Does Our Personality Help Determine Our Financial Success?

Does Our Personality Help Determine Our Financial Success?

Jonathan Clements    June 6, 2020

Does Our Personality help determine our financial success?  It seems it does, or so says academic research. Psychologists have zeroed in on five key personality traits: extraversion, conscientiousness, agreeableness, neuroticism and openness to experiences. Think of each trait as a spectrum from, say, very conscientious to not at all. Each of us sits somewhere on the five spectrums. Maybe we’re a bit of an extravert, somewhat inclined toward neuroticism, and extremely open to new experiences and ideas.

There’s a host of websites where you can take a relatively quick quiz and get scored on the five dimensions, including FiveThirtyEight, OpenPsychometrics and Truity. You don’t have to pay or give your email address to get the results at these three websites, though Truity has a more in-depth report that’s available for purchase. My scores from the three sites were remarkably similar, so taking just one test will likely suffice. What should you make of the five traits?

Conscientious individuals are organized and disciplined. They don’t leave their clothes on the floor or the dishes in the sink.

Openness measures our willingness to embrace new experiences and ideas. Those who score high in this area tend to be more curious and imaginative, while those with low scores are inclined to resist change and new ideas.

Agreeable individuals aren’t posting snarky comments on the internet or barking at you because you are—or aren’t—wearing a mask. Instead, they’re friendly, trusting, upbeat, concerned about others and slow to criticize.

Folks who score high on neuroticism aren’t necessarily “neurotic” in the colloquial sense. Rather, they struggle with emotions such as moodiness, sadness, anger and anxiety. At the other end of the spectrum are those who are emotionally stable and even-tempered.

Extraverts are the ones you hear talking at parties. They’re exactly what you would expect: They’re outgoing, sociable and enjoy being the center of attention.

No doubt all of us recognize some of these traits in ourselves and in those around us. But I’d pay particular attention to whichever trait seems to be most pronounced. Understanding who we are—and the mistakes we’re inclined to make—won’t necessarily prevent us from messing up, but it’s clearly a step in the right direction.

So what do our key personality trait or traits mean for our career and how we manage money? I pulled insights from a fistful of academic studies, including papers from 2008, 2011, 2012, 2015, 2016, 2017 and 2018. These studies don’t always 100% agree with each other, though their findings largely line up. Here’s what I learned:

 To continue reading, please go to the original article here:

https://humbledollar.com/2020/06/knowing-me/

38 Secrets for Financial Success: My Personal Finance Manifesto

38 Secrets for Financial Success: My Personal Finance Manifesto

By Len Penzo

Awhile back, somebody asked me to summarize my personal finance “playbook” in a blog post. Well … Here it is:

Debt is a form of indentured servitude where people agree to sacrifice a portion of their future earnings in exchange for instant gratification.

ATM machines are the Achilles’ heel of impulsive spenders.

History tells us that all fiat money eventually returns to its intrinsic value: zero. The US dollar is fiat money.

Given a choice, it’s always better to live your life anonymously rich, rather than deceptively poor.

If you have to ask your boss for a raise, then you need to find a new employer.

When in doubt, always choose credit over debit.

It’s almost impossible to effectively manage your personal finances if you don’t track your income and outgo.

Only suckers play the lottery.

People who properly manage their finances don’t fear credit cards. In fact, they embrace them.

Credit card “convenience” checks are anything but.

Frugality has its limits. The most effective way to stretch your income is by finding ways to earn more money.

Treat your household like a business; actively manage your finances and continuously look for ways to maximize your income.

Not everyone requires a budget to effectively manage their personal finances.

When it comes to saving money, patience is a virtue.

Nobody should pursue a non-technical college degree until they’ve calculated their projected payoff point and return on investment.

Precious metals such as gold and silver are for insuring wealth; not investing.

Money does not buy happiness. If you’re looking for nirvana, you need to focus on attaining financial freedom.

