Capital Investment Advisors

#195 – Lessons From The Psychology Of Money: Part One

On today’s episode, Wes is joined by Producer Mallory for part one of their discussion about the biggest takeaways from Morgan Housel’s bestselling book The Psychology of Money. They cover concepts such as the influence of personal history, the freedom money can offer, luck and risk, knowing how much is enough, the power of compounding, getting wealthy vs. staying wealthy, and unexpected outcomes.

Read The Full Transcript From This Episode

(click below to expand and read the full interview)

  • Wes Moss [00:00:03]:
    I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money, and it’s almost impossible to retire early. Actually, I think the opposite is true. For more than 20 years, I’ve been researching, studying, and advising american families, including those who started late, on how to retire sooner and happier. So my mission with the retiree retire sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. I’d love for you to be one of them. Let’s get started. There are a lot of good books out there about money, thousands of them.

    Wes Moss [00:00:41]:
    I’d like to think what the happiest retirees know is one of them. But of course, here on the retiree sooner podcast, we like to cover books that we think are impactful and can be helpful to your retire sooner journey. I wish I’d actually read this book sooner, but I’ve heard so much hype around it. And one of my favorite quotes of the year is from this book, or at least from the author. And I thought it was high time I dug into the psychology of money by Morgan Housel. And on today’s episode I wanted to give you the highlights of that. Now, if you do this on audiobook, I think you can get through it in seven or maybe 8 hours. But this is one of those books I liked so much that I couldn’t stop taking notes on my iPhone.

    Wes Moss [00:01:25]:
    So I took 14 pages of notes when it came to this book. The stories, the lessons, and they all hit such a strong chord with me, and I thought, this is exactly what our retire sooner folks need to hear. So today is really my take on what I would say is a timeless and really well thought out book on money lessons from Morgan Housel. As an author, he’s got tons of accolades. He’s sold close to 5 million books, and he’s been named one of the most influential people when it comes to markets and investing. But that’s not why I wanted to cover the lessons. I’m covering it because he’s perhaps the best person or writer to approach and give credit to the psychological side of money and investing. Yes, there’s a lot of books around behavioral finance, or BFI we’ve talked a little bit about here on retire sooner, and nearly all those books help identify the human money missteps that we take and kind of in a scoldy way, tries to fix you as a broken human investor.

    Wes Moss [00:02:31]:
    But I haven’t really found a lesson in behavioral finance or psychology around money that’s this helpful and this actionable. And I really think Hausel helps us with this. I think it gives the appropriate credit to not just our brain and our money, but the human psychology that pushes and pulls us in our different money directions. And by identifying our human nature and how we think about money and how it really impacts our financial journey long term. With stories of people that exemplify these lessons, I think it’s tremendously helpful. Now, there are 20 lessons in the book. I thought 20 was a little much. I tried to whittle it down to ten because it’s a nice round number.

    Wes Moss [00:03:21]:
    But I think I’m going to go over and we’ll focus in on what I thought were the 14 most important actionable that we can learn from and can help your retire sooner. Journey with that producer Mallory comes to the studio table.

    Mallory Boggs [00:03:37]:
    Hello, Mallory. Thanks for having me on. I’m so excited to be here.

    Wes Moss [00:03:41]:
    I feel like it’s been a little while since you’ve been on the show.

    Mallory Boggs [00:03:43]:
    It has took. We took a little bit of a breather. I was back here in January when we were talking about Dave Ramsey, but.

    Wes Moss [00:03:50]:
    You got married, you went on vacation or busy. You’ve been a busy lady.

    Mallory Boggs [00:03:58]:
    All I’m saying is life is good. Life is good. So, Wes, I love the fact that you actually picked up the psychology of money. And we’re reading this book, and I loved when we were talking about it last week on money matters and you mentioned how you really wish that you could just get a good summary of it for an hour. And so then you essentially decided to do that for our listeners.

    Wes Moss [00:04:17]:
    That was before.

    Mallory Boggs [00:04:19]:
    Yes, before we had recorded. I guess it was right before we recorded.

    Wes Moss [00:04:21]:
    Yeah, I know that I’ve seen book summaries online and I think it’s blink list or there’s a couple of places and I’ve tried them out and it hasn’t been exactly what I was thinking, but I’m kind of doing exactly what I would like someone to have done when it comes to this book. However, this one is so important. I wanted to get every single nook and cranny out of it. But I think because I did dive into it and spent so many hours parsing it and try to whittle down to the most important pieces, that’s what we’re trying to do here today. So, sure, yes, please go out and buy the book. I think it was absolutely worth reading or listening to or the next call it 45 minutes or so gives you most of what you need, maybe everything you need when it comes to the super important lessons in this book, I.

    Mallory Boggs [00:05:10]:
    Think it’s going to hopefully make our listeners lives a little bit easier and a little bit smarter. One thing that also stands out to me with this, besides just calling it b fi, which is the best acronym ever, behavioral Finance. B Fi. It sounds so much cooler when you say b fi as opposed to just behavioral finance. Right. But I think back when we first started working together, years and years ago, I think that’s right, when Vanguard put out their study on the value of financial advisors and how I believe, oh, my gosh, it was way back in the day, and I know they still do that study now, but I think they said that for the value of a financial advisor, you might be paying 1%, but you would have a 3% return just because of the fact you’ve got somebody holding your hand and actually helping guide you. Is that correct?

    Wes Moss [00:05:55]:
    Well, it’s similar to that, yes. And first of all, not everybody needs a financial advisor, because there are great books like the psychology of money, that can guide you with really good long.

    Mallory Boggs [00:06:06]:
    Term habits and b fi. Great b fi habits.

    Wes Moss [00:06:09]:
    B fi habits. I would call these almost psy fi habits. They’re a little different than behavioral finance habits. They’re similar, but this is a little more psychological and I think a little easier to implement. The vanguard study attempts to figure out where people get the most help around financial advice. And you can get a lot of things like asset allocation, diversification, really just through products. You can go find a fund that does a lot of that for you, and those are all important pieces of the equation. But some of the things a financial advisor will do for you or a firm will do for you are those things that you could technically just do on your own.

    Wes Moss [00:06:47]:
    And a lot of people do manage their assets on their own. And then there’s a huge percentage of the country, and there’s been various studies on this. I don’t know if it’s 30 or 40%. I’ve seen studies, it’s 50 or 60%. And when your asset levels increase and they get higher and higher, you tend to end up having. There’s a higher percentage of people that do get financial advice just because the stakes get higher and higher and they’re so high. Even if you are a great investor or great with your own money, it really helps to have someone by your side who is maybe a coach, a mentor, and can be alongside you in the journey. I remember before spinning was big, before Peloton ever came out.

    Wes Moss [00:07:30]:
    So maybe ten years before Peloton is the first time I ever went to.

    Mallory Boggs [00:07:33]:
    A spin class, a long time ago.

    Wes Moss [00:07:37]:
    Probably 20 years ago, my wife and I would go to these spin classes together again. That seems like with the number of kids we have now and all the weekend activities, that seems like such a far away event that could ever happen now. But I remember one of the instructors, one of the lines they would say over and over in these classes is even Flo Joe had a coach.

    Mallory Boggs [00:07:59]:
    Oh, I love.

    Wes Moss [00:07:59]:
    Do you remember Flojo? Flojo was one of the best female Olympic runners in the.

