10 Financial Assumptions That Need To Be Challenged

My goal is to challenge assumptions. If there is one persistent theme of Simple Economist, it would be that we need to challenge ourselves and constantly question the status quo. This post is certainly full of references that contain detailed explanations for many of the individual topics. The article will help bring together many different ways we need to challenge the financial assumptions that we are exposed to on a consistent basis.

debtI’m sure you have had it happen. I’m sure there has been a time where you cringed after hearing a comment, news report, or had a family member or friend make a statement based on a faulty assumption. The misinformed (or toxic way of thinking) that is used for rationalizing or marginalizing unwise choices can be tough to be around. I honestly think that is what drives me to write and publish my thoughts each week. I just see so much (often in myself) inefficiency, misinformation, and faulty assumption, that it motivates my need to organize my thoughts and put them down on paper. Do you ever question popular financial assumptions? Continue reading

Risk Management (Without Insurance)

Insurance is not the only way to manage risk. In the near future I will be an expert* on risk. In fact, I’m actively working on that goal now. My dissertation in Behavioral Economics and Financial Planning will be based entirely on an individual’s perceptions and measurement of risk. But what is risk? What does it actually mean? And what are the ways we can manage risk? Can we manage risk without insurance?

free climberRisk management can become a dirty word in financial circles. Although planning for and understanding risk is fundamentally necessary in all aspects of life, many individual’s interaction with sellers of insurance and risk management products are less than savory. Insurance, and especially life insurance, is seen as an entry point into the risk management industry and fraught with many inherent conflicts of interest. The underlying assumption for many individuals is that risk is managed with insurance. Sure, insurance plays an important role, but risk management is much more than simply insurance.

Risk is a broad subject. It can be thought about in terms of physical risk (safety, war, etc), financial risk, business risk, health risk, or even environmental risk. For the scope of this article, I’ll focus on personal risk, which we have some capacity to control. Continue reading

Real Food and Plant Based Diet

Nutrition makes me come alive. I enjoy it so much that I try my best to live a healthy lifestyle everyday. I’m passionate about helping others understand nutrition and implement  changes into their own lives as well. It’s one way that I can extend love to others. Giving them the information and tools to live a healthy life and feel good from the inside out. It’s not easy, but it’s so worth it! Once you decide, take action and start to experience the benefits, you will find that there is a motivation that will start to well up inside of you. Then it will come more naturally.

So, why am I telling you this? As a Registered Dietitian, I want to give the best nutrition advice I can. And I’ve come to the conclusion that nutrition is constantly changing and becoming more and more confusing for the average consumer. What is the best diet? I get asked that all the time. It’s hard to pick one, but it is difficult to beat the simplicity of eating real food and mostly plants. And I want to tell you why.

“Let food be thy medicine and medicine be thy food” -Hippocrates

Why a Plant Based Diet?
produceI know after reading those words, there is already some push back. I hear you. I like meat too. And dairy. And eggs. A plant based diet seems impossible to many of us. Especially living in America and constantly being bombarded with the idea that we deserve fried chicken, a nice filet, or the next triple patty burger. But, have you ever considered what you are actually putting into your body when you eat that kind of stuff? There is a lot of speculation, but I won’t get into that in this post. Our bodies run off of the food we eat. We need good, nutritious fuel to keep us going. When it all comes down to it, I have realized whole foods (fruits, vegetables, and whole grains) are truly the building blocks of a healthy diet. As Michael Pollan said in The Defense of Food, “Eat food. Not too much. Mostly plants”. Continue reading

The Bliss Point of Personal Consumption

On a scale of 1 to 10, how good are you at extracting maximum satisfaction from each dollar you spend? How well do you perform when you measure yourself? If you were to spend $100, what would give you the most joy? Take a few moments to brainstorm: What in your monthly spending gives you the most joy? The least? What spending is mindless and what is mindful?

old cokeHave you ever had a drink that was too sweet? In the book Sugar, Salt, Fat, researchers discuss the exact amount of sugar it takes to make people crave sodas. Too little sugar and the individuals prefer sweeter; however, too much sugar makes people sick. There is a point where the joy of consumption is maximized- the Bliss Point. It’s a Goldilocks’ dilemma. What about alcohol? There is a point where alcohol makes you feel a buzz, but if you consume too much you are guaranteed to feel terrible. Money works in the same way. Consuming too little leaves us feeling deprived, yet consuming too much leaves us feeling gluttonous and overindulgent. The quicker you can examine yourself and determine your personal bliss point, the greater satisfaction you will be able to experience. Continue reading

I Need More Than a (Financial) Pill

Everybody wants a pill. People want a quick and easy fix. It takes real work to dive under the surface and address the true challenges we face. We are often too tired, too lazy, and too comfortable to initiate any type of real change in our life. We don’t want to change, we just want our problems fixed. So, we ask for a pill. The trouble is, even when we get a pill, we end up just treading our symptoms instead of actually addressing the underlying problems in our lives. Sure, it makes us feel better for the moment, but does it actually make our lives better?

Debt, weight loss, relationship communication, stress, poor sleeping habits, addictive substances? Sure, a pill will fix all of those.

money pill“I don’t want to work any more or spend any less but I’d like to get rid of this debt. I don’t want to eat any differently or exercise at all, but help me lose 50lbs. I want my relationship to be better with my _________ but I don’t want to be uncomfortable working though current and past issues. I want to feel healthy and wake up feeling good on weekend mornings but I’m not ready to give up cigarettes or alcohol. We see it all around us. We see it in ourselves. We often have major issues that need to be addressed but rarely have the emotional fortitude to address the challenges head on. It is a lot easier to take a pill. It is much harder to fix ourselves. Continue reading

I’ll Be Happy When…

I’ll be happy when I get a raise. I’ll be happy when I lose 10 pounds. I’ll be happy when we move into that new house. I’ll be happy when I meet that special someone. I’ll be happy when the little one sleeps though the night, or when they’re out of diapers, or going off to school, or finally graduating. Hey, I’ll be happy when I get the job. Maybe I’ll finally be happy when I retire. Wait, will I ever be happy?

