Begging to Differ
Begging to Differ
Jonathan Clements | Jun 10, 2023 Humble Dollar
DON’T ASSUME YOUR PATH up the mountain is one that everybody else should also follow.
I don’t budget, I earmark 80% of my retirement savings for stocks and I’m currently well above that level, I don’t have a separate emergency fund, I expect to live comfortably in retirement on half of what I currently earn, I plan to delay Social Security until age 70 and my stock market money is entirely in index funds, with roughly half allocated to foreign shares.
Should you blindly mimic what I do? Absolutely not.
It’s called personal finance for a reason: Everyone’s approach to managing money should reflect their personal goals, circumstances and emotional makeup. Yes, it’s interesting to get a glimpse into the financial life of others—a glimpse that’s regularly offered by HumbleDollar’s articles and by readers’ comments. Those glimpses give us a chance to reassess what we do and why, and we might pick up some useful ideas that’ll help us to better manage our money.
But make no mistake: When it comes to handling money, nobody has a monopoly on truth. Yes, logic and evidence favor certain courses of action, such as buying stocks if you have a long time horizon, holding down investment costs, diversifying, indexing, saving diligently, insuring against big financial risks and so on. But in the end, each of us has to tailor such advice to our individual financial life.
That’s why I grow concerned whenever I see folks insisting that their approach is not just right for them, but right for everybody else. Where does that unwavering conviction come from? Often, it seems to rest on one or more of the following six arguments:
1. “You should do this—because it’s what I did.” I see this phenomenon all the time. Those who claimed Social Security early insist it’s wrong to delay—and those who claimed late believe it’s wrong to claim early. Ditto for those who do or don’t budget, or do or don’t own individual stocks, or do or don’t have long-term-care insurance.
I view this as a form of anchoring. Many folks find it hard to set aside what they’ve done or currently do, and imagine that a different path might work just fine for others. I don’t budget and never have. But if others find it useful or comforting, what’s the harm? I avoid actively managed funds and individual stocks. But if others actively manage their portfolio, their returns are okay and it makes them more tenacious investors, who am I to object?
Want to know what really impresses me?
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