Financial wellbeing is rarely just about the numbers. But there are some areas where investors regularly miss opportunities.
Best of all? Some of them are free.
We’re talking about that collection of qualities that determine our human capital: the attributes, experiences, and habits that contribute to our ability to do our work and do it well.
Each of us has room for growth, and many of these qualities can be worked like a muscle. Generosity? Practice gratitude, and it will flow. Creativity? Get your internal censor a nice comfy chair in the corner of your brain so that you have the space to make something—then go for it.
Notice how we’re not talking about fighting your brain or your sense of self. We’ve known plenty of friends who flushed their energy trying to evict their weaknesses while their strengths—their true talent and potential—withered.
Even better, we don’t have to make these investments in huge, life-altering waves. Many of these qualities compound. Enthusiasm, punctuality, diligence: practice a few small actions and watch the habits improve each other!
Where can you invest in yourself? Your “earning power” is linked to a lot of domains. It’s not just your education or certifications. What areas of knowledge give you a unique perspective? What experiences have shaped you? These are parts of your financial journey that you can actively work on.
You’ll notice this investment is more about reflection than ‘rithmetic—but it’s work that can pay off in many ways. Your investments in yourself cannot be taken away, they adjust for inflation, and they help you lead a more interesting life to boot.
Clients, we’re glad to be part of the journey with you. Write or call when you’re ready to talk about this or anything else.
Our thoughts become words; words, actions; actions, habits; habits, character.
What we “do” for work is sometimes hard to describe. Often, it starts in the mind. Either we have a hunch, or a client wonders, “What if…”
Soon, we’re writing or talking about it. We’re acting on our plan. We’re integrating the change into the overall vision. And we’ve done it! We’re working our whole, integrated system.
Simple enough, right? Deliberate motion.
But it starts with planning, taking those thoughts and arranging them in the direction of our goals.
Lately, we’ve been thinking about that series of relationships. We’ve seen the sentiment posted above in many forms over the years, and we found out that versions of that idea have been ascribed to various poets and teachers for hundreds of years (not to mention Lao Tzu, Margaret Thatcher, and even the Buddha!).
Maybe the credit ought to be shared after all, because we think there is treasure of wisdom in this notion. If we could condense the chain, it would be this: planning is the attempt to shape your destiny.
Planning is agreeing to take your ideas seriously enough to examine them. Planning is a decision that your life will no longer be a thing that happens to you.
Planning is “opting in” to your life.
Clients, there is no one path we’re prescribing here. But we are firm believers in helping you work toward your goals, and geez are we geared up about it.
Whether it’s a thought from your head or a question for us, we’d love to hear from you. Write or call anytime.
The efforts to slow the spread of Covid-19 are reshaping our lives. Work-from-home (WFH), social distancing, and self-isolation mean big changes, with some unforeseen consequences.
We have been thinking and studying some of the impacts on society, striving to understand the effects on commerce and the economy. There are many unknowns.
Fewer people commuting means less traffic past the coffee shop, less wear on automobiles, emptier workplaces. When the virus has faded, will these effects be lasting, or fleeting?
Will work-from-home gain a permanent boost, reducing the long term demand for office space?
Do those who formerly stopped at the coffee shop everyday resume that habit when they begin commuting again?
After enjoying more free time from less commuting, will more people seek to live closer to their work?
“Dinner and a movie” has given way to carry-out, cooking from scratch, and streaming services. What happens when the crisis fades?
What is the future for movie attendance?
Does cooking replace some fraction of restaurant meals?
What effects will these trends have on commercial real estate?
There have been other effects, too. Online shopping got a big boost from mass retail store closings. Weddings, funerals, and other kinds of gatherings have been cancelled or postponed. Some people report an increased interest in improving their health; others talk about using food or alcohol to deal with stress. Are these changes lasting or fleeting?
After the 1918-1919 great influenza pandemic, the Roaring Twenties followed. Were exuberance and celebration a bounceback from the isolation, sickness and death of the pandemic?
We have many questions. What do you think? If you would like to talk about this or anything else, please email us or call.
One investment supersedes all others: invest in yourself. Renowned investor Warren Buffett promoted this idea in a 2017 interview. It cannot be taken away, it adjusts for inflation, it helps you have a more interesting life and earn more money.
Interestingly, Buffett’s prime example of this is not an Ivy League education, but a simple public speaking course, one that many thousands of others have also pursued. Early in life he realized a crippling anxiety about public speaking would impair his career. Beginning long ago with the help of Dale Carnegie, he is now at ease in front of tens of thousands of shareholders, high powered interviewers, presidents, other business leaders, or any other situation required of him.
When we invest in our selves, we are seeking to improve our value to others. The more valuable we make ourselves, the more an employer or customer will pay us. The collection of attributes that create this value are called human capital.
Many aspects of human capital are free. Years ago I became acquainted with a senior officer of a large publicly traded company whose most obvious super power is kindness. After he moved on to a leading role elsewhere, people familiar with him always remembered that trademark feature, and how he had helped them in the past, how he made them feel.