To continue reading, please go to the original article here:

https://lenpenzo.com/blog/id25399-38-secrets-for-success-my-personal-finance-manifesto-2.html

How to Invest a Million Dollars

How to Invest a Million Dollars

September 4, 2019 By Machinist

An avid reader of the Perpetual Money Machine blog wrote in last week to ask the following question.  Say you are 40 years old, you have one million dollars cash. How and where you should deploy your money to withdraw 4 percent (inflation adjusted) for next 50 years with a high probability of not running out. What type of asset allocation, funds you would go with? As I formulated my response, I realized that this question deserves an article of its own.  Here is my response.

Thanks for reading and for your question.  It sounds like you are in an enviable position, being millionaire at age 40.  I am going to make some assumptions about the missing details of your scenario.  Please let me know if I have assumed anything incorrectly.

Emotional Concerns About Timing

The first thing that strikes me about your situations is that investing a million dollars all at once could be an emotional challenge.  What if you invest tomorrow and the market trends downward for the next few years?  Would you panic and sell?  

Would it be easier emotionally if you had earned and invested that money over decades – if you knew that your cost basis was far less than a million dollars?

In point of fact, that’s all this is – an emotional concern.  It doesn’t actually change the strategy.  In fact, holding one million dollars in an investment is really no different than buying that investment each day.  If you invested a million dollars in stocks tomorrow, there would be little difference between your day-old account and my 20-year-old account.

If you are an emotional investor, then the rest of what I say here, might not be right for you.  Your best odds of successful investing are achieved when you buy the broad stock market and hold for decades.  I have described here and here how this strategy has delivered at least 8-10% returns over the last 80 years, through depressions, wars, presidents of questionable character, and everything else. 

These returns are more than enough to sustain 4% annual withdrawals, keep ahead of inflation, and grow your portfolio.  If you are committed to investing based on math and science rather than emotions, then please keep reading.

Advantages of Investing a Million Dollars At Once

Having one million dollars is a very nice advantage in and of itself.  Beyond than that, the only other benefit of having all that money at one time is that your options of account type and your planning for tax advantages are quite limited.  I’m calling it an advantage, because I’m trying to be positive.  Mostly it just makes your choices easier even if you don’t get to save on taxes.

How I Would Invest One Million Dollars Cash

To continue reading, please go to the original article here:

https://perpetualmoneymachine.org/how-to-invest-a-million-dollars/#more-618

Permanent Assumptions

Permanent Assumptions

Jun 4, 2020 by Morgan Housel

If you were told in January what April would look like, you wouldn’t have believed it. If you were told in April that in May we’d face a nationwide protest so important it would crowd out almost all Covid-19 news, you wouldn’t have believed it.

How do you analyze the world when everything feels broken? And how do you even begin to make sense of the future when things change so fast? Humbly, is the answer.  But humility doesn’t mean clueless.

Some things are always changing and can’t be known. There can also be a handful of things you have unshakable faith in – your permanent assumptions.

Realizing it’s not inconsistent to have no view about the future path of some things but unwavering views about the path of others is how you stay humble without giving up. And the good news when the world is a dark cloud of uncertainty is that those permanent assumptions tend to be what matter most over time.

Amazon is successful because it predicted how the world would change. But it’s been really successful because it bet heavily on what wouldn’t change – a permanent assumption. Jeff Bezos said:

You can build a business strategy around the things that are stable in time. It’s impossible to imagine a future 10 years from now where a customer comes up and says, “Jeff I love Amazon, I just wish the prices were a little higher.” Or, “I love Amazon, I just wish you’d deliver a little slower.” Impossible.

So we know the energy we put into these things today will still be paying off dividends 10 years from now. When you have something you know is true, you can afford to put a lot of energy into it.

When you have something you know is true, you can afford to put a lot of energy into it. That’s why permanent assumptions are important.

I have no idea what’s going to happen next in the economy or society. But I have a handful of permanent assumptions I’ve put a lot of energy and faith into that guide almost everything I think about business and investing.

Here are nine.

1. More people wake up every morning wanting to solve problems than wake up looking to cause harm. But people who cause harm get more attention than people who solve problems. So slow progress amid a drumbeat of bad news is the normal state of affairs.