    Mallory Boggs [00:08:05]:
    You know, I don’t know if I remember her, but you guys have talked about her enough on here. I know Flojo Flo Joe is again.

    Wes Moss [00:08:11]:
    One of the best female runners in US Olympic history. And at the time, Flo Joe, I think, was even more popular. So I remember that phrase, even Flo Joe had a coach. And no matter how good you are at something, there comes a time when it’s super important to get some. So what Vanguard essentially says is that there may be some help from an advisor to make sure you do the fundamentals, the basic building blocks of investing, diversification, asset allocation. But the planning side and keeping an investor’s eyes on the long term prize, that in itself can add a huge amount of value over time, because then that, in turn, can help with the behavioral or psychological side of making sure that you’re comfortable with your investments. You have lower levels of anxiety around that, which lead to better financial decisions and then coaching behaviorally through difficult times in markets or euphoric times in markets, to not go way outside the parameters of what your plan calls for, so that you end up in a really bad situation. So where VanGuard is saying that the value of advisors, it’s a long list, but a lot of it has to do with the coaching aspects and the guidance that can be very psychologically helpful and lead to better outcomes.

    Wes Moss [00:09:32]:
    And that’s what Vanguard says in what I believe is called their Advisors AlphA study. All right, so we’re going to start out with, I think that we set this up, and again, we’re going to go through 14 of these. I’m going to give you a quick preview. Number one is no one is crazy, which is kind of the best name of all of them. Number two, freedom, as in BraveHeart. Three, luck and risk. Number four, knowing you’re enough. Number five, the power of compounding.

    Wes Moss [00:10:01]:
    That’s just the first five we’re going to get to 14. Here’s this initial story, though, that he starts out with, and this is really about how, when it comes to investing, there’s great parity. No matter how smart you are, no matter how educated you are. This is one of the places around the world, and it’s obviously an important place. It’s the cornerstone of our financial foundation. When it comes to investing, there’s great parity regardless of your education level. And I think that’s even more true today than ever, with resources like books and how much Wes can learn online. 50 years ago, it was only the rich that had a stockbroker.

    Wes Moss [00:10:39]:
    Today, financial information is rampant. Now, that can be a bad thing as well. But there’s certainly lots of good information out there. Morgenhausel was a valet, and in his, let’s call it his teens and twenties, and he was a valet, I want to say, call it La or San Francisco, some rich technology place, and would see technology millionaires come in all the time in their fancy cars. And one of the stories he told was there was a guy was so boastful and into his money, he’d carry around $10,000 in cash. He’s tipping everybody $100 bills. He broke a lamp in a hotel room, and God forbid the manager said, you’re going to have to pay for it. It’s $500.

    Wes Moss [00:11:19]:
    He said, $500. Here’s $5,000 for the lamp I broke and never bothered me again. He also got a large bag or suitcase of gold coins. I don’t know how much this costs. Call it 100 grand, maybe more. Him and his buddies went out to the coast on the beach and started skipping the gold coins. The point of that story was that even though this guy was super wealthy, he was so ridiculous and irresponsible with his spending that Morgan kept wondering, well, at some point, I guess maybe rich people, because they have so much, they can just literally do whatever they want with their money. About three or four years later, the guy was bankrupt.

    Wes Moss [00:11:57]:
    The point here is that the equation of wealth over time is really twofold. It’s obviously the in, but it’s also controlling the out. And that’s a theme that he talks about throughout the book. As an example, there’s a story of Ronald Reed, who was a gas station attendant. He fixed cars. He was a janitor at JCPenney. No one ever thought he had any money to speak of. Lived a little cabin in the woods, chopped his own firewood.

    Wes Moss [00:12:24]:
    In 2014, he passed away at the age of 92. And Ronald Reed finally made the headlines. And he did so for his extraordinary wealth that he accumulated that no one thought that he had anything in any given year, on average, about 2.8 million people pass away in the United States. And that was the number in 2014. Fewer than 4000 people left this earth, having amassed more than $8 million. Ronald Reed did. Where did he get all the money? No inheritance, no lottery, just working and saving as a janitor and a car mechanic at a gas station, and socked away money in high quality blue chip stocks and amassed over $8 million by the time he left this earth. Then he contrasts that with a guy named Richard Fascone, who was a big time executive CEO at one of the big investment companies in the US.

    Wes Moss [00:13:27]:
    The COVID of magazines made millions of dollars a year, but he also had multiple houses. He had an 18,000 square foot home in Greenwich. And after the 2008 financial crisis, ended up bankrupt.

    Mallory Boggs [00:13:43]:
    Yeah, 18,000. Lot to keep up with if you don’t have a lot coming in.

    Wes Moss [00:13:48]:
    The big difference here is that Ronald Reed, he was both patient and controlled his outflow at the same time. One was Harvard educated. We don’t even know if Ronald Reed finished high school. So there’s great parity in amassing wealth. You do not need to go to Harvard. You do not need to be the CEO of a massive company. Anyone can end up with extraordinary wealth and mallory financial success. It’s not necessarily a hard science.

    Wes Moss [00:14:17]:
    It’s more of a soft skill. And that’s what we’re teaching here today.

    Mallory Boggs [00:14:23]:
    I love it. So are we going to learn the soft skill, the 14 soft skills it takes?

    Wes Moss [00:14:28]:
    Yeah, I don’t know if they’re all soft skills. Let’s go through these. So, first of all, is this. No one’s crazy?

    Mallory Boggs [00:14:34]:
    That’s hard to believe.

    Wes Moss [00:14:36]:
    Well, or you could probably say everyone’s crazy. Everyone’s a little crazy.

    Mallory Boggs [00:14:40]:
    That sounds way more realistic. In my experience.

    Wes Moss [00:14:42]:
    No one’s crazy. Meaning that financial behaviors, they’re deeply influenced by our own personal history and our own personal experience with money. It’s not just about logic or education. It is about how we grow up and what lens we see money through. And think about how different that is for everyone. You’re wealthy, you can grow up middle class, you can grow up poor, you can grow up poor and have a frugal family, or a family that spends every dollar they have as soon as they have it. You can grow up in a wealthy family with super frugal parents. You can grow up in dark times like the Depression and have a great fear of spending money to begin with.

    Wes Moss [00:15:19]:
    You could be 18 and enter the working world in the late 1960s and then you’re faced with dramatic inflation over the next decade or so and feel like inflation is always the scariest thing you have to deal with. You could be born and you could be 18 and go into the year 2000 and live for almost two decades with very little inflation, very low interest rates. And that’s what then sets your parameters for the rest of your life. And we just can’t change that. So we all have our own unique money retire. So someone’s aggressive with their investing or conservative with their investing. It’s not that any one person is right or wrong. No one’s crazy, because we’re all operating under our own set of money DNA.

    Wes Moss [00:16:03]:
    You ever bought a lottery ticket?

    Mallory Boggs [00:16:05]:
    Oh, rest assured. Actually, I went through a little bit of a phase a couple of years ago where, when I went to the grocery store, I would like to grab just, like, one scratch off. And it was. It wasn’t all the time by any means, but it was kind of fun because it’s like you play, like, those $1 scratch offs enough for the most part. You kind of just keep getting another ticket is really what would happen. Right? You get it, you scratch it, get one more ticket. You go back, you change it out, you get another one. You get another one.

    Mallory Boggs [00:16:28]:

    Wes Moss [00:16:28]:
    Okay, so you went through a lotto ticket phase.

