﻿It’s the summer of 2004. I’m 23 years old. I’m driving down an empty El Paso highway. I’m driving
to my new apartment that I can for the first time in my life, call my own. I’m excited because up
to this point in my life, I had never lived on my own. In the moment of blind excitement, I had
signed a lease contract I didn’t thoroughly read. I purchased a bunch of brand new furniture. And
because I didn't have the cash, I maxed out all my credit cards to make these purchases. As you can
see, this wasn’t a very smart financial move for a 23 year old Tae. I ended up spending the next
3 years paying back that credit card debt with some hefty interest rate. We all like to think of
ourselves as smart, logical people. I sure thought I was when I made my purchases. But when it comes
to money, even the smartest among us can make some pretty dumb mistakes. So in this video, I want to
review with you what I’ve seen as the 5 most common dumbs things smart people do with their
money, so you can avoid making them yourself. Hi, if you are new to the channel, my name is
Tae from Financial Tortoise - a channel dedicated to helping the Sandwich Generation Master Money
and achieve Financial Security. And before I go on, if you have yet to download your free copy
of “Sandwich Generation’s Guide to Financial Security - 10 Steps to Securing Your Family’s
Financial Future!” please go to my website at financialtortoise.com and do so. I send out weekly
newsletters with other great tips on mastering your money and I wouldn’t want you to miss them.
I’m assuming that many of you who are watching this video are very smart individuals. I mean with
so many other interesting contents out there, if you have the motivation to watch personal
finance youtube videos, you have to be. But, smart individuals like you can also makde dumb money
mistakes like I have done in my life. So, what’s number one dumb things smart people do with their
money? From my observation, the most common dumb thing smart people do with their money is to take
money advice from the wrong people. And the most common place is from the financial media. When we
go to the bookstore, we see rows of magazines dedicated to money. When we turn on the news,
we see very smart sounding individuals talking about money constantly. When I was just getting
started in my personal finance journey, I thought this was the place to go to get myself financially
smarter. I thought that really well educated people read newspapers and watch the news,
so this is where I should be getting information about money right? However, boy was I wrong. What
we don’t see on the surface is that many of these publications and financial news media are actually
Wall Street’s billion-dollar marketing machines. Wall Street makes money when there are continual
trading activities. More people buy and sell financial products, more money Wall Street and
Big Banks make. So in order to stimulate more and more trading activities, what these banks
will do is they feed millions of dollars to the financial media and publications. The financial
media and wall street have a very tightly knit symbiotic relationship. The media wants readers,
viewers and listeners because that way they can get more advertising dollars from Wall Street.
And how do they get more readers and viewers? They write sensational, eye-catching content.
Top performing mutual funds this month. Best stocks to buy now. Best trading platforms this
year. And Wall Street is more than happy to pay advertising dollars because it drives more
customers to stimulate more trading activities. With the help of the media, Wall Street has been
very successful at getting individual investors to chase after last year’s winning funds and market
time. Or even using gloom-and-doom forecasters to play on investors fears and getting them to
buy safer securities. Wall Street wins either way. Be careful of where you get your financial
information. Today, the problem isn’t lack of information, it is too much information. And
it’s hard to filter out what is good information vs. the bad. So, as a smart individual, practice
good judgment when you give your attention. Smart, sound advice can make you millions,
but bad advice can also cost you millions. Number two dumb mistake smart people do with their money
is near and dear to my heart. Too many smart and successful people take on too much student debt.
In 2009, after 6 amazing years in the US Army, I decided to transition to the civilian world.
It was an amazing experience, but I wanted to see what else the world had to offer. So I enrolled in
a MBA program at UCLA. I definitely learned tons about the business world from my MBA education
and it helped me to transition successfully to the corporate world, but one thing I wasn’t very
smart about was how I funded it. The program was quite expensive and I came out of it with $87K
in student loans afterwards. The gravity of the amount didn’t really hit me until
I started paying it down with my wife after we got married. Education is important. And
smart individuals like you understand that principle. However, not all education is the
same. It’s important to think hard about the value of the education that you are willing to pay for.
If you have kids that are about to enter college and they are looking at expensive private colleges
because they have a beautiful campus and offer 5 course meals at student dining, ask yourself,
is it worth the $50,000 price tag? Oftentimes, there are many great state funded schools that
can provide just as good or even better education than what these private colleges can provide.
Both my wife and I are both proud products of our state’s higher education system; the University of
California and California State University system. When it comes to paying for higher education,
if you are willing to do your homework, there are so many different ways to offset the cost. I
was able to get my undergraduate paid for through the Army ROTC program. Though I owed the military
4 years afterwards, if you want to serve your country and get paid to do it at the same time,
the ROTC program is a great option. My wife was also able to get her Masters in Nurse Practitioner
paid for by her employer. She did owe 3 additional years working at the hospital afterwards,
but she was able to get a $50,000 education completely paid for. When it came to my MBA,
I had much smarter classmates who seeked employers who were willing to pay down their student debt
as part of their signing bonus. Excessive student debt, I can tell you from a personal experience,
can take a terrible toll. We have to delay purchasing homes or starting a family. We
can’t invest for our retirement. We can’t take healthy risks in our career because we feel too
financially vulnerable. Don’t put yourself in this position. Be wise and think twice before you take
on too much student debt. Before I jump to number 3 dumb thing smart people do with their money,
if you are receiving value from this video, please do me a favor and hit the like button.
