A talking head on a video conference. Lots of opinions, but seemingly no legs. He had become a regular feature of my workday, during the endless series of agile project “ceremonies” and bullshit meetings that consume calendars and prevent anything remotely productive from being accomplished.
He wasn’t particularly attractive or funny or wise. No witty anecdotes. No startling insights. Never achieving amazing victories, nor enduring crushing defeats. Just plodding along, keeping his head down. A non-entity. Making up the numbers. Unremarkable in almost every way.
Yet I found my eyes drawn to his little box amongst the gallery of video conference participants. Immediately behind where he sat was a large aquarium. Fish of all colours and shapes languidly swam around, doing whatever it is that fish do during their lifetime spent trapped in a glass prison.
Over the months of video conferences, I had slipped into the bad habit of tuning out and watching those fish. Only half-listening to the status updates full of boasting, blame-shifting, excuses, and prevarication.
The fish became familiar. Each with its own idiosyncrasies and habits. Watching them was relaxing.
It turns out Nemo is a hermaphrodite. Dory is armed with poisonous spines. Both are cannibals.
Now that would have made for a fascinating Pixar movie plot!
For the most part, the fish peacefully coexisted. Most just swam around in endless circles. Eating. Excreting. Laying eggs, then cannibalising their young. An empty existence, devoid of meaning.
However, a couple of larger fish were fiercely territorial. Regularly doing battle over some perceived slight, whether real or imagined. Fighting to the bitter end, until one would break off, slink away, and die quietly alone in a corner.
But overnight something fascinating would occur. The fallen fish magically reanimated, returning from the dead like a zombie in a low budget horror movie. By the time the next day’s video conferences commenced, the fish were once again all present and accounted for.
This had me puzzled for a while, until I noticed the zombie fish was markedly smaller than it had been the previous day. A missing fin had miraculously grown back. Markings slightly different.
When I asked the aquarium owner about it, he laughed and confessed to making a regular dash to his neighbourhood pet store to procure replacements. His young children had selected the fish in the tank, and hadn’t (yet) deciphered the illusion of their piscine pets’ apparent immortality.
Which at face value appeared kind of their father, sparing them from the harsh realities of life.
But when I thought about it, his actions were irrational. Even a little bit cruel.
His desire to hide from the truth and avoid an awkward conversation created a self-perpetuating bad habit. One that incurred both a high body count and a lighter wallet, during the endless game of aquarium wars.
Recently I received a cold call from a financial advisor. Not some offshore call centre operator, but a “senior partner” at a well-known Wealth Management firm that regularly features in the financial press for all the wrong reasons. High fees. Higher churn. Predatory practices. To paraphrase Fire v London’s wise words, a firm specialising in managing wealth from the customer’s wallets into their own.
The advisor claimed I had been specifically targeted as a successful and intelligent high-income earner. I was financially sophisticated. “Smart” money. Someone who, in the run-up to the end of the tax year, could greatly benefit from the firm’s exclusive products and proven expertise in advising thousands of big hitters just like me.
In other words, somebody had trawled LinkedIn for those working in financial services with keywords like “Chief”, “Director”, “Global”, “Head of”, or “Partner” in their job titles. Potential punters who likely earned low to mid-six-figure salary packages plus non-recurring discretionary annual bonuses.
Those caught in the net were then shotgunned out a flattering approach intended to pump up the recipient’s tyres and stroke their ego. The suggestions it contained weren’t all bad.
Annual tax-free ISA allowances are either used by April 5th or lost forever.
Capital gains tax allowances could be deployed to rebalance or exit underperforming positions.
Stuffing cash in personal pensions may offset the 60% effective tax rate paid by high-income earners.
Consider future tax arbitrage by transferring matrimonial assets to the partner on the lowest tax rate.
The approach email contained a smattering of stock images, showing photogenic smiling active white senior citizens. Golfing. Tennis. Yachting. All wearing designer clothing. Sporting designer watches. Rolex for him. Cartier for her. Planting the seeds of subconscious inferiority and envy. How could I lead such a lifestyle? Perhaps this wealth management shop could help?
Of course, the approach failed to mention any of the behavioural factors that separate those who financially succeed at life from those who merely aspire to.
Spend less than you earn.
Invest the difference.
Unsurprising really, given there is no money to be made from offering such straightforward advice.
A while back, a reader sent me a copy of the Barefoot Investor. An accessible, short, and simple book that sets out an actionable script for succeeding at personal finance. The author managed to squeeze more opinions and “Dad” jokes per page than any finance tome I had previously read, while articulating a napkin sized financial blueprint that a seven-year-old child could follow.
The core message was one of living within our means, while ensuring we enjoy the journey.
The author outlined a suggested allocation for how we utilise our household disposable incomes.
60% for “daily expenses”, our needs and housing costs. Rent or mortgage interest should account for no more than half that amount. The remainder pays for our essentials, think utility bills and groceries, not gifts or takeaway meals.