    Mallory Boggs [00:16:30]:

    Wes Moss [00:16:31]:
    And really it was more for fun.

    Mallory Boggs [00:16:33]:
    Yes, correct. And then, of course, actually, Reeves and I always like to say that when the lottery hits a billion dollars or more, we like to invest. We invest in our financial future.

    Wes Moss [00:16:42]:
    All right, well, think about this. So lottery spending in the US is more than sports events, movies, books combined. Who buys lottery tickets?

    Mallory Boggs [00:16:54]:

    Wes Moss [00:16:55]:
    Mostly poor people.

    Mallory Boggs [00:16:56]:
    Oh, well, okay.

    Wes Moss [00:16:58]:
    On average, they spend $412 a year. But as crazy as it may sound, maybe they’re not that crazy. To the person that makes $30,000 a year, they may look at the world and say, look, you’re living this wonderful life if you’re middle class in America or you’re the upper class, which, by the way, you can’t not see it today in America. So it looks like everyone out there is living this dream life relative to you if you’re struggling financially. So for this group that primarily, who spends money on lottery tickets, it’s not that crazy to them. So if you start putting yourself in someone else’s shoes, whether it’s someone you think is crazy and buys an 18,000 square foot house or someone that shouldn’t be spending any money on the lottery ticket, if you really put yourself in their shoes, they have a financial justification for it, because that’s what their money DNA taught them. And I think what’s important about this is just accepting that no one is crazy. That means you are not crazy on how you think about money.

    Wes Moss [00:18:08]:
    And financial decisions are made between a husband and a wife and a father and a son and a mother and a daughter. And there’s great rationale behind that. So if we understand that the world isn’t crazy when it comes to money, understand that you’re not crazy either, and just accept that’s how you are. And that’s the first step to understanding how to be good with money. The other thought is that money talking about money is actually a relatively new game. 401 ks didn’t even start until 1979. Roth Iras, not even till the 90s. There weren’t even car loans, didn’t even take off until after World War II.

    Wes Moss [00:18:51]:
    So to some extent, money education, even though money’s been around for tens of thousands of years, education around money is infinitesimally small relative to the course of history. We’re just learning. How does setting the goal to have income for a lifetime sound? It’s not a trick question. Many happy retirees create income for a lifetime, and it’s something that’s called income investing. It’s a way to harness the power of many different forms of cash flow, including rent, royalties, dividends, distributions, and interest. If you’d like help with income investing, you can reach That’s your wealth. Number two, freedom.

    Wes Moss [00:19:45]:
    Here’s what this money lesson is about. The true value of money comes from the freedom and the autonomy that it gives you in your life and over time. Not the material side of money. It’s really about your economic freedom.

    Mallory Boggs [00:20:01]:
    I feel like most of our happy retirees probably relate to that really well because that’s really what retirement is focused on. You save enough to the point that you can leave the workforce comfortably.

    Wes Moss [00:20:10]:
    Freedom of autonomy, freedom to do what you want, when you want, as Morgan Hausel will say, with who you want, whenever you want, and that control over one’s life. According to one of my favorite researchers from the University of Michigan, Agnes Campbell Wes, a psychologist who wanted to know what really made people happy. This is way before we started doing happiness research. Money and happiness research. But back in the 80s, he wrote a book called the sense of well being in America. And the common denominator around happiness wasn’t about income, wasn’t about career success, wasn’t about popularity, wasn’t even about friends, socialization, it wasn’t all the things that, it wasn’t a lot of the things we talk about. Socialization, I put on a really high part of that list. And I know there’s a Harvard study that shows that your relationships are the most important.

    Wes Moss [00:21:04]:
    But what Agnes Campbell says is the most powerful common denominator in happiness is having a strong sense of controlling one’s own life. That’s a more dependable predictor than anything else on positive feelings. So money is about freedom and autonomy and having that control over your own life. Throughout retirement, particularly, that is one of the strongest predictors of happiness. Wes, talk about income and dividends and investing here on the show. But perhaps the ability to make those choices and the freedom to have those choices throughout our lives, that is perhaps the most significant dividend that money can pay. And I think it may even be more important today. Mallory, because of this, our society in America, and again, we’re in the best system there is, capitalism, and we’re in the best system of capitalism in the world, the United States.

    Wes Moss [00:22:06]:
    But it is a pressure cooker. And we used to let’s go back a half a century, not that long ago, we used to be able to go to our jobs and then leave that job and go home. And there wasn’t anything to do. There was no email and there was no Zoom call. There weren’t 09:00 p.m. Meetings with your team, particularly if you made something. Imagine if you were in manufacturing. You would actually be somewhere, put something together, make something, and you go home and you don’t think about it until you go back the next day.

    Wes Moss [00:22:41]:
    And over the last half century, we’ve become a service economy. And a service economy is much more around the clock. Moss of you listening are in a service industry. Think about how work is now. For most of us, it is to some extent a 24 hours, seven day a week endeavor. If you’re not working and getting emails and responding to emails and having team meetings and Zoom meetings, you may be thinking about work because you might have to do something like that. And it may be after dinner, it may be 09:00 at night. It may be on a Saturday, maybe on a Sunday.

    Wes Moss [00:23:18]:
    And Hausel brings up something we’ve brought up here on the show many times, is that we always look at the Gallup polls around workplace happiness. And we know that in America, a very small percentage of people are really excited and happy about their job. And the majority of Americans are either quiet quitting or loud quitting. And that is because I think one of the primary factors of why we have such high levels of job dissatisfaction is that we don’t have control over our time like we used to 50 years ago. Think about what’s happened. 1950s, we’re a much richer country than we were in the 1950s. We have ten x today at our fingertips than we did in the 50s. We’re much wealthier, but we’re not any happier.

    Wes Moss [00:24:02]:
    And how to explain it? I think it’s got to be a lack of general sense of freedom from work as our society and our economies change. I’m not saying it’s a bad thing. This is still the best system that we have in the world, and we’re lucky to be born here. But work in America, we know, takes its toll, and accumulating wealth can bring us the freedom that we all desire. Speaking of luck, number three on my list, luck and risk. How lucky do you think Warren Buffett is?

    Mallory Boggs [00:24:38]:
    I’d definitely say he’s so smart. I don’t know if you could really say it’s just luck.

    Wes Moss [00:24:43]:
    How could you dare say it’s about luck? Right? He’s smart. What about Bill Gates? Smart.

    Mallory Boggs [00:24:48]:
    He worked so hard. I don’t know if I would attribute luck there.

    Wes Moss [00:24:52]:
    There’s no luck. Right? He’s got to be. He’s the smartest guy, and he’s worked his whole life, and he’s built the best product that’s in every computer around the world that gets annual subscriptions. It’s an amazing thing that he’s built. But the reality is that success often involves a very real element of luck and acknowledging that can lead to more humility and better decision making. And all of these are trying to. And really, all of these lessons, I think, help us make better decisions. Okay, so you don’t think Bill Gates is lucky?

    Mallory Boggs [00:25:27]:

    Wes Moss [00:25:27]:
    Okay. I get it. And I would say the same thing. However, perhaps nothing is quite as good or as bad as it ever seems. Bill Gates just so happened to go to one of the schools, one of the few schools in the country that had a computer.

    Mallory Boggs [00:25:46]:
    Oh, well, yeah, because what year was that?

