On the blog of late in our non-linkfest posts we have been spending less time talking about traditional investing topics and more time on issues dealing with more personal finance-related topics. For example, posts on aligning your goals with your finances, the value of mindfulness, making your savings goals stick and the need for humility have been fun to write.
The timing is therefore perfect to present a Q&A with Carl Richards of the newly published book, The The One-Page Financial Plan: A Simple Way to Be Smart About Your Money. You may know Carl from his Behavior Gap blog, his column at the New York Times or his first book: The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money.
Carl’s book is really for every adult because it addresses the most fundamental issues we have with money, spending and investing. Most importantly it makes addressing our financial lives seem achievable. One of the biggest issues I see, and Carl addresses, is the fact that smart, middle class people a hard time even taking those first few, tentative steps towards creating even the most rudimentary financial plans. One-Page Financial Plan: A Simple Way to Be Smart About Your Money plan does exactly that.
I had the opportunity to send Carl some questions about his book when roughly break down along the three sections of his book that address: discovering our financial goals, spending and saving and investing. Today three questions about saving and spending.
AR: Time, and how we spend it, is a big theme in your book. For many families I would bet a lot of our discretionary spending is done in the name of “saving time.” Are we really saving time, or our we just kidding ourselves?
Carl: The term “saving time” is fascinating. We actually can’t save time in terms of using it later, but I think the underlying point is that sometimes we value money more than time and sometimes we value time more than money. It just depends on where we’re at in life. Different experiences, like paying more to book a direct flight, are a clear trade off of valuing time more than money.
I don’t think it’s a question of there being a right or wrong answer. It’s a question of what we value more at that moment, time or money.
AR: There is a great deal of buzz about being more mindful in our lives. This is especially true when it comes to spending less and saving more. Are there ways we can put a buffer between our transitory wants and our longer term needs?
Carl: Tadas, your blog is good for reason. You ask fantastic questions! First of all, let’s clear up something. Being mindful is just a process of noticing what we’re doing. It doesn’t mean we spend less and save more. It could mean the opposite.
For instance, imagine saving your whole life so you can enjoy spending time with your grandkids. At that point, you save less and spend more, but that can be a hard switch for people to flip. We can add a buffer by making it point to notice, for example, every time we pull out a credit card to pay for something.
Just take a breath, and with no judgment, just notice. “Oh, isn’t that interesting,” is my favorite phrase here. Noticing the act alone, and doing nothing else, will help us get more aligned in terms of our decisions of how we spend today versus what we need later. Again, I go back to Stephen Covey’s bigger yes. We should definitely say no to get us closer to our bigger yes, but when that yes arrives, we shouldn’t be afraid to embrace it. Mindfulness can help us make that transition.
AR: Your discussion is very direct when it comes to life insurance, in that it is there to protect us from economic hardship, no more no less. Term life is the most affordable, simplest option for the vast majority of people yet many consumers end up spending more than they need on products they don’t understand. Why is that?
Carl: Because, as the old saying goes, life insurance isn’t something we buy. It’s something we’re sold. People get confused about the purpose of life insurance. However, when you understand that it’s there to replace an economic loss, it becomes a simpler discussion. You want to spend as little money as possible on life insurance to get the protection you need and no more.
Check back with us tomorrow for part 3 on the topic of investing.