*Disclaimer: The below is an opinion and for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.*
Everyone wants to get rich quick. I do too. Fortunately the typical ‘get rich quick’ scheme is easy to spot, and most of us do not fall for them .
Everyone wants to get rich easily. I do too. Unfortunately the typical ‘get rich easily’ tips are hard to spot, and most of us do fall for them. We downplay simple advice to overindex on complicated products that make us feel good but perform below average.
Both Of Dollars and Data and Morgan Housel commented about the state of personal financial advice recently, coming from different angles. Nick at Of Dollars and Data took issue with people giving financial advice that was inapplicable to people outside of exceptional circumstances, while Morgan offered simple advice that was applicable to most people.
Financial pornography is the normalization of exceptional financial circumstances in order to gain attention.
This is the nature of financial pornography. It seduces you with the idea of something more, but, ultimately, provides nothing of substance.
Nick goes on to cite examples that might be similar to articles you’ve seen before: a woman interning in Manhattan while making $25/hr, who conveniently happens to have her parents pick up major expenses. Or the real estate millionaire who made it through his 10 rules, while also using 100% financing. Or others who post about how ‘holding X for 10 years would have made you rich’ while ignoring the behavioural component of doing so.
I agree with Nick on this. There is too much financial clickbait online providing unhelpful advice. This is understandable though since most publishers are incentivised to drive views for ad revenue, and pushing out surprising content is a convenient way to do so. Take for example, the number of search results for ‘make money quick’ (2 billion!) or ‘become a millionaire’ (80 million!)
I highly doubt even 10% of the authors for those 80 million search results are millionaires themselves. Which brings us to another point Nick makes: considering the hypothetical scenario on hindsight is nice, but usually unrealistic . Critics of contemporary art like to say “I could do that” whenever seeing a strange piece; a simple defense agains that is to respond “But you didn’t.”  Similarly, the majority of financial advice posts promoting an imaginary scenario as the winning strategy conveniently avoid the fact that the author didn’t implement that strategy.
I also like Nick’s take on the advice:
I don’t discount someone’s advice because they were born with more advantages than others. I discount their advice when it tries to be something it isn’t.
This is a balanced, fair point of view. Just because the advice has caveats doesn’t mean it is useless. However, disclosure upfront about what the caveats are would help frame the appropriate mindset to approach the article. I don’t need to read till the end of the article to realise that the way the author retired by 35 was to inherit his money.
And Morgan gives the following advice:
Accepting that living below your means requires suppressing your ego to below your income.
This is simple, but difficult. Think of the number of celebrities who end up broke, some spending more money in a year than I think I’d need in a lifetime. Of course I want to eat at Osteria Francescana, buy that bottle of Willett, or go on that vacation in Prague. But I need to control my spending habits to what I should spend on .
Avoiding trouble to begin with.
Utilize low-status, high-efficiency services.
Both of these are related. I’m a fan of Charlie Munger’s belief in avoiding stupidity, and just staying out of situations which have high potential to turn on you. If you do decide to get involved in whatever speculative activity, put in the amount you’re totally comfortable losing.
Pick a career that may not be your passion but pays a decent wage.
This was interesting. I’ve linked before about the passion trap. It’s nice to see Morgan Housel also give realistic advice. If I followed my passion I’d be opening my own small speakeasy with a dance floor. I’d also be closing that speakeasy in a year’s time after running out of cash.
Everyone wants to get rich. I do too. But there’s good and bad advice, some misleading and some not. There’s simple advice, but it’s not easy.
- We could always do with more education for people that do fall for these schemes, but I’m assuming that if you somehow found this blog you’re less likely to fall in the category that mails money to Nigerian princes.
- Not knowing the full context of some of those ‘holding X for 10 years’ posts, I’m inclined to be slightly more accomodating here, since the authors could just have been entertaining the thought rather than promoting it as sound advice.
- I’ll be the first to acknowledge I have close to zero ability to judge whether art is good or not, but understand that it could be more difficult than it seems to make. Sometimes though…
- At the same time, don’t be a miser, and realise that money is for spending rather than hoarding. I’d say if you end up like Hetty Green you’ve swung too far in the other direction.