    Wes Moss [00:25:49]:
    Well, here’s the story. In 1968, there were a little over 300 million high school students around the world. There were about 18 million high schoolers in the US. There are about 300,000 high school students where Bill Gates lived in his state, in Washington state. There are about 100,000 in Seattle where he lived, but there were only 300 high school students, 300 that went to a high school with a personal computer. So it was literally one. Let’s go back to the lotto. Out of 1,000,300 students, out of 300 million around the world in that year, that had a personal computer.

    Wes Moss [00:26:39]:
    Massive, massive head start for Bill Gates. Now, of course, all the other ingredients are that this guy’s brilliant. He loved computers. It was his life, passion to start a company around computers. Yes. So there’s a massive side of what he put into it to bring his luck to fruition. But what if Bill Gates was born in Montana? What if he was born on a ranch in Montana and herded cattle until he was 25 and never saw a computer until he was 40? He wouldn’t have been the founder of Microsoft. That’s the reality.

    Wes Moss [00:27:12]:
    So, yes, there’s a lot that goes into success, but some of it has to do with luck. I would call this more fortune, just.

    Mallory Boggs [00:27:22]:
    Good fortune, for so many reasons.

    Wes Moss [00:27:24]:
    For so many reasons. Bill Gates had a great friend. His name was Ken Evans. He would have likely been one of the founders of Microsoft, along Bill Gates. They were best friends. Late nights on the personal computer, coding things. Ken, late in high school, died in a hiking accident. So that’s the other side of luck, and that’s bad luck.

    Wes Moss [00:27:49]:
    So if we look at risk, let’s call it the compliments luck. Microsoft would have never come to fruition if Bill Gates hadn’t taken that risk to begin with.

    Mallory Boggs [00:27:59]:
    I’ve always heard those who are lucky are the ones who are willing to take chances and put themselves out there. You have to take that risk to.

    Wes Moss [00:28:06]:
    Find the luck and to find luck. And I think that’s a really important way to look at that, is that if you’re not in the game, you can’t get lucky in the game. And risk is the perfect complement to being able to get lucky. But of course, as we know, the ultimate example of bad luck because of risk. His best friend, Ken Evans, who wasn’t there with him in that journey because of something, there was a risk he took, and unfortunately, Luck went the other way. Ideally, in our money journey, we have a little bit of both. We take some risk and we get some luck. And the longer we’re in the game, provided we don’t get too over our skis, like Richard Fiscone in the beginning when we allow the lock to happen.

    Wes Moss [00:28:55]:
    Number four, knowing you’re enough. Knowing you’re enough.

    Mallory Boggs [00:28:59]:
    I feel like I hear this a lot in those makeup ads and everything. You are enough as an individual.

    Wes Moss [00:29:08]:
    Oh, it’s enough. You’re enough.

    Mallory Boggs [00:29:10]:
    You are, isn’t it?

    Wes Moss [00:29:10]:
    More? You’re enough. It’s okay.

    Mallory Boggs [00:29:12]:
    It’s good.

    Wes Moss [00:29:13]:
    Don’t worry. Just because you’re not successful, it’s okay. You’re enough. Is that what it does?

    Mallory Boggs [00:29:19]:
    I think it’s more like, oh, you’re not very pretty, but you are enough if it’s a makeup ad.

    Wes Moss [00:29:23]:
    All right, well, I feel like I’m making people mad today on this podcast. I don’t know.

    Mallory Boggs [00:29:30]:
    We’re just trying to pick a fight.

    Wes Moss [00:29:32]:
    Knowing you’re enough. Recognizing when you have enough is critical to avoid pitfalls that can come from greed and then also maintaining financial peace. There is something, again, this goes back to capitalism and free markets in America. Part of what makes America great and so productive is that we’re always looking for more. And I don’t think that’s necessarily a bad thing. But when it comes to financial planning, if you’re always moving the goalposts, then you may never feel financially fulfilled. So if you want to get to 1 million, but then if your goal is to get to a million, and then you get to a million, your goalpost, I would need to get 2 million. Then you’re always chasing, and maybe less, at peace with your overall, let’s call it wealth or plan, you get to $2 million now.

    Wes Moss [00:30:19]:
    Oh, now I need to get to $5 million. So we’re very good at moving the goalposts out in America, and it’s a really powerful thought to know if enough is going to give you financial peace of mind and lead you to the economic freedom you want and happiness in retirement, then it is very powerful to know when enough is enough. Are you like that? Do you feel like you’re always pushing.

    Mallory Boggs [00:30:47]:
    Out the goalpost constantly?

    Wes Moss [00:30:49]:
    It’s one of those in your business, because you’re a business owner, you thought, oh, I want to get here, and then you get there and you want even more.

    Mallory Boggs [00:30:56]:

    Wes Moss [00:30:56]:
    Are you guilty of that?

    Mallory Boggs [00:30:57]:
    I’m so bad about that, and I think most people are. I think it’s easy to say, all right, I got there, I did the thing, and now what? That’s always a question, right?

    Wes Moss [00:31:08]:
    Yeah, that is America. And I think that is, it’s not necessarily a bad thing in business, but I think it’s a powerful thing to start to acknowledge, and I think it’s a very powerful thing in planning. Number five, the power of compounding. We already know the mathematical power of compounding. 10% on a million dollars is $100,000. A 10% return on $100,000 is ten grand. Not bad. But if you get to the point where you have a million dollars.

    Wes Moss [00:31:41]:
    Now, 10%. A 10% gain is $100,000. At $10 million. A 10% gain is a million dollars just in any given year. So we know that power of compounding, but we don’t tend to see it until the numbers start to get big. But compounding is the very thing that allows us to get that critical mass. So when it comes to compounding, any strategy that allows you to stay in the game the longest and sleep well at night is likely the right strategy. Maybe this goes back to luck and skill.

    Wes Moss [00:32:20]:
    We’ll talk about Warren Buffett for a second. The best investor of all time, right? The most well known investor.

    Mallory Boggs [00:32:26]:
    Goat, if you will.

    Wes Moss [00:32:27]:
    He’s the goat, but it’s hard to find anyone else out there that has been able to stay in the game longer than Buffett. Now, I’m not saying he got lucky here, but his true advantage, when you see his long term compounded rate of return, has been time. He’s been investing for almost three quarters of a century. So over 60 years of investing, if he had started a decade later or maybe hung up his cleats and stopped investing, let’s say, when he was only 80, then that compounding would look very, very different, because the difference in time. There’s a guy named James Simons who’s another investor who is arguably a, quote, better investor, because this is a guy who has had much better annual returns to the tune of over 60% annual rate of return. But he still doesn’t even come close to matching Buffett’s long term compounding just due to time. He had a much shorter run. He was only in the game for, call it a meager 15 or 20 years.

    Wes Moss [00:33:45]:
    That’s nothing compared to 60 plus. So if we think about compounding, yes, we think, oh, we want the best rate of return. That makes total sense. We want the highest returns. But successful investing isn’t necessarily about the highest returns in big home runs, because home runs usually can’t be repeated. It’s about getting pretty good returns that you can stick with for as long as humanly possible. That’s when compounding runs wild. Number six, getting wealthy versus staying wealthy.

    Mallory Boggs [00:34:23]:
    Two different skill sets.

    Wes Moss [00:34:25]:
    Two different skill sets. So think about this. So we’re trying to navigate this journey of wealth. This lesson says you need a mix of short term paranoia to ensure your survival and long term optimism to find growth. It’s two very different things, almost like a barbell personality. So it should help you accumulate wealth, but then, more importantly, preserve and keep the wealth. There’s a famous investor back in the named Jesse Livermore. While everyone was on margin and investing heavily in the stock market for one reason or another, Jesse Livermore shorted the market the day before black Monday.