 To continue reading, please go to the original article here:

https://www.collaborativefund.com/blog/permanent-assumptions/

23 Challenges That Will Change Your Life

How To Better Yourself – 23 Challenges That Will Change Your Life

August 31, 2019 By Michelle Schroeder-Gardner

Learning how to better yourself is something we can all work on. Even small adjustments and improvements can have long-lasting effects on your life.

Improving yourself can change your financial situation, your relationships, your self-esteem, your health, and more. But, learning how to better yourself can feel like a very difficult thing if your life isn’t going the way you want. Maybe you had a different plan but things don’t seem to be going your way. Maybe you just want a change because anything is better than how things are currently going.

Each of those things can leave you feeling overwhelmed, stressed, or like everyone is doing better than you. Those feelings can be hard to escape, but my goal is that you’ll find at least one thing on this list that will start to change your mood and your life for the better.

No matter how you’re feeling, I do believe that everyone is in charge of their own destiny.

If you feel that things are not going the way you want them to go, then change it!

Trust me, I know it can be hard – focusing on how to better yourself can be one of the biggest challenges you face. You may fail sometimes, but you’ll never improve your life if you don’t start trying.

Instead of looking at how to better yourself as one big and overwhelming challenge, there are lots of smaller challenges and ways to better yourself that will start to change how you see yourself and how you see the world around you.

Despite your fears, challenges can change the way you think because they open you up to new ideas that you may have never experienced or realized before. By making yourself “uncomfortable” or putting yourself in a position that you are not used to, you will truly learn how to feel better about yourself.

I know that the ideas on this list below will look like a lot and can be overwhelming. You don’t need to work on everything, and especially not all at once. Simply choose one or some of the ways to better yourself and go from there.

Living a better life starts with small steps and changes – just start with something small on this list of challenges. Get out of your comfort zone a little and see how it feels to succeed.

As you keep working on how to better yourself, you’ll start to see your life changing around you.

How to better yourself – 23 challenges that will change your life.

1. Be thankful for what you have.

The next time something negative is bringing you down, I suggest you try to remember all of the good things that you already have in your life. You already live a great life, and to live life to the fullest, you just need to remember that.

 To continue reading, please go to the original article here:

https://www.makingsenseofcents.com/2019/08/how-to-better-yourself.html

15 Things To Stop Being Scared Of So You Can Be Rich, Happy, And Successful

15 Things To Stop Being Scared Of So You Can Be Rich, Happy, And Successful

May 11, 2020 By Michelle Schroeder-Gardner

Being scared is a natural reaction, but a lot of good things can and will be scary.

Often, people are scared when things are changing, like if you’re starting a new job, getting married, or any other major life event. It’s only natural to be a little scared about how things will turn out.

You might be scared when you are trying to do something that is difficult, like paying off debt. What if it takes you longer than you had hoped? What about the sacrifices you will have to make?

Being scared happens when you do or try things that are new or outside of your comfort zone, and everyone feels scared from time to time. You may not believe that you cannot achieve what you are setting out to do. But, you have to push through these negative moments and realize that you are holding yourself back if you want to start overcoming fear and let yourself move forward and do something new.

I have had a lot of fears to overcome to get where I am today. I was scared to quit my job to blog full-time. I was scared to move from our regular house to an RV. I was scared to move onto our sailboat. Being scared is natural, but if I didn’t address my fears in a positive way, I wouldn’t be living the life I am today.

Everyone is scared of something. However, it’s how you approach that fear that really matters. If you hide from your fear then you may be holding yourself back. This can then lead to regret later, which often feels worse than being scared. Whether you are wanting to tackle your debt, you want to leave a job you hate, you want to travel the world, and so on, you need to overcome the fears associated with these goals to live and enjoy the life you want.

Below are 15 things you should stop being scared of so that you can learn how to be rich, happy, and successful (or whatever you want to be!).

1. Don’t fear discomfort.

Many of the best things in life are probably going to make you feel uncomfortable. Being scared and staying in your box all the time, while it seems easy, can hold you back in some situations.

I’m a big believer that growth comes from trying things that make you feel uncomfortable! This may mean going on stage to do public speaking, climbing a mountain, selling your home to travel full-time, exercising, making new friends, learning a new skill, and so on. By doing things that make you uncomfortable, you may learn new things about yourself, find something that you love doing, and so on.

