An intriguing recent blog post, “Why We Fear Simple Money Solutions,” from Behavior Gap author Carl Richards got me to thinking. In his post, he cites three reasons he feels people way over-complicate their money management. His third point was especially familiar: “We like tradition,” says Richards, “So any time we see something that’s too different from what we’re familiar with, we treat it with suspicion.”
True enough. It’s why we love our comfort foods, our holiday gatherings, bowling leagues. As motivational speaker Jim Rohn has observed: “We generally change ourselves for one of two reasons: inspiration or desperation.” And my guess is that it’s desperation more often than not! That said, especially in the realm of finance, there is often good reason to look before you leap. Each change should be:
- Balanced – Embracing each and every change on Wall Street would likely add to your life’s complexity rather than simplify it.
- Well-Tailored – In a trash/treasure sort of way, your neighbor’s excellent new solution may be a disastrous idea for you and your circumstances. The saving, investing and spending needs of a single, 25-year-old entrepreneur is going to look very different from those of you who are deep into planning for your retirement while sending your kids through college and assisting aging parents.
- A Good Idea – Not every “new & improved” really is. Just ask Coca-Cola® about that.
That’s where I come in as an advisor. It’s my job to help our clients separate durable form from expensive flash. I like how Vanguard chairman emeritus described it in a recent interview, in which he was discussing the oxymoron of actively managed Exchange Traded Funds (which is another blog post entirely). He said: “Products keep coming out, and it’s worrisome. The big challenge for advisers is figuring out what’s innovation and what’s proliferation.”
So make new friends … and traditions. Keep some of the old. Whenever you’re not sure which is what in your money management, give me a call.
 InvestmentNews, “Three Things That Worry Jack Brennan,” February 17, 2013.