    Wes Moss [00:35:16]:
    So while everyone was throwing up in their trash can because losing so much money and going bankrupt over the course of a day or a few days, Livermore came home, was like, wow, this is the best day I’ve ever had in the market. Of course, if we short stocks and they go down, we actually make money. In fact, he made the equivalent back then of $3 billion. So again, one of the richest people in America, at the same time, there was a famous story about one of the richest people in America named Abraham Germansky, who lost almost everything during that week and was reportedly kind of walking the streets and ultimately took his own life. But it was only a few years later that the same thing happened with Jesse Livermore. So he had made all this money shorting the market and then was already wealthy, and then continued to bet big and bigger and bigger and bigger, and he went bankrupt and ultimately took his own life. They both got wealthy, but it wasn’t enough. This goes back to moving the goalposts so they didn’t stay wealthy.

    Wes Moss [00:36:27]:
    So getting money and keeping money are two different skills. So you can be really good at making money, but it is a different skill when it comes to keeping money. And that’s where this mix of long term optimism and short term paranoia kind of blends together. One helps you accumulate over time. One helps you keep the money that you have. So this lesson essentially says to us that we’ve got to be optimistic about the future, but paranoid about what could stop you from getting there. Sensible optimism. So, knowing that eventually there will be a good outcome, but the journey is going to be filled with a bunch of landmines, and it’s going to be filled with some pain.

    Wes Moss [00:37:12]:
    Think about this over the long term. Over the last, call it 170 plus years, we know just how prosperous this economy has been. Our standard of living is up over 20 x over that period of time. So if you were to zoom out, all you need to do is just, hey, let’s just invest in America. Long term optimism, but also know that there’s going to be shocks constantly along the way. Short term paranoia, it’s okay, but we don’t want to let the short term paranoia scare us out of that long term journey. Even though during that period of time, we had nine major wars, almost a million and a half Americans died while fighting in those wars. Over 99% of all companies during that whole period of time that were created also went out of business.

    Wes Moss [00:38:01]:
    Four presidents were assassinated. We had a pandemic that killed 675,000 people in one year. Wes had 30 separate natural disasters, 33 recessions that cumulatively lasted 48 years. Stocks during that period of time lost over a third of their value. Twelve different times, annual inflation was over 7% in over 20 separate years. But again, over that period of time, with all those hiccups and those landmines, our standard of living up 20 fold. Long term optimism, number seven. I would say this is the cutest one on the list.

    Mallory Boggs [00:38:53]:
    I’m a big fan of cute.

    Wes Moss [00:38:55]:
    This is cute. Tails, you win.

    Mallory Boggs [00:38:57]:
    Oh, that is cute.

    Wes Moss [00:38:58]:
    That is cute. The power of tail events. When you hear of a tail event, what comes a tail event?

    Mallory Boggs [00:39:04]:
    A tail event.

    Wes Moss [00:39:05]:
    A black swan. Black swan, Covid.

    Mallory Boggs [00:39:07]:
    We just went through this, right? So I think we all just sort of collectively experienced a tail event. Absolutely.

    Wes Moss [00:39:12]:
    Yeah. You typically think of these tail events as like, first of all, any tail is if you get the bell curve. Draw this out. It’s the middle of the bell curve. That’s the probability that most things happen. Then you keep going out to the right or the left. Much more less likely. Then you get to the very tail of that bell curve, and you have this infinitesimally small chance of something happening.

    Wes Moss [00:39:33]:
    Usually you think of the tail event.

    Mallory Boggs [00:39:35]:
    As something bad, like Titanic.

    Wes Moss [00:39:38]:
    What’s that? One out of a million? One out of, right. One out of 100,000 chance that something would happen. Tail events, improbable, but we know they happen.

    Mallory Boggs [00:39:52]:
    So tails you win, though, right?

    Wes Moss [00:39:54]:
    So tails you win. Because when it comes to investment outcomes, it’s very often the rare and unexpected outcomes, the tail events, that can drive success way more than we realize.

    Mallory Boggs [00:40:07]:
    Oh, fascinating.

    Wes Moss [00:40:10]:
    And I love this story. Heinz. I can’t pronounce it. It’s Heinz Brogan. Heinz Brogan, I think, grew up poor in Germany in the 1930s, and when he died and he passed away in his 90s, he left an art collection to a museum in Germany worth a billion dollars.

    Mallory Boggs [00:40:35]:
    That man must have been very good at his job.

    Wes Moss [00:40:37]:
    Exactly. Thinking he’s got to be good. He’s got to have the eye of. The eye of an angel.

    Mallory Boggs [00:40:42]:
    Did he find the Mona Lisa? I don’t exactly what in the world?

    Wes Moss [00:40:45]:
    And really, the story is not that really at all. Now, I’m sure he was probably pretty good at his job, but how many art collectors end up with a billion dollar collection? You don’t ever hear of that. You hear of billionaires buying famous pieces of art. You rarely hear of someone who’s an art collector that amasses that much value. And what Bergruen did was instead of buying individual pieces and saying, I think that’s going to be valuable one day, or, I think that’s going to be valuable one day, he looked at collecting art much more as just amassing a whole bunch of art, almost like, I’m not going to say an art junkyard here, but he got his hands on every piece of art he could get, and he would buy whole collections, even if they weren’t all that expensive. He would buy 20 paintings at a time, 30 paintings at a time, 50 paintings at a time. So he masked almost what you would think is this, call it this index of paintings over the years, and guess what? A few tail risk winners emerged. He just so happened to have a couple Picassos.

    Mallory Boggs [00:41:51]:
    Yeah, that makes sense then.

    Wes Moss [00:41:53]:
    So you get a few key pieces, a few assets like Picasso’s, they skyrocket, and then they make the entire portfolio immensely valuable. That principle isn’t too far off from the strategy of buying baskets of companies. Stock indices, an ETF with 100 companies, 1000 companies, five hundred s and P, five hundred companies that allow the winners to emerge. Some of the statistics around this, you look at the Russell 3000, which is, again, an extremely broad stock index in the United States. It’s averaged around 11% a year over a very long period of time. If you look at what drove those returns, it’s really only 7% of companies that did really well. About 40% of those companies went out of business. About 40% of publicly traded companies eventually go out of business over long periods of time.

    Wes Moss [00:42:49]:
    Now, as they do that, though, they make up smaller and smaller pieces of the index. As their values eventually head down to zero, they have less and less impact, typically in an index, if the index is cap weighted. So if we’re doing index oriented investing, we are allowing winners to have more and more of an impact in the basket itself. So if we can spread out our bets, whether it’s art or investing, a few winners can pay off really big tails.

    Mallory Boggs [00:43:25]:
    You win. That is cute.

    Wes Moss [00:43:26]:
    Number eight, the simple act of saving. And I would couple this with another one of these. I didn’t put it on the main list here, but there’s another lesson called the wealth is what you don’t see.

    Mallory Boggs [00:43:38]:
    Oh, I like that one, too.

    Wes Moss [00:43:40]:
    So this lesson essentially says that the real wealth, we think of wealth as what we can see. They have a Rolls Royce, they have a giant home but often wealth are the financial assets that you accumulate that you don’t spend, so it doesn’t show up as material. Kind of like Ronald Reed, who lived in a little house in the woods and died with $8 million.

