How to Create Your Estate Plan: A Checklist

How to Create Your Estate Plan: A Checklist

Follow these steps to tackle this daunting task.

Christine Benz  Nov 30, 2022

“Estate planning” is off-putting on so many levels. “Estate” conjures up images of the uber-wealthy setting aside giant tracts of land for the next generation. (Do I even have an estate, you wonder?)

And once you delve deeper and find out that estate planning revolves around organizing your affairs in case of your death or incapacity, the project sounds even less compelling than cleaning the gutters or shredding those giant piles of paperwork that have been accumulating in your office. Then there are the costs: Properly drafted estate plans usually involve attorneys, and they like to get paid for their services.

So, that’s a potentially costly exercise that involves contemplating your demise and may be mainly for rich people anyway. Is it any wonder that so many people put off estate planning, and less than half of the U.S. population has drafted a will?

The good news is that you’ve probably already done a little bit of estate planning; you just may not be aware of it. If you’ve designated beneficiaries for your retirement accounts, you’ve started the estate-planning process. Ditto if you’ve picked a guardian for your young children—even if you’ve not yet formalized it—or compiled a list of all of your household’s liabilities and assets.

8 Steps to Start Your Estate Plan

It’s helpful to think of estate planning as a process, rather than something that’s one and done and begins and ends in an attorney’s office. Crafting an estate plan involves a series of steps, some of which you’ve probably already undertaken and are probably going to need to revisit as your life unfolds.

As you do tackle your estate plan, here are the key jobs to check off your list:

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

https://www.morningstar.com/articles/817462/how-to-create-your-estate-plan-a-checklist

9 Bills You Should Never Put on Autopay

9 Bills You Should Never Put on Autopay

Dec 15, 2022  By Valencia Higuera

We can all use a simpler, more efficient way to manage expenses and save money. Putting your bills on autopay can ensure never forgetting a due date, which minimizes the risk of late fees and dings on your credit report. But although automatic payments can save time and streamline your personal finances, it isn’t the right choice for every expense.

Autopay is ideal for payments which don’t fluctuate every month, such as your mortgage and car payments. You know what to expect from these bills, so it’s easier to plan and budget for automatic drafts. This isn’t the case with monthly expenses that fluctuate. Before you get excited and put your entire financial life on autopilot, here are some bills you should never put on autopay.

Cellphone

If you have an unlimited cellphone plan and your bill never varies, autopay is a time-saving strategy for managing payments. There’s also the option of setting up automatic payments for a non-unlimited cellphone plan. The problem, however, is the amount you owe can change from month to month, depending on data usage. And if you forget to read your cellphone statement in months where you owe more than usual, the extra funds taken from your bank account could trigger an overdraft and bank fees.

Some cellphone plans also don’t have the same billing date each month. While you might have a set date — say the 15th — others have a monthly cycle which varies depending on the number of days in the month. This doesn’t guarantee a consistent payment date each month. You could be caught off guard, or out of funds, if a payment posts when you weren’t expecting it.

Since autopay is a hands-off approach to paying bills, you’re also less likely to inspect your cellphone bill after setting up automatic payments. This means you might not catch billing errors and will pay more than necessary.

Utilities

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

https://www.gobankingrates.com/saving-money/budgeting/bills-should-never-put-autopay/?utm_term=related_link_1&utm_campaign=1197538&utm_source=yahoo.com&utm_content=2&utm_medium=rss

7 Things You Should Never Pay For With Cash

7 Things You Should Never Pay For With Cash

Jennifer Taylor  Wed, December 14, 2022

Some people charge everything to a credit card to rack up rewards points, but that isn’t your style. When possible, you prefer to pay with cash. Maybe you’ve ditched the plastic as a way to curb overspending, avoid credit card fraud or simply because you prefer to shop off the grid. However, despite the many good reasons to pay with cash, it isn’t always the best choice.

Not sure what types of purchases warrant leaving the cash in your wallet? Here’s a look at seven common payments that should always be made with a different form other than cash.