Ill be happy whenTake a moment to evaluate yourself. How is this season going for you? What is making you happy? What is causing you to be stressed? What will likely change and what will remain consistent? I spent a little time thinking through the various positive things in my life and also considered many of the unique stressors that are impacting my current environment. Sure, having a toddler and newborn bring about some new challenges, but the excitement of watching the little guys learn and play is incredible. The seasons will change but the challenges will only evolve as we age. They certainly will not go away. Part of living a happy, healthy life is understanding our mental tendencies and learning to appreciate the challenging seasons of life we are all certain to face. Continue reading

Time Poverty of the Ultra Rich

A billionaire’s conference? I didn’t know such a thing existed. I was listening* to a discussion the other day about a conference put on exclusively for billionaires. Founding members of the conference noticed a strange phenomena. Although the conference was originally planned as a week-long event, none of the wealthiest individuals on the planet could actually attend the entire time. Most were only able to come for a day or two. The irony is simple- wouldn’t the wealthiest people in the world have the greatest ability to take a few days off? The surprising answer is No. Although we currently do not have billions, a lot of us fall into similar situations as our careers, incomes, commitments, expectations, and responsibilities grow and mature. The question begs to be asked: Is the money we make bringing us any closer to actual freedom?

stressThis observation has also been discussed on the other end of the spectrum when looking at individuals with very little money but plenty of margin. Although the case is compelling, Simple Economist readers tend to be high income earners with above average accumulation rates. In essence, we actually have to deal with a different set of challenges and expectations that arise when our incomes go up, even if we are maintaining consistency in our levels of consumption. We must be attuned to the fact that income often comes with responsibility and, if we are not careful, can limit our freedom rather than add to it. Continue reading

Why We Paid Off Our Mortgage at 30

Is it wise to pay off your mortgage early? The debate about when to pay off a mortgage seems to be a popular one in the financial world. Some prevailing financial personalities abhor debt and suggest paying it off at all cost. Others (including many finance professors & rich dad) seem to enjoy low-rate mortgages, and fundamentally love the idea of a leveraged debt position. I’m not really sure there is a right or wrong answer in the debate, but I know we have chosen a side and I’m pretty happy with where we currently sit.

Pay off house earlyAbout three years ago we found a little house we liked in a great southern town. We saved pretty aggressively after we got married so we had a good down payment to go with a small mortgage. We fixed up the little house and it has been a great place to live as our family has begun to multiply. Although we chose a traditional 15 year mortgage, we realized if we put a little extra towards the house we could pay it off pretty quickly. Once the idea was planted, we focused, and ended up paying it off much faster than our initial estimates. So, why did we pay off the house? Why not invest the money in the market instead? Is it ever smart to pay off low-interest debt? Continue reading

100 Days of Real Food

“Eat food, mostly plants, and not too much” says Michael Pollan in his book about eating simply. Our diets can become extremely complicated with all of the choices available and the extras that have been added into the products that line the grocery store shelves. Even when we try to eat healthily, many of the products we buy are filled with highly processed ingredients that do not even sound like food. Overall, our family tends to eat a pretty balanced diet, but occasionally we like to try new things to challenge ourselves and break the routine of our weekly diet. So, bring on the 100 Days challenge.

100daysWe discovered 100 Days of Real Food a couple years ago while searching through food/nutrition blogs, and have completed the 100 days challenge in the past (a 100 days without eating any highly processed, refined food). The blogger and creator, Lisa Leake, implemented this meal plan in her family, saw amazing results and is now challenging others to do the same. The plan simply promotes healthy eating, learning to read the ingredient labels on packages, and removing highly processed foods. We conveniently received her cookbook for Christmas, and thought the new year would be the perfect time to start.

Health is one of the most important aspects of lifestyle design. It is hard to do anything efficiently when our bodies feel bad or we do not have energy. So fueling up with healthy foods is a must for feeling good, sleeping well, and overall productivity. 100 Days is really about simplifying our food choices and removing all of the crazy substances that have crept into our food over the last fifty years. -SE

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The Post Christmas Declutter

Christmas is a pretty exciting time in our household. We were able to spend a lot of quality time with our immediate and extended family, eat tons of delicious food, and relax without many external distractions. The highlight of christmas is really spending time with people we care about, but we also enjoy the gift giving process as well. Although the Christmas season is a time of extreme accumulation for many individuals, it can also be a time to evaluate everything we currently own and the new things we received. One of my goals this years is to end Christmas with less stuff than I started with. Is that even possible? What about with kids? We currently have a lot of stuff (and added plenty more), but in the next few days we will take some time to go through our stuff and donate/recycle/sell anything will not be using in the near future.

Christmas TrashBoth my wife and I come from very generous families who really enjoy the holidays. We get a few things and the grandkids get all kinds of crazy stuff. They really enjoy it. I enjoy it too, but I also dislike the deadweight loss of Christmas and the over-consumerism that tends to expand each year. We have done pretty well about communicating our expectations and keeping the entire holiday season focused primarily on spending time with each other. Somehow, we still end the year with lots of new things that make it into our house and take up our valuable space. Continue reading