It really helps with the YouTube algorithm and allows videos like this to be shared with more
people. The third dumb things smart people do with their money is making really risky bets. And
really smart people are especially prone to doing this. There is a behavioral finance term called
“Recency Bias.” We overemphasize the most recent event and subconsciously project it towards the
future. In the late 2000’s everyone thought that the housing market would continue to rise because
they saw it rise the past several years. Smart individuals thought they could bank on this rise
and would buy homes, refinance it when the price rose and buy more homes with the proceeds. But
as history has shown, nothing in life stays the same indefinitely. Many superpowers of the past,
the Romans, the Mongolians, the British Empire all seemed invincible in their days. However,
with time, they all either crumbled or lost their powers. To make wise financial decisions,
we must look beyond the recent patterns and consider that the future could be very different
from today. I mean who could have predicted COVID-19 to have had the impact that it did.
Or inflation going as high as it is right now. The key is to make sure that you don’t stake
your financial future on the success or failure of a single crazy bet. After having watched the
market constantly and reading countless articles from so-called financial professionals, you might
feel tempted to jump in on the latest tip to get a piece of the action. However, practice
prudence. The best path to take when investing is oftentimes the simple and slow. Accepting only
as much risk as necessary to reach your goals and sticking with your investing plan through
both up and down markets. And for individual investors like you and I, I firmly believe that
low-cost index funds provide the wisest investing options. Number 4 dumb thing smart people do with
their money is to try ‘timing’ the market. And smart people especially persist in this
activity of timing the market, because we think we are so smart. Many of us who have successful
professional careers are accustomed to having others see us as being “smart.” Our clients and
colleagues see us as experts, so why shouldn’t we be able to predict short-term market movements?
It’s obvious isn’t it? When I talk to people about the economy, market timing is probably one of the
most common statements people make without even realizing they are doing it. And I’m the ultimate
culprit. We say statements like, “the market is up right now, so I’m going to wait until it dies
down before I buy.” “My Tesla stock is down right now, but it should jump back up again soon.” And
when we point out that they are timing the market, they often acknowledge that timing is not a smart
move. But they also present all sorts of reasons why it makes sense in their specific situation.
The bottom line is that if we are waiting to buy or sell until some point in the future, then we
are timing the market. I get into this wrinkle constantly. Though we have set up automatic
investments on a regular basis, at times, I can’t help myself look at the market and consider the
idea of delaying the purchase or making it sooner because I think the market is either overvalued
or undervalued. Then my wife who is much wiser than I would need to kick some sense into me.
Experts have long cautioned against trying to time the market. Financial Journalist Jane Bryant Quinn
observed, “The market timer’s Hall of Fame is an empty room.” The sobering truth is that nobody is
smarter than the market. When we try to time the market, we are making investment decisions based
on emotion, not logic. Be ok being lazy when it comes to investing. This is a hard pill to
swallow for smart individuals because many of you have achieved your professional success through
hard work and smart decision making. But when it comes to investing, the only smart decision
you need to make is to set up your low-cost index fund once and forget about it. The Nobel
Prize winning economist Richard Thaler had said that his “...lazy strategy of doing very little,
buying mostly stocks and then not paying attention has served him well.” I feel if it worked for him,
it will work for you too. Number 5 dumb thing smart people do with their money is
not to plan for your aging parents. You might be a superstar when it comes to all the items
we talked about so far; you don’t watch the financial news, have no student debt,
don’t take unnecessary risks and don’t even think about trying to time the market. However,
this fifth one gets a lot of people because it's beyond our specific area of control. And I know,
we don’t like to think about our aging parents more than we like to think about ourselves dying
or our home crumbling under an earthquake. Because talking about aging is so difficult, we fail to
discuss our parents’ needs and desires. And the consequence is that we fail to research what those
needs and desires might cost and come up with a plan for the future. Before we know it, the
future arrives and we suffer unnecessary financial and emotional pain because we are scrambling to
figure out a solution on the fly. I saw this way too closely when my wife’s grandmother was going
through her final stages of life. She was over 90 years old, yet there wasn’t a plan for who,
what and how things were going to be handled if something was to happen to her. Everyone in
the family was just hoping that the time would come later, rather than sooner. But the time
came sooner than everyone realized when she was diagnosed with Stage IV lung cancer and her health
took a dive. My responsibility was primarily just the driver for my wife and her grandmother,
but I saw first hand how lack of preparation brought so much financial and emotional
tension to the family. There wasn’t a healthcare directive to guide the family towards her wishes.
People couldn’t agree on where to house her during the final stages of life. There wasn’t a plan for
what would happen to her assets afterwards. Afterwards, my wife and I vowed that we would
never want to repeat that experience with our own parents if we could help it. And I agree
that no amount of planning and discussion can free us entirely from the burdens of caring for
aging parents. Because, to be honest, when we study and analyze our options, we likely will
find most unattractive. But that doesn’t mean we shouldn’t plan because planning allows us
to gain at least some semblance of control of an inherently emotional and unpredictable situation.
We may not like our options, but if we plan, we at least will understand them in advance. If
you would like to learn more about how to talk to your aging parents about money, check out my video
here where I go in more depth. Thank you guys for watching and I’ll see you in the next one.