If you’re looking for more success in life – be it in your property investing, wealth, or money management, today’s episode of my Podcast is for you.
I’m going to share 2 sessions with you – in the first one, I will discuss 21 reasons many people are terrible at managing money.
And even if you’ve got your finances under control, I bet you’ll learn something from the lessons I want to share.
And then I’ll be chatting with Brett Warren, national director of Metropole Property Strategist about something very interesting he found when he sat down with potential clients of Metropole. He realized that their homes often performed better than investment properties they owned. I’m going to ask him why.
21 reasons you're terrible at managing money
Morgan Housel wrote a great column at Fool.com 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:
- You suffer from the Dunning-Kruger effect; lacking enough basic financial knowledge to even realize that you're making mistakes.
- For every $1 raise you receive; your desires rise by $2 or more.
- You spend lots of money on material stuff to impress other people without realizing those other people couldn't care less about you.
- You have never been able to predict what the market will do next.
- 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.
- The single largest expense you'll pay in life is interest.
- You're thrilled that the credit card you're paying 22% interest on offers 1% cashback on all purchases.
- You work in a stressful job in order to make enough money to have a stress-free life. You see no irony in this.
- You're a pessimist in a world where far more people wake up in the morning trying to make things better than wake up thinking we're all doomed.
- You try to keep up with the Joneses without realizing the Joneses are buried in debt and can probably never retire.
- You associate all of your financial successes with skill and all of your financial failures with bad luck.
- Rather than admitting and learning from your mistakes, you ignore them, bury them, make excuses for them, and blame them on others.
- You say you'll be greedy when others are fearful, then seek the fatal position when the market falls 2%.
- You let confirmation bias take control of your mind by only seeking out information from sources that agree with your pre-existing beliefs.
- You think you're too young to start saving for retirement when every day that passes makes compound interest a little bit less effective.
- You're investing for the next 50 years but get stressed when the market has a bad day.
- You don't respect the idea that "do nothing" are two of the most powerful words in investing.
- You feel especially smart after last year's market rally without realizing that you had nothing to do with it.
- 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. Then, with no experience, you go about investing willy nilly, all by yourself.
- You think financial news is published because it has useful information you need to know.
And here's two bonuses one for you:
- 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.
- You nodded along to all of these points without realizing I'm talking about you.
Why your home may outperform your investments with Brett Warren
My business partner Brett Warren wrote an interesting blog recently explaining what he found when he spoke with potential clients of Metropole who were existing homeowners and also owned one or two investment properties.
He found that while often their homes had performed strongly growing significantly in value, yet in many cases, their investment properties have struggled and, in some cases, fallen behind.
So, today I ask Brett why this happens so frequently.
Brett Warren says that while people may keep fundamentals firmly in mind when looking for their homes, they often overlook them when it comes to investments.
Take a look at some of the fundamentals that investors tend to overlook.
- Supply and demand
- Understanding the intrinsic land value
- The neighbourhood features
If you wouldn’t compromise on these factors when buying a home, you also shouldn’t compromise when investing in a property.
Links and Resources:
Some of our favourite quotes from the show:
“It’s optimists who are successful in this world, not pessimists.” – Michael Yardney
“By the way, successful investors have a long-term horizon.” – Michael Yardney
“What a neat philosophy – to never quit looking for another way to get where you’re supposed to go.” – Michael Yardney
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