Rent

Writing a check can be a hassle, so if you don’t have the option to pay your rent online, you might opt for cash. However, William Capece, CFP, director of business development at the JS Benefits Group, said doing so is unwise, because it leaves you without a paper trail.

“Too often we hear stories of landlords who evict tenants over unpaid rent, while the tenant swears to have paid,” he said. “Cash leaves no paper trail and thus no proof.” On the flip side, he said landlords should also never accept cash payments for the same reason. “This should be outlined in the renter agreement,” he said.

Car

Since interest rates are at historic lows, Capece advised against buying a car with all cash. “Utilizing a car loan helps in many ways,” he said. “Dealers make more money when customers utilize debt, so they are more likely to give you a better deal.”

Beyond that, he said paying for such a large purchase in cash limits your ability to invest. If you can swing it, he recommended financing your car purchase and using the cash as the down payment on a rental property. “Use an appreciating asset to pay for your lifestyle,” he said.

Home Maintenance and Updates

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

https://news.yahoo.com/7-things-never-pay-cash-120012133.html

6 Money Resolutions To Get Your Finances on Track for 2023

6 Money Resolutions To Get Your Finances on Track for 2023

Jenny Rose Spaudo  Tue, December 13, 2022 at 5:28 PM·4 min read

Have you thought about your financial New Year’s resolutions yet? If not, now is a great time to start. Over 27% of American adults say saving more money is their top financial goal for 2023, according to a recent GOBankingRates survey. Around 23% plan to get out of debt, and another 23% want to make more money.

What practical steps should you take to reach your goals next year? Here are the top money resolutions financial experts recommend if you want to get your finances on track in 2023.

Set a Budget To Achieve Your Goals

Hoping to save enough for a big purchase next year? GOBankingRates found that over 40% of adults are planning to buy a car in 2023, more than 26% expect to take an expensive vacation and around 24% would like to buy a home.

To reach your savings goal, though, you’ll need a budget, said Jay Zigmont, CFP and founder of Childfree Wealth. Creating and sticking to a budget throughout the year can help you stay on track with your savings and avoid overspending.

“It doesn’t matter if you follow a cash-stuffing approach, use an app, or just put it down on paper,” Zigmont said. “You just need to have a plan for your money each month. Your first month of budgeting won’t be perfect, but the key is to keep at it and keep making improvements.”

Pay Off Your High-Interest Debt

Many financial experts will tell you that, although not all debt is harmful, high-interest debt can quickly put a strain on your finances. According to a 2022 GOBankingRates survey, over 31% of American adults have more than $1,000 in credit card debt.

Paying off these debts can free you to invest, save and enjoy more of your money. Start by making sure you understand all the terms and conditions of your current loans, said CPA and finance coach Tatiana Tsoir. Try to make this a habit before taking on any new debts, too.

“Many people don’t understand the terms of their credit cards, bank accounts, loans, or cash advances,” she said. “Know what you’re getting yourself into and whether it’s going to help or hurt your financial situation.”

Contribute To a Retirement Account

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

https://news.yahoo.com/6-money-resolutions-finances-track-235224567.html

One-Third of Americans Say Inflation Is Top Stressor Going Into 2023

One-Third of Americans Say Inflation Is Top Stressor Going Into 2023 — How To Not Let It Get You Down

By Ashleigh Ray  December 12, 2022

The holidays are rapidly approaching, meaning 2023 will be here before you know it. While a new year always brings with it feelings of hope and optimism, there’s also a lot of uncertainty and concern surrounding the economy. The rising costs have had a significant impact on everyone, forcing budgets to get tighter and tighter.

A recent GOBankingRates survey found that a third of Americans (33%) say inflation is their number one stressor going into 2023. You can see this especially when you consider the two thirds of people who say rising food and gas costs impacted their finances the most this year.

Aside from inflation, 23% of Americans say their top stressor going into 2023 is living paycheck to paycheck, and another 20% are most concerned about debt. Inflation seems to have taken quite the financial toll on American wallets, but you don’t have to let it get you down. Here are some ways to prepare your finances for rising costs in the coming year.

