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[The following is a partial transcript of this episode of The Scott Alan Turner Show. Listen to the full episode to hear this story, listener questions, money hacks, and inspiring stories of people that are changing their financial lives. Subscribe to the free podcast on iTunes or Google Play]
Why do smart people make such big money mistakes?
Good question, right?
Do you know what’s funny to me, is how so many people will often say, “Well, it’s because of bad luck”. They are quick to give a free pass and blame someone else.
Most people are not dumb. And they aren’t lazy either. In fact, they’re very smart. We have all these people that work 40+ hours a week which requires some serious skills, have high school or college educations, make good money – an average of $54,000 a year, and yet they know little about their finances, how to protect them, and how to grow them securely.
They know many things, and are smart, but how many things do they know about what they should be doing with their finances, and how smart are they at what they do end up doing?
They’re so concerned about today, they are losing money and probably going to get burned tomorrow.
And it’s not that they’re dumb, they are smart. They put food on the table, they have a house, but they miss the long term picture.
Sometimes our financial future should be our priority today.
We’re spending more time on watching sports, planning vacations, or checking Instagram (hello cat pictures!), but we have no clue about what financial products we have or should have.
There’s nothing that costs us more in our finances than not understanding financial products.
Think about this. Here’s some data from a Dalbar study they publish every year. An investor that invested in the entire stock market over a 20 year period would end up with twice as much money as someone who keeps changing their investments all the time. $250,000 vs. $483,000. That’s unreal.
Did you know that most people who invest get in and get out as they listen to the nightly news or read financial rags hyping the latest thing to buy or sell.
Think about that for a second. Think about that one thing, cost a person $250,000. And if they had invested more or longer, the difference would be $500,000 or $1,000,000!
I’m not anti-fun, I watched Star Trek just last night, I love it. You’re listening or watching this now so thank you. We should spend some time decompressing or vegging out, it’s relaxing. But shouldn’t we spend a little more time to end up with a lot more security, choice, and peace of mind?
And I get it, you’re not the only one that’s confused, everybody is. It’s ok to not be an expert in your company benefits, a 100 page insurance document or to understand anything in a will which is written by lawyers that speak and write in these languages nobody has used in 200 years. Though, hitherto, witnessed hereof.
But most people aren’t taking the time to understand because it can be overwhelming and they’re afraid to look dumb and ask questions or they think they’re smarter than they really are because they’re smart in these other areas of life. Doctors are notorious for this.
Check this out. If somebody spends an hour a week – one hour of 168 – to learn about a product, the benefits in dollars are massive. So they have this one hour a week, or 52 hours a year, and the real cost is more like $10,000 if I had to guess, and that’s probably on the low side. Do you make $10,000 for a week of your time?
So the cost of not understanding is huge and most people aren’t taking the time to understand NOT because they are ’too busy’ or ’too dumb’ or ’too lazy’, it’s because they aren’t aware of the costs of doing nothing.
Some people will say ‘Scott, you don’t know my situation.” I know, but I bet you’ve lost some money from something you didn’t understand.
- Maybe there is a person who handles it all
- Maybe its the terms of a loan or how compound interest works
- Maybe its gold, or a reverse mortgage, or some insurance product
I’m not an expert in everything finance, nobody is. That’s why there are specialists. I’m not spending hours digging through the tax code, that’s what accountants are for.
- I’m about having some basic understanding of things so I can ask better questions
- I’m about trusting and verifying, not just giving blind trust
- I’m about minimizing mistakes so I can maximize money
It’s hard to maximize your money when you’re buying stuff you don’t understand. That’s what happens to people – they buy stuff they don’t understand, and it costs them money that they worked har for. Then later something happens and they’re like, wait a minute, I thought I was covered.
They have no idea of the costs or risks of products. They don’t understand and it’s going to be a very hard recovery to get back that time or money.
What do people do? They don’t do anything. They tell this lie. They think ‘Come on Scott, you don’t understand that I understand this stuff.’
We all feel like we know what we’re buying into.
- That one page glossy marketing brochure told us everything we need to know
- The 100 page contract or document is just there for show
- The person we’re buying from is a friend or relative, and they would never sell us an inferior product because we trust them.
And what’s happened is we’ve let the fear of not looking smart keep us from
being smarter with our money, keep from getting ripped off, protecting our family and loved ones.
You know if your not reading the fine print, your going to miss the finer things in life.
So let’s agree today to understand more. Say to yourself, you know what, I’m smart, but I’m going to be even smarter. I’m going to be smarter by asking about the costs of these financial products. I’m going to be smarter by researching alternatives that can save me money. I’m going to be smarter by getting other opinions. I’m going to be smarter by admitting I’m not smart at everything so I can feel like the Warren Buffets, the Bill Gates, the Sir Richard Branson’s of the world who know to surround themselves with other experts for advice, and to ask lots of questions.
So I can feel in control. So I can feel like I won’t get duped into some bad purchase. So I can feel confident my money is funding my goals and not somebody else’s. And we can only have that if we aren’t afraid to ask lots of questions.
If we take an hour of week to do some research. If we learn from the mistakes of others and follow good advice. We deserve that. That’s avoiding being a money moron and being a financial rock star. That’s being someone who’s in control of their finances. That’s being a person who has confidence in their plan. That’s being a person who won’t get taken advantage of.
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