You can’t Netflix and Chill your way into financial security
I get it. There’s a lot going on in the world. Events abroad this year have been a worry, and things at home are just plain baffling.
It’s all very downbeat, so it’s easy to become jaded or disillusioned, to turn your back on decisions and plans and just settle down with a bottle of red and Netflix.
That’s precisely what I did the other night. For a documentary called “Get Smart with Money.”
If you’ve not caught it, this US production matches four financial experts with families across the US who are struggling to make sense of money.
Admittedly one of those families included a highly-paid NFL player, and one of the experts spells his name Ro$$, but once I looked past this, there were a few good take aways.
1: Get smart, get educated
If you’ve not had any financial education or done your own homework then making clear, informed financial decisions isn’t only challenging, it’s stressful.
In the show, this was equally true for the wealthy as it was for those just getting by. In my experience, the best way to combat procrastination, apathy and reduce money stress is to learn.
Or, if you simply don’t have the time or bandwidth, find someone who’s learnt about finance who can offer you advice.
2: You can be smart by default
Some of the guidance from the coaches made me wince but all of them recommended something I agree with.
Unless you have compelling evidence suggesting otherwise, a well-diversified, low-cost investment fund that tracks the prices of the world’s great companies is an ideal starting point for any financial plan.
With this passive approach, rather than trying to identify the best “needles” in the market haystack, you simply buy the whole haystack. And that haystack means that you own a small part of thousands of the world’s great brands.
The alternative is the active approach. Here you pay much higher fund charges to potentially find the most profitable needles (hoping they’re not blunt). This approach to investing can work over short periods but is notoriously difficult to sustain.
Passive investing is therefore a great default investment engine for most financial plans.
3: Turning your brain off can be a smart decision
It’s called analysis paralysis. You’ve got something to do, and there are so many options that you just can’t do anything. At all. Ever!
It’s something I see time and time again. Someone has a hard-earned lump sum to invest in their pension or ISA fund. And that analysis is in overdrive.
“Is now a good time? Do I wait a week? A month? A year? What if X happens? Or Y, or Z, or ℼ?”
It’s all the pressure from that lump sum and the answer is unknowable.
Avoid it. Turn your brain off and set-up a monthly standing order, and automatically invest in your fund at different times and prices. It’ll even out those X, Y and Z fluctuations so you get a good slice of the ℼ.
The best time to invest is rarely obvious, so take the pressure off yourself.
4: Being smart isn’t always about sounding smart
You might think the language in this blog, or that the Arkenstone team use when they talk to you is simplistic. Or that the analogies seem a bit basic.
To get smart with money, it can be invaluable to have someone explain things in a way you can understand. But that’s not the default for the finance profession:
Netflix Coach: You need to invest in the S&P.
Client: The Essen what?
There’s so much jargon in finance but over-using it isn’t big or clever. A financial planning meeting shouldn’t sound like an episode of Star Trek.
5: Smart people don’t push. They pull
One couple on the show had a goal, a really clear one. They wanted to reach financial independence as soon as possible. “The ultimate goal of our money is to never have to think about our money.”
They made sacrifices, downsized their home, cut their expenditure. All huge decisions for their young family. And it was all driven by the pull of the future life they craved.
They weren’t pushed into financial changes by fear or boredom, they were pulled along by a meaningful goal.
If you want to make smart decisions, find your pull.
6: Finally, smart people find help
We all want the same things. Someone we can trust. Someone who can help us understand the complicated things.
That’s definitely true of finance and true of the families on Get Smart with Money. They found experts to give them straightforward advice when they needed it, or coaching and perspective when that was required.
A lot goes into a smart financial decision. The best thing you can do is often the first thing. So if you don’t have the time, confidence or expertise, reach out to a professional that does. From there, everything else – goals, strategy, management and administration – naturally follows suit.
Employing a helping hand could be the smartest thing you do today.
At the very least, it’ll free up some brain space for you to get back to Netflix.
Simon