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21 reasons you’re terrible at managing money - featured image

21 reasons you’re terrible at managing money

Morgan Housel wrote a great column at many years ago where he explains that people usually get better at things over time, but there's something about money that gets the better of us.

It's one of the only areas in life we seem to get progressively dumber at.

He then outlined 77 Reasons You're Awful at Managing Money.


Here are 21 of my favourites:

1. You suffer from the Dunnig-Kruger effect; lacking enough basic financial knowledge to even realise that you're making mistakes.

People's lack of understanding about things like compound interest and inflation can lead them to believe they're making good financial decisions when in reality they're tripping over themselves with failure.

2. For every $1 raise you to receive; your desires rise by $2 or more.

3. You spend lots of money on material stuff to impress other people without realizing those other people couldn't care less about you.

You'd be shocked at how few people care where your purse was made or how much noise your car makes.

4. 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.

5. 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.

6. 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.

7. You're thrilled that the credit card you're paying 22% interest on offers 1% cashback on all purchases.

8. You work in a stressful job in order to make enough money to have a stress-free life. You see no irony in this.

9. You're a pessimist in a world where far more people wake up in the morning trying to make things better than waking up thinking we're all doomed.

10. You try to keep up with the Joneses without realizing the Joneses are buried in debt and can probably never retire.

11. You associate all of your financial successes with skill and all of your financial failures with bad luck.

12. Rather than admitting and learning from your mistakes, you ignore them, bury them, make excuses for them, and blame them on others.

13. You say you'll be greedy when others are fearful, then seek the fatal position when the market falls 2%.

14. You let confirmation bias take control of your mind by only seeking out information from sources that agree with your pre-existing beliefs.

Collecting Money2

15. You think you're too young to start saving for retirement when every day that passes makes compound interest a little bit less effective.

16. You're investing for the next 50 years but get stressed when the market has a bad day.

17. You don't respect the idea that "do nothing" are two of the most powerful words in investing.

18. You feel especially smart after last year's market rally without realizing that you had nothing to do with it.

19. You seek advice from a doctor to manage your health, an accountant to do your taxes, a lawyer to manage your legal problems, a plumber to fix your plumbing, a contractor to build your house, a trainer to help you exercise, a dentist to fix your teeth, and a pilot to fly when you travel.

You wouldn't consider doing it differently.

Then, with no experience, you go about investing willy-nilly, all by yourself.

21. You think financial news is published because it has useful information you need to know.

In reality, it's published only because the publisher knows you'll read it.

And here are two bonuses one for you:

22. 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.

23. You nodded along to all of these points without realising I was talking about you.

About Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

Hi Michael, i just finished reading your book " How to Grow a Multi-Million Dollar Property Portfolio " and I wanted to share my thoughts on the book with you and your readers. Since starting my " Property Investment/Development Business " 2 ye ...Read full version

1 reply

Re number 22... Warren Buffett used that asset when he was way younger than 20.

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