    Mallory Boggs [00:44:03]:
    I think that guy knew his enough.

    Wes Moss [00:44:05]:
    He did know his enough. We already all know this one. We know we need to save. We know that you can build wealth without a high income, but we also know you cannot build wealth without savings. So it is the number one essential component, because if we don’t save, then we can’t invest that savings. So it’s really that whole continuum. But what’s also interesting about how Morgan Housel puts this as a lesson is that savings buys you flexibility and autonomy. So imagine you’re running without any sort of savings at any given time, and something happens at work and you lose your job.

    Wes Moss [00:44:50]:
    Well, without a cushion, even though maybe that cushion is sitting in the bank, it’s not paying you anything. It’s only getting me 0% or 1%. It’s not earning me anything. Imagine how much, particularly in the world we live in today, that’s so globally competitive. Imagine what that cushion could do when it comes to giving you time to make the right career decision. So, no savings, what happens? You take the very first job, I have to work immediately. Right now. The cushion could buy you time.

    Wes Moss [00:45:21]:
    Maybe it’s three months of time, maybe it’s six months of time. But during that period of time, a job emerged that is exactly what you should be doing with more money. Core opportunity, core upside. So even though there was money sitting in the bank, maybe not earning anything, imagine how valuable that savings was. That savings may have been priceless because it allowed you the flexibility to improve your future. Savings isn’t just about having money sitting in the bank. It’s about buying you flexibility and time. And that can be invaluable.

    Wes Moss [00:46:00]:
    We all know we need to save. Thinking about a little bit more in this context, and just the sheer value in savings beyond the monetary side, I think, is really powerful and a really good lesson number nine, reasonable is greater than rational.

    Mallory Boggs [00:46:17]:
    Now, this is confusing.

    Wes Moss [00:46:19]:
    What does this mean to you?

    Mallory Boggs [00:46:20]:
    I’m just confused. Hang on. Reasonable is better than rational, or vice versa.

    Wes Moss [00:46:26]:
    Think of it this way. So, first, I would say financial decisions that are reasonable, which take into account your own personal biases, because everybody’s crazy, your own personal biases and your own limitations can be more beneficial than strictly rational ones.

    Mallory Boggs [00:46:45]:
    Oh, interesting.

    Wes Moss [00:46:46]:
    So it’s rational that over time, the stock market goes up, and that would be a rational strategy, because empirically that makes sense. But it may not be reasonable for you because your money opinions were, let’s say, formed starting in 1999, and all you know is technology stocks going into a bubble and crashing, then recovering, then going to a great recession, then recovering, then going into a pandemic. It may not be reasonable for you because you may be more risk averse. I think it boils down to this. What keeps you in the game. It may not be rational to be age 40 and have 80% in bonds doesn’t seem very rational. But for you, it’s reasonable, and it keeps you in the game, and it keeps you invested, at least in that asset class, which we know historically hasn’t done a whole lot more than inflation, or in an asset class that is only best in inflation by a little bit. It may be rational for you to do so so that you could only stomach 20% in stocks, but at least you were able to have 20% in equities.

    Wes Moss [00:48:00]:
    And that strategy or diversification or allocation for you was reasonable for you, and perhaps allowed you to at least have some stock exposure over the course of your lifetime, which arguably may be where your best returns come from. If it was the other way around, you had 80% in stocks. Because stocks go up over time, you may have found yourself not sleeping well at night and selling out of the market every single time. We go into a 1020 30% correction, which we know will virtually wipe out your returns over time, and you might as well have just stayed in cash and not had the angst. So whatever is reasonable is more important because it keeps you in the game. It keeps you in the investing game, it keeps you in the money game the longest. Even though it may not be perfectly rational.

    Mallory Boggs [00:48:51]:
    I think this one might be my favorite one so far.

    Wes Moss [00:48:53]:
    Here’s another example about fevers.

    Mallory Boggs [00:48:57]:
    Hang on. We’re talking about money and fevers.

    Wes Moss [00:48:59]:
    Money and fevers. Think about this. Fevers from 101 to 104 may actually be good. The body heats up and it kills all the bad stuff.

    Mallory Boggs [00:49:09]:
    Oh, okay. Yeah, because you go to the doctor, and the first thing they’re going to do is try and reduce the fever.

    Wes Moss [00:49:14]:
    But our culture is super against fevers. If I have a kid with a fever, get him Advil and Tylenol immediately. Right. Because fevers hurt people, and people don’t like to be hurt. If I have a fever, 102, give me some advil. So to reduce a fever may be totally reasonable, but it’s not necessarily rational because the fever is meant to help you get rid of the bad stuff. Now, you could make all sorts of arguments here. Well, what if your fever is going to go from 104 to 106 and you’re going to die? Again, I’m not a doctor here, but it’s a really interesting example that we have a culture, even though in medicine mild fevers may actually be good, our human body’s response to get rid of, again, the bad stuff inside us kill it off.

    Wes Moss [00:50:03]:
    But we don’t like them, so it’s not reasonable to say, oh, that’s great, you have a fever of 103. Well, just stay there, honey. It’s going to kill all the bad stuff quicker. Rational.

    Mallory Boggs [00:50:13]:
    That’s not what you want.

    Wes Moss [00:50:14]:
    Rational to say that, but probably a nurse or a doctor you would fire if they said that, too.

    Mallory Boggs [00:50:19]:
    Yeah, you’re not going to stay there for long.

    Wes Moss [00:50:22]:
    Listen, I don’t know if that’s a great example of it, but again, I’m covering a book here and that was one of the examples, so it’s not my example. And hopefully I explained that in the right way.

    Mallory Boggs [00:50:34]:
    I think so.

    Wes Moss [00:50:35]:
    All right. What’s. Okay, let’s see. Surprise. The future is unpredictable. Things that have never happened before happen all the time.

    Mallory Boggs [00:50:43]:
    Oh, that’s so true.

    Wes Moss [00:50:44]:
    So true. This one I have a little bit more trouble with because I do believe that history is a good guide, because I think history shows that ultimately how we overcome issues, wes overcome major recessions, we overcome September 11, we overcome World War II, we overcome a pandemic. But what history doesn’t do is show us exactly what we’re going to face because it’s always brand new. So World War II, very different than World War I. The great Recession, very different than the Great Depression. September 11, very different than a war, a pandemic, very different than natural disasters or wars that we had been through. So to rely on history to say, how do we get through this? It’s a little difficult because there’s only so much comfort that history can give you. So I think that what he’s saying here in this money lesson is to accept that we will be completely surprised, not just a little surprised, but things will go completely off script.

    Wes Moss [00:51:51]:
    Even though we know that things go off script, we will still be ultimately shocked as new things develop. And we need to be flexible about that. So even though history is a great teacher and I think helps us, particularly through the understanding how we overcome challenges, it’s also not a crystal ball. So if we’re prepared to be surprised, not just that, I know I’m going to be surprised, but I’m going to be surprised by something that is actually even more surprising than I thought I would be surprised about is really powerful lesson when it comes to making money decisions so that a new surprise or something brand new that’s way out of plan doesn’t necessarily have to completely knock us off track. Number eleven, the cost.

    Mallory Boggs [00:52:36]:
    The cost of everything is this tie into inflation matters.

