Why We Should K.I.S.S. – Keep It Simple Stupid.
Remember the KISS principle: keep it simple, stupid? Let’s apply it finances. Why do we think finances have to be complicated anyway? Is it because that’s what we’ve been told? Or maybe we don’t understand how to calculate ROIs and run a risk evaluation on a retirement portfolio. I’m not sure I can do either of those things that well either. Maybe with time and a lot of google . . . but I digress.
My point is, money and finances don’t have to be complicated. We just make it so. Your finances can be as simple or complex as you make them.
With that in mind, why make things harder than they have to be? Think about it this way.
Your Current Situation . . . is Boring.
You have money coming in in the form of a paycheck. And you have money going out to pay for bills, food, gas, etc. You should also be saving for the future.
Related: Make a Plan that Works: a Budget
To keep track of this, you have a budget. And maybe you use Quicken, Mint, Personal Capital, or even Excel to track your income and expenses. Even some of these programs are more complicated than others. But you find a system that works for you and stick with it.
After a while it becomes more automatic. Money comes in, money goes out to various places. And life goes on. It’s simple really. Once you’ve setup your plan, there isn’t much to do.
Your debt will be paid off in X number of months.
You’ll reach financial independence in Y number of years.
And you can retire when you turn 60, 65, or whatever age you previously decided.
And I realize not everyone is to this place financially speaking. Otherwise we wouldn’t have folks living paycheck-to-paycheck with massive student loan debts, and car loans, and the list goes on. And maybe you’re struggling to get there. Your debt seems overwhelming. But be encouraged! You can do it, and you can get there. But remember to keep it simple, stupid!
Why Can’t We be Satisfied With Boring?
It’s what happens after this that gets a lot of us in trouble. Things are going well, and it’s in a word – boring. As normal people, we hate boring!! We want excitement, and the thrill of almost defeat. But too much excitement can be stressful.
What we actually want is variety. Because change keeps us busy, and on our toes.
So when our finances get boring, we get antsy.
You want to earn a little more from your savings than the 1.5% from your savings account. Or you think you can do better than the average 7% that the average index fund historically will net you. You want to squeeze out a few more dollars into your retirement account.
So you forgo the K.I.S.S. principle and instead of keeping it simple, you add risk by investing in more speculative investments. You want the thrill of hitting it big or losing it all at least for a while.
You’ve heard about bitcoin. And how it’s the next big thing in cryptocurrencies. And maybe it is, and maybe it isn’t. But that’s the point. It’s speculative. Nobody really knows for sure. It doesn’t have a proven track record over a long period of time. But you’ve got money to burn, and you’re going to be one of lucky ones.
Or maybe you want to try your hand at that travel-hacking thing you’ve been hearing about. You’ve read, and I’ve read, about these bloggers that travel around the world for basically free. It seems easy enough. You get a couple dozen credit cards. Figure out the point structures and bonuses. You just have to keep track of all this in a spreadsheet or multiple spreadsheets. Oh, and you also have to spend boatloads of money to get some back in the form of rewards. But that’s ok, it’s money you would have spent anyway.
Or, instead of travel hacking or bitcoin investments, what about old fashioned real estate investing? That’s pretty safe.
You can buy a bunch of rentals with little to no money down, and the renters will pay your mortgage and cover expenses. And if you picked the right rentals in the right location, you’ll even make money on the deal. How many articles have you read about people who become real estate moguls worth millions just by leveraging their way to wealth? They use other people’s money to make themselves rich. You can do it too . . . right?
For the majority of people out there, NONE of these things will pay off.
You’ll lose your bitcoin investment. Because you won’t have the stomach to hold it long term through the ups and downs. So you’ll sell at a huge loss just to be off the roller coaster. Or maybe you’ll hold it long term just for it to never pan out. And the next “big thing” will replace it.
Your travel hacking dreams will be crushed as soon as you miss a credit card payment, and you now owe gobs of interest. Which effectively cancels out any of the cashback or points you were going to get. Or maybe you’ll lose your job, and then you’ll be saddled with credit card debt out your ears. Think it can’t happen to you?
Related: Read about my experience with losing my job here: “Business is Business”.
And the rentals you were convinced could make you rich? You had one rental vacant for a few months. And another needed a new roof. All these expenses that you thought couldn’t happen – happened. You’re barely breaking even. And the stress of what-if is coming down on you hard.
It’s not because you didn’t work hard or do your research. It’s because these financial actions and decisions have risk inherent with them. High risk equals high reward. But when there is risk, inevitably most people don’t come out on the high reward side of the equation. They forgot to keep it simple, stupid.
The people you read about and their success stories? They’re basically statistical outliers. You won’t be so lucky.
So What Should We do Instead?
First, I’m not saying don’t ever invest in a risky venture. Just don’t invest any money you wouldn’t be willing to lose. For most of us, me included, that means zero. Because I’m not willing to lose anything.Don't invest in something you don't understand, and keep it simple, stupid!! Click To Tweet
Keep it simple, stupid.
You’ll have to get used to the idea that you may never hit it big. Or become wealthy overnight. Does that happen to a few people? Sure.
Will it happen to you? No!
Keep on doing what you know to do. Steady investing over a long period of time. Keeping your expenses manangable and trackable with a budget. And then . . .
Forget about it. Go live your life.
Don’t think about money, and how to eek just a little bit more out of your investments. Be satisfied with the plan that you set up, and live with the results.
Personal finance is personal. But it’s also more about behaviour, and less about numbers and math. Don’t let your thirst for adventure and danger get in the way of your well-thought-out financial plan. Leave the adventure for your next vacation.
What about you? Are you in danger of straying off your financial path? What tempts you the most?
Let me know in the comments, and thanks for sharing this post and reading.