The case to be boring with your money
The idea of ââgetting rich in flashy ways is not new. After all, Charles Ponzi, for whom Ponzi schemes were named, defrauded investors over 100 years ago with a get-rich-quick scheme based on lies. Today, speculative investments, multilevel marketing companies, and other risky endeavors to generate profits are still enticing traps.
You can always leave your money alone in an interest-bearing account and let the time do its thing, but that doesn’t really make for exciting party conversations, does it? We therefore open and close accounts. We invest in hot stocks and sell them at the first sign of bad news. We waste our money because, in our minds, growing wealth is supposed to take effort.
âIn almost everything we do, activity pays off: if I want to be a good runner, I should run every day. If I want to be a good painter, I should constantly practice, âMorgan Housel, Collaborative Fund partner and author ofâ The Psychology of Money, âsaid in an email. âBut if you want to be a good investor, the best thing for people to do is don’t trade, don’t tinker, leave it alone – and I think it’s so counterintuitive because it’s so unique to invest. “
In a world full of financial influencers peddling products and friends bragging about buying NFTs, it’s perfectly okay to manage your money in a way that primarily entices you to yawn. Here’s why.
BEING BORING GIVES YOU MORE TIME TO LIVE YOUR LIFE
Managing your money is a necessary chore, and it’s not really fun. Fortunately, we are living in an efficient age. Within minutes, you can set up automatic money transfers that discreetly send your money to separate accounts serving different purposes. Why keep money management on your to-do list when it can happen on its own while you sleep?
âMoney is a way you live your life, not the life itself,â Meg Bartelt, financial planner and founder of Flow Financial Planning, said in an email. “The more complicated, changeable, or scary your investments, the more time you spend working or thinking about them, and therefore the less time you have to live.”
BORING PREVENTS YOU FROM MAKING UNINTENDED DECISIONS
It’s important to periodically take a look at your investment accounts, but obsessing over every move in the market is exhausting and counterproductive. This can lead to reactive decisions that damage your wealth in the long run.
Choosing to be boring with your money is an exercise in letting go of the illusion of total control. Yes, there will always be financial news around the clock, but not everything that happens in the big economy affects you as an individual. Turn off news and stock market alerts on your phone so you don’t want to react. Instead, consciously decide when to watch the news and check your accounts so you can stay informed with less stress.
WHAT IS BORING MONEY MANAGEMENT
– CREATE A PLAN THAT YOU ARE RESPECTING (NOW): Bartelt finds that, whether his clients avoid their money or obsessively follow it, it is because they all feel the same emotion: fear. The antidote is a financial plan on the basis of specific goals and values. âHaving a plan is reassuring,â she said. “Once they have the plan, or hell, once they know they’re going to have one, people relax.” Base your savings and investment goals on what you plan to spend in the short, medium and long term. Leave some leeway for life changes and other uncertainties, as these are guaranteed.
– PREPARE FOR EMERGENCIES: There’s nothing particularly appealing about up-to-date emergency funds, life insurance and wills, but if the unexpected happens, these things can help keep you financially stable .
– AUTOMATE YOUR MONEY: Automatically transfer funds from check to savings or check to brokerage account. Contributing to a 401 (k) through your job is automation too, because that money comes directly from your paycheck. Making regular contributions to different accounts and increasing them as your budget allows and your goals change will increase your nest egg.
Once you’ve established your boring financial base, you can sprinkle some riskier investments if you want. But stick to your plan. âYou must actively and continually ignore the pervasive distractions, charlatans and blowers in order to stay true to your own values ââand goals,â Bartelt said.
This column was provided to The Associated Press by the personal finance site NerdWallet. The content is for educational and informational purposes and does not constitute investment advice. Sara Rathner is a writer at NerdWallet. Email: [email protected] Twitter: @SaraKRathner.
NerdWallet: What is a financial plan and how do you create one? https://bit.ly/nerdwallet-financial-plan