Try To Cut Back Where You Can

On your next trip to the grocery store, see if you can switch out some of your name brand products for the generic brand. While it might only save you cents in the moment, those savings will add up over time. If you continue to find small ways to cut back, you’ll be able to give yourself a little more breathing room in your budget

Stick To Your Budget

No one’s sure when prices will stop increasing at the rapid rate that they have been. With that in mind, it’s a good idea to keep an eye on your finances and stick to a budget that allows you to keep contributing to your savings and retirement accounts. Try seeing if there’s any expenses you could cut back on or remove entirely. While one person may want to budget for their gym membership, another person will want to budget for their high-speed internet package. It’s up to you to determine which expenses are worth the cost.

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

https://www.gobankingrates.com/money/financial-planning/inflation-top-stressor-tips/

A $0.25 TRILLION Monthly Deficit? What Could Possibly Go Wrong??

A $0.25 TRILLION Monthly Deficit? What Could Possibly Go Wrong??

Simon Black December 13, 2022

On the fifth of April in the year 1853, a diplomat from the United Kingdom with the most quintessentially British name — Stratford Canning — arrived by boat to Constantinople and immediately took an emergency meeting with Sultan Abdulmejid of the Ottoman Empire.

After decades of relative peace, Europe was once again on the brink of war. Russia was a rising power at the time, and, eager to flex its muscles, Russia threatened to invade the Ottoman Empire over completely ridiculous reasons.

Everyone knew that much of Europe would be drawn into a pointless conflict. And that’s why Britain, the dominant superpower at the time, sent Stratford Canning to try to prevent a war.

The British thought they were in good hands. After all, Canning had nearly five decades of experience in diplomacy. Certainly he of all people would be capable of maintaining peace.

Sadly for the British (and everyone else in Europe), Canning was a total failure. Not only did this man, with his five decades of experience, fail to prevent the war, but he actually escalated the conflict by convincing Sultan Abulmejid to reject Russia’s peace proposal.

Russia didn’t appreciate the rejection. And by the end of June, Russian troops invaded Ottoman-controlled territory.

This conflict became known as the Crimean War, and it was pretty much a disaster for almost everyone involved, including Russia… and especially the Ottoman Empire.

Russia suffered nearly half a million casualties from the war. They depleted their treasury and severely injured their economy. And most of all, Russia’s imperial army — which everyone had previously assumed to be among the best in Europe — was found to be second rate and poorly equipped.

But the Ottoman Empire fared even worse.

The empire was already in extreme decline by the mid 1800s. And about the only thing the Ottoman Empire had going for them economically was that they had ZERO foreign debt. That is, until the Crimean War.

In 1854, the Ottoman Empire took on its first foreign debt; the war was costly and they needed money. But once they started borrowing from foreigners, they never stopped. Even after Russia finally threw in the towel and the Crimean War ended in 1856, the Ottoman Empire kept borrowing.

Meanwhile the Ottoman economy continued deteriorating. The Ottoman government was full of self-righteous, entitled bureaucrats who harassed the private sector with mountains of regulations and debilitating taxes.

The Ottoman Empire also saw its share of bad luck. A number of pandemics swept the empire, including a nasty Bubonic Plague outbreak in 1876, which added to the government’s economic woes and forced them to borrow even more.

In fact, by 1876, the imperial government had borrowed so much money that debt service took up roughly HALF of their entire tax revenue.

More importantly, Ottoman borrowing costs had soared. They borrowed money at less than 5% at the beginning of the Crimean War in 1854. But by the mid 1860s, foreign lenders typically demanded 10% or more.

Needless to say the Ottoman Empire eventually defaulted on its gargantuan debt. And once they did, their foreign lenders took control of the imperial government and its finances; the Ottoman Empire effectively lost its sovereignty and became a client state of its European lenders.

History has no shortage of similar examples — once powerful and thriving empires who mismanaged their economies, took on enormous debts, and became weak through sheer financial insanity.

The US government seems to have willfully chosen to ignore these lessons time and time again.

Back in 2018, as the US national debt was closing in on $25 trillion, I pointed out that Treasury Department was projecting to increase the debt by roughly $1 trillion per year.