Kindness is free. So are dependability, punctuality, being true to your word, enthusiasm, diligence, and all the other traits we seek when we deal with others. Others desire those same traits in us.
Some aspects of human capital require time and money, sometimes lots of both. Think of the education and training required of surgeons, for example. Educational paths and career planning are beyond the scope of this essay, but the value and wisdom of all of your choices ultimately comes down to whether you figure out how to add value to the rest of society.
We have heard the idea of “follow your passion” debated back and forth. Understand the difference between doing what you are passionate about, and being passionate about what you do. One of them has a wider range of opportunity than the other.
The source of our wealth is our earning power, which arises from our human capital. In future letters we will talk about how to manage the fruits of your human capital, but it all starts here.
Clients, if you would like to talk about this or anything else, or suggest ideas for future letters, please email us or call.
Knowing and doing are two different things. We were reminded of this recently, during a Financial Literacy Month discussion. A colleague surprised us with a contrarian opinion on financial literacy.
Conventional thinking is that the presence of so many people who fail to save for retirement and make costly mistakes is proof that more and better financial education is needed. Our colleague asked us whether the issue was one of knowing, or one of doing?
“Consider what we know about health and what we do about health,” he said. By some estimates, lack of exercise and poor eating habits lead to millions of deaths each year, not to mention deaths from tobacco use and alcohol abuse. Haven’t we all heard about these things?
Likewise, most people may have heard that investing for the future is a good idea, and spending within one’s means. But surveys show that many are ill-prepared for retirement.
Whoever first said “knowledge is power” perhaps was only partly right. Wall Street pioneer Roger Babson wrote a century ago:
“Experience has taught me that there is one chief reason why some people succeed and others fail. The difference is not one of knowing, but of doing. So far as success can be reduced to a formula, it consists of this: doing what you know you should do.”
Our view at 228 Main is that ‘knowledge in action is power.’ We will continue to promote knowledge and awareness of financial and investment concepts and ideas. But we will also work to motivate and persuade on the merits of taking worthwhile action.
Knowing. And doing. We need both in order to get where we want to go. Clients, if you would like to talk about this or anything else, please email us or call.
I’ve been electrified by James Clear’s book, Atomic Habits. Examining the central message, you may be able to see why:
“Small habits don’t add up. They compound. It’s remarkable what you can build if you just don’t stop. The business you can build if you don’t stop working. The body you can build if you don’t stop training. The knowledge you can build if you don’t stop learning. The fortune you can build if you don’t stop saving. The relationships you can build if you don’t stop caring. Small habits don’t add up. They compound. Tiny changes. Remarkable results.”
This might help explain the wealth I’ve seen you build with lifetimes of work, the stellar careers and businesses so many of you have had, the warm network of relationships so many of you enjoy.
I’m heartened by this message when I think of building a sustainable enterprise to serve you more reliably, staying healthy so I can work to age 92, and meeting other, more personal challenges.
It is exciting, too, to think about bringing the message of effective habits to generations just beginning to save and invest and make career decisions.
Clients, if you would like to talk about this, or anything else, please email us or call.
We humans are not perfect, have you noticed? Many of us have aspects we would like to improve in order to make life better.
In his book Atomic Habits, James Clear illustrates three layers of behavior change. We may seek to change an outcome, or the process to get that outcome, or our identity. Let me explain.
The outcome is the obvious thing, what we want to end up with. I’m reminded of comedian Steve Martin’s advice on how to become a millionaire. “First, get a million dollars.” Lose weight, get a degree, or get in shape are other examples of outcomes.
The process or systems you use to get to a desired outcome are a better focus for our efforts to change. If your goal is financial independence, you might begin contributing to a retirement plan, start a Roth IRA, begin a monthly automatic deposit to a savings account, find ways to earn more money, or monitor your expenses more carefully.
It seems like a process orientation – how we get to our desired outcomes – is a better place to focus than on the outcomes. But there may be a more powerful layer to effect change.
A recent news story indicated that a large fraction of pre-retirees believe they will struggle financially in retirement. If part of one’s identity is they will end up broke, it may be difficult to make process improvements stick. “What’s the use, if I am going to end up broke anyway?”
If identity becomes “I am a person who will always be able to get along financially,” then doing the things that are necessary to make that true become easier, if not automatic. But can our identities be changed?
James Clear says that what we do affects what we believe about ourselves, our identity, just as our identity affects what we do. So taking those steps to improve our processes, combined with a thoughtful approach to what we want to become, may actually shape our identity over time.
Consider the difference between “I’m trying to quit smoking” and “I don’t smoke anymore.” The first version is from a person who still identifies as a smoker. The second version is from someone who believes that smoking is now a part of their past, not their present identity. You know which one is a more effective way to look at it.
Clients, if you would like to talk about this or anything else, please email us or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.