Ah, Grasshopper

The Chinese have a saying, “Understanding others, that is wisdom. Understanding yourself, that is enlightenment.” For those of you who remember Kung Fu, the TV series, feel free to do your best Master Po imitation and add, “Ah, grasshopper.”

On the long annual Christmas tour of Georgia I listened to Master Your Money Type by Jordan Goodman. Goodman is a financial journalist, author, radio personality, and speaker. He claims that after talking with thousands of people about personal financial problems, he believes that most of us can be categorized as falling into one (or more) of the six following psychological money types. No, it isn’t science, but I believe this book would be a useful and entertaining starting point for many individuals, as they tread the path to financial self awareness. My wife, who is not at all interested in such topics, enjoyed listening to the book.

1) Coasters
2) Debt desperadoes
3) High rollers
4) Ostriches
5) Squirrels
6) Strivers

It is hard to indentify my own blind spots. If I could do so, they would not be blind spots. Yet we all have them. We have a basic financial operating system that is reinforced by our upbringing and our experiences. Often our understanding of these experiences is so skewed by our worldview that we continue to believe strongly in our prejudices even when the evidence is all to the contrary. I believe the technical term for this psychological phenomenon is cognitive dissonance.

According the Jordan, I am probably something like ½ coaster and ½ squirrel. My wife would probably increase the squirrel percentage to something like 2/3.

Coasters are, “organized, responsible, and focused on stability.” They tend to be well informed and generally they are doing the right thing and getting good results. Because coasters are doing most things right, they tend to ignore the things that make them uncomfortable and avoid taking steps in new financial directions. For example, I have never written a will, or a living will, or established medical power of attorney, all things I rather not think about. I excuse my behavior by observing that if I die, everything except my 13 year old Honda is jointly owned. My wife can continue to operate without me without any legal hassles. True enough, but what if we both die?

Squirrels gather nuts and bury them in the ground. I come by this trait honestly. My father’s family is full of financial squirrels. They get an education, work hard all their life, pay off their debts early, save money, and die. Squirrels understand budgeting, double coupon day at the grocery store, how to find a bargain, balance the checkbook, and most importantly, they know how to spend less than they earn. Sometimes squirrels go through an entire lifetime without ever enjoying any of their money, because they believe that if they enjoy themselves, it will result in financial disaster. Although I have improved over the years, particularly in the area of nice vacations, it is very hard for me to spend money on anything just to enjoy life.

Both coasters and squirrel tend to avoid risk, any risk. Both types tend to keep too much of their money in low interest accounts, guaranteed by the FDIC. Guilty as charged. I did not begin to seriously study and make investments until I was 50 years old, even though I had more than enough money to begin such a program. I thought, “I don’t know what I am doing, what if I make a mistake?” To be honest, I still do not know what I am doing. Management guru Peter Drucker once observed: "Anybody who tells you that he understands the American economy ought to be sent to teach modern dance." Even though I still don’t know how to operate my crystal ball, the results of my studies and efforts at investment have generally been blessed. I try to remain thankful for all that I have been given.

One last thought, I don’t know where I read this little story but here it is anyway. A famous author was invited to be one of the celebrity guests at a billionaire’s party. At the party, another guest told the author, “Our host has made more money in one single day, than you will receive in your entire lifetime.”

The author replied, “That’s OK. I have more money than he does.”

Stunned, his companion replied, “How can that be true? He is one of the richest men in the world!”

The author answered, “I have enough.”

Ah, grasshopper.