    Wes Moss [00:52:40]:
    This is actually not about inflation. This is about the painful journey of eventual success. There is no one with great wealth or on some great mountaintop that didn’t have a lot of pain to get there. A real price to pay. We’ve talked about this on retire sooner. You can’t get a 1011 percent annualized compounded rate of return without paying some sort of price. It’s got to hurt or else everybody would do it and then it wouldn’t be available. So it has to have some level of pain.

    Wes Moss [00:53:13]:
    Think of it this way. Here’s theory versus practice and an example of how things are always harder than they sound. There’s more to it. Take the SP 500. From 1959 to 2018 it was up 119 fold. 119 x sounds easy, right? Just invest and let your money grow. No big deal. But the real test is holding on through all of those massive ups and downs that happen along the way.

    Wes Moss [00:53:46]:
    Especially when it feels like the sky is falling. There’s so many times I look back as an investor that there’s some big new surprise that’s beyond the normal surprise you were anticipating. I think about COVID I think about how scary that was, trying to go back and learn from history and not a whole lot of information on how we got through the spanish flu. And then we all remember when the world fully shut down and NCAA tournament was canceled. I remember being out in lacrosse practice and hearing that full seasons were canceled and really recognizing that the world was shutting down. And then we essentially stayed home and businesses were shut down for an entire month or a multi month period of time and thinking, how can this economy ever get through something this damaging? And literally within a month, the market was down. It lost a third of its value. That is ultra painful, nerve wracking.

    Wes Moss [00:54:44]:
    And then of course, it wasn’t that long before the market fully rebound, recovered and made new highs. There’s a cost to that. If you got out of markets in March of 2000 and sat out for a year or so, you missed a massive, massive run. If you got out in March of 2020 and just sat out for a year or so, you’ve missed the vast majority of the rebound. Again, another example. Look at the Dow Jones 1950 to 2019 almost 11% annualized gain. But here’s the kicker. The Dow spent most of that period of time below its all time highs.

    Wes Moss [00:55:26]:
    So investors, if you’re always looking at your all time high, very rarely are you ever there. Most of the time, 98% of the time was spent below a high you had gotten to, which means investors were often a little anxious as opposed to excited. I’m at an all time high. And then think about the pain and the price tag of that pain. Investing is tricky because the cost isn’t always upfront. And I’m not talking about expense ratios here and basis points. I’m talking about the cost of endurance. A market drop, for some reason, might feel more like a fine or a ticket, something that we really dislike or we really disdain.

    Wes Moss [00:56:14]:
    Imagine you get a speeding ticket, $200.

    Mallory Boggs [00:56:18]:
    It always hurts.

    Wes Moss [00:56:19]:
    It hurts.

    Mallory Boggs [00:56:20]:
    And it’s always like right when you’re right about to get to the end of your destination. Right?

    Wes Moss [00:56:24]:
    And a fine is something that we’re programmed to avoid. But here’s a shift in perspective. Think about volatility and what we have to go through as an investor, as the admission fee to the market. Not a punishment, just part of the cost of doing business. So embrace the roller coaster that is investing in the market as more of a cost or a fee that we pay to be able to be along for that ride, not a fine that we run from. And maybe that’ll help convince us or ourselves that the price of admission dealing with the market’s volatility is worth it. Number twelve, the seduction of pessimism.

    Mallory Boggs [00:57:10]:
    Well, that’s an interesting spin on things. Not something you typically hear.

    Wes Moss [00:57:14]:
    So easy to be seduced by the siren of pessimism. For some reason, optimists can sound dumb, can’t they?

    Mallory Boggs [00:57:22]:
    Oh, yeah, they’re proven going to be okay. They’re proven wrong all too often.

    Wes Moss [00:57:26]:
    It’s going to be fine. But here’s the case for optimism. Some people say that if you’re walking around optimistic, you’ve got your head in the sand, or maybe head in the clouds. But optimism is really just about believing that things will eventually improve over time. Not that they’re going to be great every day, but they will eventually improve over time. I think we did a show here about factfulness, or I’ve done some sort of either money matters or retire sooner podcast about that Hans Rosling, who wrote factfulness. The late author wrote factfulness. I admire him a lot.

    Wes Moss [00:58:05]:
    He calls himself a possibleist, which means he believes in the possibility of a better future. Not just wishful thinking, but there’s a real allure to pessimism. And again, leads. It leads. I don’t like that. But there’s a real allure to pessimism. It’s easy to sell. It’s easy to sell because it’s about the here and now.

    Wes Moss [00:58:29]:
    It’s precise. Pessimism is about what is wrong, not what we think will be good in the future.

    Mallory Boggs [00:58:36]:
    I guess that’s why there’s so many end of the world movies.

    Wes Moss [00:58:39]:
    You’re right. Books, very easy to nail down. What could go wrong? So, pessimism, it’s precise, it grabs your attention, and it’s kind of addictive. Think about social media. Or, I mean, I think about social media. I think about something like Twitter x. It’s like 99% negative every time I’m on there. If I’m ten minutes later, I’m looking at it, I’ve just read ten minutes of just straight pessimism about how awful everything is.

    Mallory Boggs [00:59:07]:
    Oh, that’s disappointing.

    Wes Moss [00:59:08]:
    Well, yeah, that’s social. A lot of social media, not all.

    Mallory Boggs [00:59:11]:
    Social media, but it is a good bet.

    Wes Moss [00:59:13]:
    The Wall Street Journal, which I would say is actually pretty balanced and relatively optimistic because they’re not afraid to write an optimistic story. But the majority of what you read in any given day on their homepage. Is something going wrong? It’s this lawsuit, that lawsuit, this issue, this company not doing well. These two companies fighting, suing each other. It’s addictive to keep reading.

    Mallory Boggs [00:59:38]:
    Well, and it’s a lot more entertaining than something like, was a goodish day.

    Wes Moss [00:59:44]:
    It’s much more entertaining. A goodish day. Doom and gloom sells. So heading for the hills, a lot of times, seems like the logical thing to do. That’s why the investment newsletter business, almost every investment newsletter I’ve ever read, they’re almost all about all the things that are going wrong. They’re very doomy and gloomy, and that’s a booming business, even though the stock market’s up over 17,000% over the last century. Easier to sell fear than to sell hope. But of course, the lesson here is to not be seduced by pessimism.

    Mallory Boggs [01:00:24]:
    Even if it’s all I’m reading in.

    Wes Moss [01:00:25]:
    The headlines, even if it’s the only thing you see in the headlines. You and me. Lesson number 13. You and me. What does this one mean?

    Mallory Boggs [01:00:38]:
    I’m just thinking we’re sitting here at the table in the recording studio. You and me, Mallory.

    Wes Moss [01:00:41]:
    Just you and me. This one’s about Mallory. You and me. You and me is a reference to what is good for you may be totally wrong for me. What’s right for me may be totally wrong for you.

    Mallory Boggs [01:00:52]:
    So this is very related to everybody’s crazy.

    Wes Moss [01:00:56]:
    This is a little bit more about how I’m going to invest. So we may be different. No one’s crazy. No one’s crazy. But how we approach investing can be really different. And that’s okay.

    Mallory Boggs [01:01:06]:
    It’s not a one size fits all, right.

    Wes Moss [01:01:08]:
    This is about recognizing that we’re all in different financial situations. We’re in different time periods, we have different needs, we have different ways. We think around money. And your neighbor or your friends or your cohort, they may be buying something very different, maybe buying into some sort of hot stock because they’re looking for quick gains. But maybe you’re saving for retirement and you need something a little more balanced or less risky, and that’s okay for you. So the key is to understand that just because someone else is making a move, it doesn’t mean that it’s the right move for you. Which means also that we have to stay true to our own financial path. So no one’s crazy.