2. Stop being scared of what other people think.

If I let the opinions of others stop me from doing things, I would probably be hiding in a closet and never leave my house. This is completely different from how I used to be. Now I don’t care at all about what others think, and I couldn’t be happier. You shouldn’t let the opinions of others affect you. Like I always say “WHO CARES?!“


 To continue reading, please go to the original article here:

https://www.makingsenseofcents.com/2020/05/stop-being-scared.html

Why Meaningful Work is an Essential Part of Life

Why Meaningful Work is an Essential Part of Life

By Matt Spillar · MAY 4, 2020

Last time we talked about some of the lessons I’ve been reflecting on during this coronavirus pandemic. I’ve been trying to use this time for extra reading and learning. The more I learn and grow, the more clear it becomes to me that two essential components to living a fulfilled life are meaningful work and quality relationships. This post will cover meaningful work, and then I’ll cover quality relationships in an upcoming post.

With so many people finding themselves unemployed, those who are still working should be thankful to be in the position they’re in. However, to me it’s important to live a life with intentionality. We are responsible for the decisions we make and the path we choose. Rather than drifting through life we should make choices consciously, that align with our values.

What are the components of meaningful work?

In Outliers, Malcolm Gladwell defines meaningful work in this way:

“Those three things – autonomy, complexity, and a connection between effort and reward – are, most people will agree, the three qualities that work has to have if it is to be satisfying.

It’s not how much money we make that ultimately makes us happy between nine and five. It’s whether or not our work fulfills us. Work that fulfills those three criteria is meaningful.”

Gladwell says the three qualities that make up meaningful work are:

Autonomy – the desire to be self-directed, we don’t like others micromanaging us

Complexity – we like to work on challenging problems

Connection between effort and reward – the harder we work, the more acknowledgment we get for our efforts and the better our results are

In Drive, Daniel Pink talks about the three intrinsic motivators we’re all wired with, and it matches up very similarly to Gladwell’s theory:

“It turns out there are three factors that the science shows lead to better performance, not to mention personal satisfaction: autonomy, mastery, and purpose.”

Autonomy – again, we want to be self-directed

Mastery – we want to keep improving in areas that are important to us

Purpose – the sense that what we do is making a difference in the world, beyond ourselves

 To continue reading, please go to the original article here:

https://www.spillsspot.com/finance-blog/2020/05/04/meaningful-work-essential-to-life/

Five Lessons from History

Five Lessons from History

May 29, 2019 by Morgan Housel

“The dead outnumber the living fourteen to one, and we ignore the accumulated experience of such a huge majority of mankind at our peril.” – Niall Ferguson on the lessons of history.

“History never repeats itself. Man always does.”– Voltaire

The most important lessons from history are the takeaways that are so broad they can apply to other fields, other eras, and other people. That’s where lessons have leverage and are most likely to apply to your own life.

But those things take some digging to find, often sitting layers below the main story.

The Great Depression began with a stock market crash. October 24th, 1929. That’s the story, at least.

It makes for a good story because it’s a specific event on a specific day. But if you were to go back to October 1929, during the crash, the average American might seem unfazed. Only 2.5% of Americans owned stocks in 1929.

The huge majority of Americans watched in amazement as the market collapsed, and perhaps lost a sense of hope that they, too, might someday cash in on Wall Street. But that was all they lost: a dream. They did not lose any money because they had no money invested.

The real pain came nearly two years later, when the banks started to fail.

Just over 500 U.S. banks failed in 1929. Twenty-three hundred failed in 1931.

When banks fail, people lose their savings. When they lose their savings they stop spending. When they stop spending businesses fail. When businesses fail, banks fail. When banks fail people lose their savings. And so on endlessly.

The stock market crash wasn’t a relevant lesson to the vast majority of Americans who didn’t own stocks in 1929 and likely never would. But the bank failures upended the day-to-day lives of tens of millions of Americans. That’s the real story of how the Depression began.

As we look back at the Depression 90 years later, you might think the main lesson is “don’t let the banks fail.” And it’s a good lesson. But it’s also a lesson that’s not useful to many people today. I’m not a banker or a regulator. So what can I do with a lesson like “don’t let the banks fail?”  I don’t know.

