The Dumb Things Smart People Do with Their Money
Jill Schlesinger
19 min
9 Key Points
4.5 RateWhat's inside?
Discover the common financial mistakes even smart people make and learn practical strategies to correct them for a secure financial future.
You'll learn
1. Avoiding money blunders2. Smart ways to invest3. Planning for a chill retirement4. Kicking debt to the curb5. Budgeting: Why it's a big deal6. Making sense of insurance jargon.Key points
01Even smart folks can mess up with money. Don't assume you're immune to financial blunders
Let's talk about Randy, a guy who was really good at his job. Back in the late 90s and early 2000s, he was a top-notch loan officer at a big bank. His job was to figure out if small businesses were a safe bet for loans. He was so good at it that he decided to quit his job and start his own consulting firm in 2003. His business took off, and he started making double his previous salary, raking in $300,000 or more a year. Life was good for Randy and his family. But here's where Randy goofed up: he didn't buy disability insurance. Now, you might be thinking, "What's the big deal?" Well, it turned out to be a huge deal when Randy was diagnosed with multiple sclerosis in 2006. His health took a nosedive, and he started having trouble with his balance and was prone to falling. This made it really hard for him to work. He couldn't meet with as many clients or travel for work, and his income took a big hit, dropping to just $75,000 a year. This put Randy and his family in a tough spot. If he had disability insurance, he would have been getting monthly payments close to his yearly income. But without that safety net, they were in a financial pickle. His wife tried to make up for the lost income, but it just wasn't enough. Randy had to start dipping into his non-retirement savings of $500,000. This meant that by the time he hit 65, his savings would be all gone. Randy's story is a real eye-opener. It shows that even smart, successful people can make big financial blunders. The author uses stories like Randy's to dig into why we make these mistakes and how to avoid them. Despite being a financial whiz, Randy missed the boat on disability insurance, a mistake that cost him and his family big time. It just goes to show, even smart folks can make dumb money moves.
02Too many investment choices can be a headache. Don't dive in without understanding what you're getting into
Let's talk about money, specifically, the silly mistakes even the brainiest folks make when it comes to their finances. It's a jungle out there, with a dizzying array of investment options that can leave even the smartest people scratching their heads. Take gold, for instance. It's often seen as a safe bet, a solid investment. But here's the thing: gold is just like any other commodity. Its value can swing wildly from one day to the next. Plus, it doesn't generate any income like interest or dividends. So, if you're looking for a steady income stream, gold might not be your best bet. Instead, consider a gold exchange-traded fund (ETF). It's a type of investment that tracks the price of gold but trades like a stock, giving you more flexibility. Then there's the topic of reverse mortgages. They're often pitched to older folks who've paid off a good chunk of their home but are short on retirement income. Sounds like a good deal, right? Not so fast. Reverse mortgages can be a risky business, especially for younger adults. It's super important to do your homework and understand the ins and outs of a reverse mortgage before you sign on the dotted line. And let's not forget about hedge funds. They're like the shiny new toy that everyone wants to play with. They promise high returns, but they also come with high risks. And if they're not managed properly, they can lead to big financial losses. So, how do you avoid these financial blunders? It's all about understanding what you're investing in. Ask yourself these five questions: What's the cost? What are my other options? How easy is it to get my money out, and what happens if I do? What responsibilities come with this investment? And what's the worst thing that could happen? By taking the time to understand your investments, you can make smarter decisions and avoid the money mistakes that even the smartest people make.
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03Picking the wrong financial advisor can cost you. Do your homework before you trust someone with your money
04Don't let money rule your life. It can lead to bad decisions
05Smart people can still get buried in student loans or buy a house when they should rent. Think long-term
06Taking too many financial risks can ruin you. Don't gamble with your business or family
07Spending too much early in retirement can leave you broke later. Don't saddle your kids with your financial problems
08Many smart people forget to plan for aging parents, buy the wrong insurance, or forget a will. Don't overlook these important steps
09Conclusion
About Jill Schlesinger
Jill Schlesinger is a certified financial planner, Emmy-nominated business analyst for CBS News, and host of the "Jill on Money" podcast. She has spent her career demystifying the world of personal finance and encouraging people to take control of their financial lives.