    Wes Moss [01:01:52]:
    You do what you want to do, but this is what’s right for me. And if I can identify that again through planning, again, these are fundamentals of making strong money decisions. If I can identify what’s right for me, then that is the strategy that works. That’s the winning strategy. So it’s a reminder to just focus on your goals. Not somebody else’s. Not Instagram. Of course not Facebook.

    Wes Moss [01:02:15]:
    Focus on your goals, your risk tolerance, your timeline. And that’s how to avoid getting caught in some sort of bubble or bad investment situation. It’s not about greed. It’s about staying true to your own financial journey.

    Mallory Boggs [01:02:31]:
    Some BfI knowledge right there.

    Wes Moss [01:02:34]:

    Mallory Boggs [01:02:36]:

    Wes Moss [01:02:36]:
    BFI. Sci-fi.

    Mallory Boggs [01:02:40]:
    Sci-Fi I kind of like that.

    Wes Moss [01:02:41]:
    I like Sci-Fi I like Sci-Fi this one really is about just flexibility and planning. We want to have a plan. We want to know a destination. We want to know. We need a million or 2 million or 5 million or $10 million for our retirement goals.

    Mallory Boggs [01:02:54]:
    Yes. 10 million is the correct amount. Thank you.

    Wes Moss [01:02:56]:
    50. How about we’ll go 50 for you. There we go.

    Mallory Boggs [01:02:58]:
    50 million for you. Love it.

    Wes Moss [01:03:00]:
    But we also have to be flexible because we don’t know exactly what we’re going to want in the future. There’s something called the end of history illusion. And I don’t know if I buy into this but this is a real thing. We look back and we see how much we’ve changed. So think about, you were a punk rocker, now you’re a Harry Potter fan, right? And you’re single for all these years, now you’re married. I mean, you’re different today. And again, I’m going to tell you, some people say they never want kids, and then they go through phases that all they want is kids. So we look back and we see how much we’ve changed, but we think, wait a minute, that’s the end of our evolution.

    Wes Moss [01:03:39]:
    And somehow we think that even though we’ve changed a lot, we’re not going to continue to keep changing. We’re done. I’ve done my change and I’m done. That’s called the end of history illusion, and it tricks us into believing we’ve reached our final form. Spoiler alert, we haven’t. So the takeaway here is that life’s only constant is change and the dream job, the aspirations that we may want. The dream job. You thought you wanted to be doctor in your entire life, and you went through medical school, and ten years in, you think, why did I want to do this? This is the last thing I wanted to do.

    Wes Moss [01:04:13]:
    Whether it’s this dream job or even what you value most can and will shift over time. And the trick is to allow your plan to be flexible. For that, allow yourself to have the freedom to adapt. Don’t trap yourself into a past punk rock version of yourself. So be ready instead to evolve, because you’ll change whether you plan to or not. Now, if I were to sum this up into my favorite habits, here’s how I sum all this up, Mallory. By the way, what’s the most memorable habit lesson? Money lesson.

    Mallory Boggs [01:04:50]:
    So I’m going to go with tails. You win, because again, it’s cute.

    Wes Moss [01:04:54]:
    It is pretty cute.

    Mallory Boggs [01:04:56]:
    And then also it’s a fascinating concept where it’s like going broad can really pay off long term because it gives you that space to find a winner. Yeah, I love that.

    Wes Moss [01:05:07]:
    A tail event to the good. I’ve always thought of tail events to the bad. Here’s how I look at this. No one’s crazy. It’s your money. And how you feel about it is correct. Freedom comes from autonomy, and that’s why we’re saving and investing to begin with. So we have freedom and choice, and that is the most significant dividend money can pay.

    Wes Moss [01:05:31]:
    However, everything has a cost, meaning that markets don’t give you ten or 11% a year for free. There’s a cost to it. Now, the cost is a temporary loss in order to win. And look at that as a cost, not a fine. And guess what? There’s as much luck in the game of investing as there is risk. There’s lots of both. It’s not just luck. It’s not just risk.

    Wes Moss [01:05:56]:
    When you start, when you finish what the world looks like at any given time, the only way to increase your luck is through time and participation. The game we’re playing is about the power of compounding, which is the most powerful force we’re dealing with when it comes to building wealth. So we’ve just got to survive in that game as long as we can to capture the tailwind of compounding and then just saving. Just saving. It’s the only way to start that compounding process. To begin with, tail events are the market, meaning there’ll be a few trends and a few companies that ultimately carry the day, the exponential winners. And just like the art dealer, you can’t expect to find Picassos in one art buy. You likely need to amass a full collection of art to allow the Picassos to emerge knowing you’re enough, as opposed to allowing someone else to influence you or you.

    Wes Moss [01:06:52]:
    Move your own financial goalposts. Because investing is about you and not me. So make sure you have an eye on what your money goals need to be. Don’t keep moving the goalposts and ignore what everyone else is doing with their investments in retirement. There are always going to be surprises in the world, the economy, your life, investing. We just have to accept that and don’t get seduced by pessimism. Choose optimism over pessimism, which will ultimately win over time and carry the day. Yes, everything will change, but most importantly, you will change.

    Wes Moss [01:07:29]:
    Know this too, and be okay with how your evolving self might change your investment plans. Frugality not only do we have to get wealthy, we have to stay wealthy, and what we spend plays a massive role there, even more than how much we amass. And above all, and I think this might sum up the entire book of lessons, remember that any strategy, reasonable, over rational, that allows you to stay in the game the longest and sleep well at night while doing so is likely the right strategy for you. For me, it’s mostly dividend paying stocks and broad equity etfs. For the families we work with, it may only be 60 or 70% in stocks and 30% to 40% in bonds and alternative income areas, but I’m still on this retire sooner journey, just like you. And speaking of, thanks for being on this journey on this episode with us.

    Mallory Boggs [01:08:31]:
    Hey y’all, this is Mallory with the retire sooner team. Please be sure to rate and subscribe.

    Mallory Boggs [01:08:36]:
    To this podcast and share it with a friend.

    Mallory Boggs [01:08:38]:
    If you have any questions, you can find that’s You can also follow us on Instagram and YouTube. You’ll find us under the handle Retire sooner podcast.

    Mallory Boggs [01:08:49]:
    And now for our show’s disclosure. This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guaranteed offer that investment return, yield or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions for stocks paying dividends. Dividends are not guaranteed and can increase, decrease, or be eliminated without notice. Fixed income securities involve interest rate, credit inflation and reinvestment risks and possible loss of principal. As interest rates rise, the value of fixed income securities falls.

    Mallory Boggs [01:09:30]:
    Past performance is not indicative of future results. When considering any investment vehicle, this information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investment decisions should not be based solely on information contained here. This information is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment tax, estate or financial planning considerations or decisions. The information contained year is strictly an opinion and it is not known whether.

    Mallory Boggs [01:10:04]:
    Strategies will be successful.

    Mallory Boggs [01:10:05]:
    The views and opinions expressed are for educational purposes only as of the date of production and may change without notice at any time based on numerous factors such as market and other conditions.

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This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security.  Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved.  There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid.  Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals.  Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio.  A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors.  It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio.  This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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