And does it even apply to bank regulators in 2019, when things like FDIC insurance now lower the odds of repeating the kind of consumer bank runs we saw in the 1930s?  Only a little, I’d say.

The point is that the more specific a lesson of history is, the less relevant it becomes. That doesn’t mean it’s irrelevant. But the most important lessons from history are things that are so fundamental to the behaviors of so many people that they’re likely to apply to you and situations you’ll face in your own lifetime.

Let me offer one of those lessons from the Great Depression. I think it’s one of the most important lessons of history:

Lesson #1: People suffering from sudden, unexpected hardship are likely to adopt views they previously thought unthinkable.

One of the most fascinating parts of the Great Depressions isn’t just that the economy collapsed, but how quickly and dramatically people’s views changed when it did. Americans voted Herbert Hoover into office in 1928 with one of the biggest landslides in history (444 electoral college votes). They voted him out in 1932 with a landslide in the other direction (59 electoral college votes). Then the big changes began.  The gold standard, gone. Gold actually became illegal to own. Public works, surged.

To continue reading, please go to the original article here:

https://www.collaborativefund.com/blog/five-lessons-from-history/

You Have To Live It To Believe It

You Have To Live It To Believe It

Apr 9, 2019 by Morgan Housel

Richard Held and Alan Hein raised 20 kittens in pitch black darkness. Which is the kind of thing you should only do if it’s necessary to prove a point critical to understanding how the world works. Thankfully they did just that. The two MIT cognitive scientists, working in the 1960s, showed that seeing the world around you was not enough to understand how it works. You had to actually experience that world to learn how to operate in it.

The scientists raised cats in total darkness to control the relationship between seeing and learning. Once a pair of kittens were old enough to walk, they were placed in a lighted box for three hours a day.

In the box was a kind of carousel, with each kitten placed in a harness. One of the cat’s legs reached the floor, and its walking movements made the carousel move in a circle. The other cat’s legs were restrained by the harness. It could see everything going on – the movement, the other cat walking around in circles – but its legs never touched the floor. It had no active control over the carousel.

After eight weeks of daily carousel walks the cats were brought into the real light-filled world to test what they had learned. They were tested to see if they’d automatically place their paws on a surface they were about to be set down upon. And if they’d avoid a steep ledge, walking around to a gradual ramp instead. And whether they’d blink when an object was quickly brought close to their face. The results were extraordinary. 100% of the cats whose legs had control over the carousel’s movements tested normal. The cats who only watched, but never controlled, the carousel were functionally blind.

They bounded towards the steep ledge and fell straight off. They didn’t put their paws out to land on a surface. They didn’t blink when an object accelerated toward their face. It wasn’t that they couldn’t operate their bodies – they learned to do that in the dark room they were raised in. But they couldn’t associate visual objects with what their bodies were supposed to do.

The two cats grew up seeing the same thing. But one experienced the real world while the other merely saw it. The result was that one was normal; the other was effectively blind.

One of the most important topics in business and investing is whether all of us are, in some ways, like these blind cats.

Sure, we’ve read about the Great Depression. But most of us didn’t live through it. So can we actually learn lessons from it that make us better with our money?

Sure, we all know about the 2000 dot-com bust. But many – maybe most – investors and founders weren’t active back then. So do they actually understand the power of bubbles as well as those who did live through it?

My generation, the millennials, has never experienced significant inflation. We can read about gasoline lines of the 1970s and 15% mortgage rates in the 1980s. But am I as concerned about monetary policy as the Baby Boomer who does remember those things? And is the Baby Boomer as concerned as the Venezuelan who’s experienced hyperinflation? The answer to these questions is – at best – maybe.

I say it’s one of the most important topics because it affects everyone. What I’ve experienced as an investor is different from what you’ve experienced, even if we’re from the same generation. And the generation and country you’re born into, the values instilled in you by your parents, and the serendipitous paths we all wander down are out of our control.

Investor Michael Batnick says, “some lessons have to be experienced before they can be understood.” We are all victims, in different ways, to that truth.

