Investments, trading, retirement planning, high-level finance and dealings: complicated, mathematically intense stuff best left to the pros, right?
Not necessarily, according to financial planner-turned-New York Times blogger Carl Richards, who is taking personal finance questions from the NewsHour audience. The main points, he said, are all simple. So simple they can be drawn on the backs of cocktail napkins. (Not unlike how Arthur Laffer used a napkin to illustrate his famous Laffer Curve theory — the relationship between government revenues and taxes — for us.)
“What I’m trying to do is capture a complex subject and say, ‘This is what really matters,'” Richards told us. “What matters is if you have a plan that matches your goals, not if you watch CNBC every day.”
Richards, who said he has no background in art, started sketching out concepts on whiteboards for clients while he was at brokerage firm Merrill Lynch. He started blogging his sketches after he was asked to put them down on paper so a client could share them with his spouse.
“Often these ideas are so complex, but maybe we can reduce them to a single drawing,” he said of his thought process.
In “The Behavior Gap,” Richards explores the book’s tag line — “simple ways to stop doing dumb things with money” — in easy-to-grasp writing, a bit of humor and, of course, plenty of sketches. One of the biggest lessons he hopes readers will walk away with? Learning there’s a disconnect between what we should be doing and what we actually do with our money.
“I’ve asked the question, ‘What’s important to you about money?’ hundreds of times. The answer is almost always ‘freedom’ or ‘security.’ So we say that, but then we go and do things that are not in line with those values,” Richards said.
In one Venn-diagram sketch, the left circle is labeled “Buying things we can’t afford.” The right, “Believing the ‘universe’ will pay for it.” The center part where the two circles combine? “Ends up in collections.”
He followed up with an example of a client who wanted to save for a child’s college education, but then took on a car lease for $700 a month. “Money decisions are really emotional issues. We need to get aware and get consciously present when we’re making them.”
Another problem Richards sees repeatedly is a tuning-out to one’s personal financial reality and not knowing the right questions to ask.
“I grew up in an environment where money, sex and politics just weren’t talked about in polite company. We’re not having the dialogue about money between loved ones that we need to,” he said. “What’s missing from the discussion is asking better questions. I didn’t want to write a prescriptive ‘how-to’ book — those have all been written and written very well. I was interested in how to start more in meaningful conversations.”
So we wonder: What are your personal finance questions? Submit them below and Paul Solman will pose the best to Richards in an upcoming post.
Napkin images by Carl Richards in “The Behavior Gap.”