This was at a time when the economy was strong, tax revenues were at record levels, etc. There were no major wars, no financial crises, no major disasters.

And I wondered — if the government can rack up a trillion dollar deficit when everything was great, “what’s going to happen to the US federal deficit when there actually IS a financial crisis or major recession?”

Well, we got our answer in 2020 when COVID struck. They added $5+ trillion to the debt, practically in an instant, and acted like it was no big deal.

Yet even though the government claims the pandemic is over, today they’re STILL spending absurd quantities of money.

Yesterday the Treasury Department announced that the federal budget deficit for last month alone was a whopping $248.5 billion.

That’s a near quarter of a TRILLION dollar deficit. In a SINGLE MONTH.

This wasn’t a one-time anomaly either. The deficit over the past six months (June-Nov) totals nearly $1.3 trillion, an average monthly deficit of more than $200 billion.

All of this deficit spending adds to the national debt, which, duh, eventually needs to be repaid.

Whenever the Treasury Department borrows money to pay for these outrageous deficits, they do so by issuing bonds. And those bonds are sold to investors with terms ranging from 28 days all the way up to 30 years.

The average maturity for US government debt is about five years. This means that, every year, roughly 20% of US debt matures and needs to be repaid.

Naturally the government doesn’t have the money to repay its debts. So instead they borrow new debt to repay the old debt. It’s basically a Ponzi scheme.

To make matters worse, interest rates have been rising rapidly; last year the government borrowed money at 0.1% or less. But today they have to pay 4% or more.

That’s a huge difference.

Thanks to rising rates, the US government will spend nearly $1 trillion this fiscal year… just to pay INTEREST on its debt. And if rates keep rising (or remain this high), that figure will only grow as they continue to refinance their debts.

History shows that it’s very difficult to remain a superpower when you have to spend vast sums of money just to pay interest.

And yet the people in charge remain completely oblivious to this fact… and pretend like absolutely nothing could go wrong.

This is plenty of reason to have a Plan B...

PS: If you can see what is happening, and where this is all going, you understand why it is so important to have a Plan B. That’s why we published our 31-page, fully updated Perfect Plan B Guide, which you can download here.

To your freedom, Simon Black, Founder  Sovereign Research & Advisory

https://www.sovereignman.com/trends/a-0-25-trillion-monthly-deficit-what-could-possibly-go-wrong-144706/

How Long Should You Wait To Remind Your Friends To Pay You Back?

How Long Should You Wait To Remind Your Friends To Pay You Back?

By Nicole Spector  September 3, 2022

It can start out so innocently: a friend asks you to spot him some cash. Maybe it’s a fairly trivial amount — a $20 for his share of brunch, say. Or perhaps it’s a tad more substantial: $100 to tide him over until he gets paid. Or maybe he asks for $500, $1,000 or more.

And he’s your friend, and he’d do it for you, right? And you have the means…

“Like they sing about in the Friends theme song, friendship is about being there for each other, and this can sometimes mean being there financially,” said Anthony Martin here, founder and CEO of Choice Mutual. “We all need a hand sometimes; you may find yourself in a position to spot your friend for a few meals or even assist with a slightly larger financial burden like overdue rent or a car payment.”

So you lend him the money. Key word being “lend.” But then what? Well, you may make an informal verbal agreement that he pays you back in a few weeks or months. But the days pass and pass and no money is returned.

How long do you wait to nudge your friend and remind him about the money that you loaned him — and that it’s time to pay you back?

It Depends on What You Agreed Upon

“Reminding them to pay you back really depends on your original agreement,” said Craig Miller, a psychologist and the co-founder of Academia Labs, LLC. “For instance, if your friend borrowed money from you and promised to pay you back after a month, then the first reminder for payment should come after a month. If your friend is able to pay already, then well and good. If not, then your friend should indicate a specific time he’ll be able to pay. Only then can you remind your friend again for payment.”