10% splurged on daily indulgences. The short term wants that make life enjoyable. Books. Coffees. Clothing. Entertainment. Hair and nails. Hobbies. Nights out. Presents. Shoes. Store-bought lunches.
10% put towards saving up for larger, life-enriching, “smile” inducing, delayed gratification purchases. Cars. Furnishings. Holidays. Home renovations.
The remaining 20% was dedicated to financial stress reduction and wealth generation. Paying off consumer debt. Establishing a contingency fund. Saving for a house deposit. Paying down the mortgage early. Creating an investment portfolio.
One intriguing aspect of the author’s approach was the absence of money for investments throughout the early stages. He prioritised establishing a sense of financial security first. Investing came second.
While I didn’t agree with everything the author said, I applauded his recognition that psychology and learned behaviours played a determining part in our financial success or failure.
Relying upon a combination of automation, conditioned response, and positive reinforcement he sought to establish self-reinforcing behaviours and habits.
Recognising that budgets, like diets, don’t work because they demand self-control and self-discipline.
Accepting that depending upon continuous good judgement and sensible decision making is far less likely to succeed than automated habits where there are no decisions to make. Avoiding internal and external influences such as apathy, guilt, temptation, or well-intentioned borrowing from our future selves with vague plans of somehow one day making good the difference.
Retirement savings were one such example. Funded throughout the journey, via workplace pension contributions made from before-tax income. Which meant the investor was “paying themselves first” by squirrelling away the money without ever seeing it hit their bank account.
The author’s approach was deliberately simple. Methodical. Easily understood by the “average everyperson”. People who had better things to do with their precious time and scarce attention than obsessing over spreadsheets or living in a financial fantasyland of predictable trends and free from surprises.
Cash flow was often mentioned. Understandable, given it frames virtually every decision we make.
Net worth barely at all. A number useful for little more than bragging rights. Impacted just as much by externalities such as exchange rates, interest rates, inflation, luck, and market movements as it is by our own individual actions, behaviours, decision making, diligence, and discipline.
This last observation made me chuckle. It follows a similar evolution to that experienced by seasoned personal finance writers.
In the beginning, before they know any better, the focus is all about the numbers. Faster progress. Higher saving rates. Larger net worth. Get rich quick or die trying. Hustle till you drop.
Over time, many writers experience an epiphany.
Wealth is measured in time, not money. A feeling, not a number.
Control originates from predictable cash flow, not a portfolio balance.
Chasing early retirement is often a disguised attempt to run away from themselves.
Real freedom is found in finding contentment where they are and with what they have, rather than constantly yearning for more. In accepting ownership and accountability for the circumstances they find themselves in.
That cold calling wealth manager had tried to lure me in by telling me what a career worth of professional experience told him that someone in my position would find too compelling to turn down.
Access to niche investments, a cool kids club reserved exclusively for insiders.
Plays called by the very best active fund managers in the business. The rockstars and legends of the financial industry.
Exotic financial instruments. Complex and elaborate tax minimisation arrangements.
All the leverage I could eat, boosting potential returns to the moon.
The pitch could be distilled down to a simple: you are one of us, assume your rightful place. It is your due. Recognition for your professional excellence and discerning taste.
My unremarkable colleague enabled his children to live in a similar dream world, divorced from reality and the consequences of their decisions. The fish they had chosen were mortal enemies. Incompatible by design, an outcome baked into their very DNA, just as the interests of financial advisors and their clients can never be truly aligned.
The answers to both challenges lay within, not without.
Honesty. Self-awareness. Simple behaviours, consistently applied.
There is a reason the likes of Barefoot Investor, Jack Bogle, Mr Money Moustache, and Rich Dad Poor Dad attract such a cult-like following: simple lessons that work. Clearly articulated. In a relatable way.
Barefoot says live within your means, automate the journey, and allocate funds to enjoying the ride.
Jack Bogle says don’t try to pick winners, win by picking everything while keeping costs low.
Mr Money Moustache says the higher your saving rate, the sooner work becomes optional.
Rich Dad says investments generate free cash flows. Everything else, your home included, is a liability.
Each of their messages resonates. Intuitively true. Common sense. Obvious in hindsight.
Which raises an uncomfortable question about what all those “sophisticated smart money” investors are really doing? Maintaining dozens of positions at any given time. Churning. Trading. The fees and commissions incurred driving the bar for achieving benchmark performance ever higher.
Are they really any different from those aquarium fish? Looking attractive while swimming in circles. The outcome is certain: somebody is getting fat and happy. The question is will their habits and behaviours result in them becoming the big fish, financially secure and free from worry.
Or will they find themselves falling prey to the big fish?
- Adeney, P. (2012), ‘The Shockingly Simple Math Behind Early Retirement’, Mr Money Moustache
- Bogle, J. C. (2007), ‘The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns‘
- Kiyosaki, R. T. (2007), ‘Rich Dad, Poor Dad‘
- Pape, S. (2016), ‘The Barefoot Investor: The Only Money Guide You’ll Ever Need‘