Post, Business Insider and USA Today. He’s talented at expressing financial truths in a way that hits home. I’ve picked my favorite 13 of Morgan’s observations from his February 10, 2014 post titled “77 Reasons You’re Awful at Managing Money.” Here they are:
#4. For every $1 raise you receive, your desires rise by $2 or more.
#7. You have never been able to predict what the market will do next. This doesn’t deter you from trying to predict what the market will do next.
#10. You get upset when you hear on TV that the government is running a deficit. It doesn’t bother you that you heard this on a TV you bought on a credit card in a home you purchased with a no-money-down mortgage.
#13. The single largest expense you’ll pay in life is interest. You’ll spend more money on interest than food, vacations, cars, school, clothes, dinners out, and all forms of entertainment. You do this because you don’t save enough and demand a lifestyle you can’t actually afford. The future owns your income.
#16. You think dollar-cost averaging is boring without realizing that the purpose of investing isn’t to minimize boredom; it’s to maximize returns.
#28. You worship “legendary” investors whose only real skill is marketing themselves. Their career track record probably lags a money market fund.
#31. You think you’re too young to start saving for retirement when every day that passes makes compound interest a little bit less effective.
#33. You’re investing for the next 50 years but get stressed when the market has a bad day.
#34. You’re willing to work hard for $15 an hour, but too lazy to spend four minutes to fill out your company’s 401(k) paperwork that could result in thousands of dollars of free money from matching contributions.
#46. You forget that the single most valuable asset you have as an investor is time. A 20-year-old has an asset Warren Buffett couldn’t dream about.
#56. You think the stock market is too risky because it’s volatile, without realizing that the biggest risk you face isn’t volatility; it’s not growing you assets by enough over the next several decades.
#60. You don’t respect the mountains of evidence showing that once basic needs are met, the amount of happiness each additional dollar of income provides diminishes quickly. This causes you to spend most of your life chasing “the number” you think will make you happy, but probably won’t.
#63. You think renting a home is throwing money away when for many it’s one of the smartest financial decisions they can make.
Please visit Morgan’s post for his other 64 bits of wisdom…