Consider a Timetable

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

https://www.gobankingrates.com/money/financial-planning/how-long-should-you-wait-to-remind-your-friends-pay-you-back/

15 Most Important Assets That Will Increase Your Net Worth

15 Most Important Assets That Will Increase Your Net Worth

Jennifer Taylor   Tue, December 13, 2022

Your net worth is more than just the balance in your bank account. It's a measure of your financial health.

To get the answer to "What is my net worth?" subtract your total liabilities from your total assets. If you're trying to figure out which assets are the most valuable or will otherwise give your net worth a boost, here's a rundown of 15 critical assets. Learn how you can start making lucrative investments toward your future.

1. Owning Your Primary Residence

Homeownership ranks among the most common ways people gain a substantial increase in net worth. Instead of choosing the traditional 30-year mortgage, opt for a 15- or 20-year term, so you can pay it off more quickly, which will result in a significant asset and savings on interest. And if you decide to sell after you pay your home off, capital gains are tax-free up to $500,000, as long as your status is married filing jointly.

Renting might make more financial sense than owning in some high-priced urban areas, depending on whether the cost of ownership is reasonable in relation to total living expenses.

Take Our Poll: How Long Do You Think It Will Take You To Pay Off Your Credit Card Debt?

2. Second Home

Second homes are a savvy way to earn passive income via short-term rental platforms like HomeAway, VRBO or Airbnb. At first, you can use the extra income to help pay off your mortgage more quickly. Then, once you pay off the mortgage, you'll own a significant asset while still benefitting from the passive income of renting it out if you choose -- both can result in a nice gain in your net worth.

3. Retirement Savings

Retirement might be decades in the future, but saving now can enhance your net worth.

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

https://news.yahoo.com/15-most-important-assets-increase-133014378.html

6 Things You Must Do When Your Salary Reaches $100,000

6 Things You Must Do When Your Salary Reaches $100,000

Heather Taylor  Mon, December 12, 2022

Once your salary reaches $100,000, you need to take certain steps to ensure you stay in good financial health.  There’s a chance you already might be making some of these money moves, even if you’re earning a little less. Make sure you start taking these actions as soon as you begin earning $100,000.

Eliminate High-Interest Debt

Those who just started earning six-figure incomes will need to quickly pay off any high-interest debt. Think student loans, credit card balances or any other outstanding debt where the interest rate is extremely high.

Alissa Krasner Maizes, financial planner and founder of Amplify My Wealth, said eliminating this debt yields the quickest return on investment. Not sure where to begin? Krasner Maizes recommends automating monthly payments beyond the required minimum payment due.

Start with your highest-interest debt and, once you eliminate this debt, move on to paying off debt with the next highest amount of interest. Keep going until you have paid off all high-interest debt — and find yourself debt free.

Maximize Retirement Contributions

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

https://news.yahoo.com/6-things-must-salary-reaches-130028760.html

The Coming Bonanza in Distressed Debt

The Coming Bonanza in Distressed Debt

December 12, 2022  Simon Black & Sovereign Research & Advisory Group

On the morning of June 20, 1783, the Continental Congress of the United States was just starting its daily session at Independence Hall in Philadelphia when the building was suddenly mobbed by hundreds of angry people.

It turned out the protesters were soldiers who had fought in the American Revolution. And they wanted their money.

By the summer of 1783 the American Revolution was effectively over; the British had already surrendered at Yorktown more than 18-months prior, back in October 1781, and everyone was just waiting for the diplomats to conclude the final peace treaty.

In the meantime, the fledgling government of the United States had already started work on building a new nation. But one of the biggest challenges they faced was their enormous mountain of debt.

The national and state governments in the US had borrowed vast sums to finance the war, and they owed money to just about everyone — including the French, Dutch, and Spanish, not to mention plenty of private investors in the US.

Moreover, the US and state governments owed money to their soldiers; most of the troops had been paid in IOUs, especially during the latter part of the war. Plus farmers and merchants who had provided critical supplies to the US Continental Army had also been paid in stacks of IOUs.

And with the war formally winding down in 1783, there were a lot of people who wanted to the government to make good on its IOUs… hence the protest in Philadelphia.

