Key to Financial Success: Avoiding Stupidity

April 10, 2018  |  

Key to Financial Success: Avoiding Stupidity

One of my heroes is Charlie Munger, Vice Chairman of Berkshire Hathaway.  While I admire his successful career, I’m more impressed with how he thinks about the world

There are so many pearls of wisdom in each speech he gives or books written about him that it’s hard to choose a favorite.  However, the one statement I always come back to is the following anecdote from a shareholder letter:

It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.  There must be some wisdom in the folk saying, ‘It’s the strong swimmers who drown’.

While this concept can be applied to various walks of life, I view it as the key to long-term financial success.

Here are some examples of how a person can avoid “stupidity” when handling their personal finances:

  • Living within your means, instead of spending mindlessly and hoping for the best
  • Developing and sticking to a financial plan based on your goals, instead of flying blind
  • Investing in a passively managed, broadly diversified, low-cost portfolio that aligns with your goals, instead of attempting to find the next hot manager who will try to be consistently brilliant (odds are they can’t)
  • Sticking with the plan and keeping your emotions in check, instead of trying to time markets on the ups and downs
  • Taking advantage of the tax code along the way through strategies like tax-loss harvesting, Roth conversions, and smart charitable giving, instead of filing your return in April and thinking “why is my tax bill so high?”
  • Having an up-to-date, coordinated estate plan, instead of saying “I’ll get to it next year”
  • Purchasing insurance to protect you and your loved ones from catastrophic losses, instead of purchasing insurance that will solve all your financial problems in one package
  • Choosing an advisor to review these areas that acts in a fiduciary capacity, instead of an “advisor” who is just selling products

Obviously, these points are just the tip of the iceberg.  Please feel free to share any others that have helped you along the way.

Registration with the SEC should not be construed as an endorsement or an indicator of investment skill, acumen or experience.  Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.

About Patrick Runyen

As a Wealth Manager at Independence Advisors, Patrick Runyen, CPA/PFS, CFP® works closely with clients to implement wealth management solutions. He leverages his technical financial planning and consulting experience to assist clients with investment counseling, retirement planning, estate planning, wealth enhancement, asset protection, tax planning, and other personally significant financial decisions. CLICK HERE TO ASK PAT.
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