This report digs into the effect difference experiences we’ve had have on our ability to make smart decisions about business and investing risk.

Part 1: Blind Spots

Two events shaped the 20th century: The Great Depression and World War II.

 To continue reading, please go to the original article here:

(A lengthy read but very intelligent - informative and interesting )

https://www.collaborativefund.com/blog/you-have-to-live-it-to-believe-it/

First Things First : Why You Must Get Out Of Debt

First Things First : Why You Must Get Out Of Debt

May 22, 2020 · by The Escape Artist · in Debt ·

Here’s a question I saw online in a financial discussion forum: 

“I would like to ask some advice from you. I have recently came into a small windfall of money to the sum of £3K and wondered what best to do with it. Not a lot I know, but for my salary its quite a bit.

Initially my thoughts were to either: – Invest into a stockmarket tracker fund?; or – Start saving towards a deposit for a flat? …but then I wondered whether I should use it to pay off my credit card debt or my student debt?”

This is a bit like someone asking what type of garden furniture they should be buying when their roof is on fire.  Often in personal finance there is no right or wrong answer, its down to individual preferences. But here there is a correct answer and it goes something like this:

Why are you talking about investing in the stock market or buying a house?

First things first…you have CREDIT CARD DEBT and that is an EMERGENCY. You need to pay that off, right now!

This was a mild case. The windfall was enough to clear the credit card debt, problem solved. But the fact that someone was even asking the question made me realise how much financial illiteracy confusion there is out there.

I’m sure you realise that debt is a trap, but perhaps you could forward this article to someone (especially a young person) that needs to know this?

First Things First

Let’s say you’ve locked down your spending and have some money to throw at your debts / savings / investments. Where should it go?

Well, first things first…there is a hierarchy of priorities:

First you pay off payday loans and bank overdrafts (typical interest rate ~40%).

Next you pay off credit cards (typical interest rate 20-30%).

Next you build up an emergency fund of 3-6m expenses in cash in an instant access bank account.

Next, have you cleared all expensive consumer debt? (excluding a mortgage but including personal loans, hire purchase, car lease payments etc)

Now (and only now) you can invest in the stock market.

[Note: I have excluded UK student debt which is more like a graduate tax that depends on earnings and so depends on individual circumstances.]

 To continue reading, please go to the original article here:

https://theescapeartist.me/2020/05/22/back-to-basics-why-you-must-get-out-of-debt/

Not My Priority - Investment Pointers

Not My Priority - Investment Pointers

Dennis Friedman    May 22, 2019

SOME YEARS AGO, I had a health scare—and it taught me an important lesson about my relationship with money. My primary care physician wanted me to see a hematologist. “Your white blood cells have been trending lower for the last five years,” he opined. “We need to find out what’s causing it.”

After a number of tests, the hematologist thought I might have a rare blood disease. He said the test results were inconclusive, but I fit the profile. He wanted to confirm his suspicions by performing a bone marrow biopsy. He went on to say that there was no cure for the disease, but there were drugs that could extend a patient’s life.

The doctor’s comments shook me to the core. Suddenly, I faced the possibility that my time on earth might run out far sooner than I expected. I started thinking about the things in my life that are important to me. How do I protect, experience and enjoy them?

The following were the first things I did after leaving the doctor’s office that day:

I reviewed the beneficiaries on my retirement accounts to make sure the people who are important to me would be taken care of.

I reviewed my trust to confirm it reflected my current wishes on how my estate would be distributed to family, friends and charitable organizations.

I verified that the powers of attorney for my finances and health care were in order. I wanted someone who could oversee my affairs if I became incapacitated.

I checked my passport to make sure it hadn’t expired. I wanted to visit many countries and landmarks that I hadn’t yet had a chance to experience.

Looking back, I realized the things that were most important in my life during this stressful time—besides my health—were my family, friends and life experiences. What I didn’t care about: buying a new car or how my investment portfolio was performing. Before the health scare, tracking the stock market and my investments were an everyday ritual. I now realized those shouldn’t be my life’s main focus.

To continue reading, please go to the original article here:

https://humbledollar.com/2019/05/not-my-priority/