The protesters, however, were unsuccessful. The politicians managed to escape (temporarily relocating their capital to Princeton, New Jersey), and the event was deemed an insurrection. Several protesters were arrested, and Congress later held a formal investigation into the matter.

And yet no one was actually paid. The men who had fought and bled for independence were largely abandoned, and most people soon believed their IOUs to be worthless.

Now, these IOUs essentially constituted government debt… like a bond. And it didn’t take very long for savvy New York banking houses to see an opportunity and to start buying up all the IOU/bonds they could find.

Bankers bought IOUs from former soldiers and farmers for pennies on the dollar, and then leaned heavily on their political influence to ensure the IOUs would be repaid in full.

Their plan worked. By 1790, the new federal government had passed a series of laws, taxes, and tariffs, guaranteeing repayment of the debt.

The bankers made out like bandits. And ironically, the same farmers and ex-soldiers who sold their IOUs for pennies on the dollar were the ones who ended up paying the new taxes in order to repay them.

This is a far too common theme in the history of finance; large, politically-connected players often take advantage of the little guy. But sometimes circumstances offer the little guy a chance to hit back.

I believe we are entering one of those periods now.

The first important point to understand is that the last 14 years or so has seen some of the most unprecedented financial conditions in 5,000 years of human history.

Literally never before have interest rates been kept so low, for so long, in virtually every major corner of world.

In the US — the largest economy in the world — interest rates were held at zero for years. And multiple countries totaling over 20% of global GDP actually had NEGATIVE interest rates.

It turns out this policy had a lot of consequences. And one consequence was that governments and corporations borrowed enormous amounts of money.

Hopelessly bankrupt governments with a history of default (like Argentina) were able to issue ONE HUNDRED YEAR bonds paying irrationally low rates.

And companies with very little hope of becoming profitable were able to borrow a ton of money; they then used a lot of that money to buy back their stock, artificially boosting the stock price and giving the appearance that everything was going great.

But now there are a lot of governments and businesses in a serious pickle. Interest rates have been rising rapidly.

The global economy is slowing. And it’s starting to look very likely that a number of governments and businesses won’t be able to pay their debts.

I originally brought this idea up more than two years ago at the beginning of COVID, suggesting that a lot of companies would be wiped out from the twin threat of lockdowns plus heavy debt burdens.

But that COVID distressed debt bonanza didn’t materialize… because the government stepped in and bailed everyone out. Plus central banks slashed rates back to zero, kicking the debt can down the road even further.

Financial conditions have changed substantially since then. Interest rates are MUCH higher across the board than they were two years ago.

Residential mortgage rates have climbed from 2.75% to 7.32%. The US 6-month Treasury was just 0.03% last summer. Today it’s 4.75%.

And corporate “junk bonds” yielded as low as 3.8% last year. Today those junk rates are nearly 10%.

That last point is really important, and I’ll give you an easy example. We all know how the cruise industry struggled once the pandemic hit, and those struggles continue today.

Carnival Cruise Lines is hurting so badly that the company’s ‘gross profit’ is negative, meaning that it costs the company more to operate their cruise ships than they generate in revenue.

In Q2, for example, Carnival generated $1.2 billion in cruise revenue. But they spent $1.7 billion on fuel, food, crew salaries, etc., resulting a NEGATIVE gross profit of -$500MM. And that’s BEFORE paying for corporate management, administrative expenses, etc. (which totaled another $400 million).

And it’s also before Carnival paid a single penny of interest or principal on its debt.

They’re clearly in a tough spot. And it was even worse last year and the year before.

Yet Carnival has been able to keep the party going by taking on debt; its total debt is now nearly $30 billion, up from less than $10 billion in 2019, pre-COVID.

That’s a lot of debt, given that Carnival’s total equity is only around $8 billion. So it’s ‘debt to equity’ ratio is nearly 4:1.

When rates were still low and their business was somewhat healthy, Carnival was able to borrow money at just 1%.

But now that their business is in the dumps, and interest rates have increased substantially, Carnival is borrowing money at 10.5%.

Remember, the company doesn’t even make enough money to pay its 1% debt, let alone 10.5% debt.

And what’s worse is that these bonds will eventually need to be paid back; in the next 12 months alone, Carnival will have to repay nearly $1 billion in debt. And they simply don’t have the money.

This is a classic distress situation. And it’s no wonder that investors have been dumping Carnival bonds.

But it’s not just Carnival, or even the cruise industry. You’d be surprised at how many companies are in a similar situation — heavily in debt and unable to pay. They’re basically walking dead, which is why they’re commonly referred to as ‘zombie companies’.

Zombie companies have been with us for years; they’ve only been able to survive thanks to cheap interest rates and government bailouts.

But, again, financial conditions have changed dramatically. And if interest rates stay high (or go higher), I think it’s likely that we’ll see a wave of bankruptcies and asset sales, possibly over the next 12 months.

This means that there may be a coming bonanza in distressed debt. And, for a change, one where the little guy has a major advantage.

To your freedom,  Simon Black, Founder   Sovereign Research & Advisory

https://www.sovereignman.com/trends/the-coming-bonanza-in-distressed-debt-144702/

Ideas That Changed My Life

Ideas That Changed My Life

DEC 7, 2022  by Morgan Housel @morganhousel

You spend years trying to learn new stuff but then look back and realize that maybe like 10 big ideas truly changed how you think and drive most of what you believe.

Brent Beshore recently listed the biggest ideas that changed his life. A few of mine:

Everyone belongs to a tribe and underestimates how influential that tribe is on their thinking. There is little correlation between climate change denial and scientific literacy. But there is a strong correlation between climate change denial and political affiliation. That’s an extreme example, but everyone has views persuaded by identity over pure analysis. There’s four parts to this:

Tribes are everywhere: Countries, states, parties, companies, industries, departments, investment styles, economic philosophies, religions, families, schools, majors, credentials, Twitter communities.

People are drawn to tribes because there’s comfort in knowing others understand your background and goals.

Tribes reduce the ability to challenge ideas or diversify your views because no one wants to lose support of the tribe.

Tribes are as self-interested as people, encouraging ideas and narratives that promote their survival. But they’re exponentially more influential than any single person. So tribes are very effective at promoting views that aren’t analytical or rational, and people loyal to their tribes are very poor at realizing it.

Psychologist Geoffrey Cohen once showed Democratic voters supported Republican proposals when they were attributed to fellow Democrats more than they supported Democratic proposals attributed to Republicans (and the opposite for Republican voters). This kind of stuff happens everywhere, in every field, if you look for it.

Everything’s been done before. The scenes change but the behaviors and outcomes don’t. Historian Niall Ferguson’s plug for his profession is that “The dead outnumber the living 14 to 1, and we ignore the accumulated experience of such a huge majority of mankind at our peril.”

The biggest lesson from the 100 billion people who are no longer alive is that they tried everything we’re trying today. The details were different, but they tried to outwit entrenched competition. They swung from optimism to pessimism at the worst times.

They battled unsuccessfully against reversion to the mean. They learned that popular things seem safe because so many people are involved, but they’re most dangerous because they’re most competitive. Same stuff that guides today, and will guide tomorrow. History is abused when specific events are used as a guide to the future. It’s way more useful as a benchmark for how people react to risk and incentives, which is pretty stable over time.

Multi-discipline learning: There’s as much to learn about your field from other fields than there is within your field. Most professions, even ones that look wildly different, live under the umbrella of “Understanding how people respond to incentives, how to convincingly solve their problems, and how to work with others who are difficult to communicate with and/or disagree with you.”

 Once you see the roots shared by most fields you realize there’s a sink of information you’ve been ignoring that can help you make better sense of your own profession. 

I didn’t appreciate how important communication is to providing investment advice before reading about how many doctors struggle to communicate effectively with patients, leading to patients who don’t stick with treatment plans and are resistant to lifestyle change. There are millions of these dots to connect. Probing beyond the confines of your day job is more fun anyways.

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

https://collabfund.com/blog/ideas-that-changed-my-life/