But with that said: what do you think are some effective strategies for people to manage their money? One of the big problems we have is, in my view, that a great many people don't really know very much about what to do with money in practice. They make bad choices that lead to them losing it, or missing out on returns or interest they could have had. And because these things compound over decades, by the time retirement rolls around, very few people are even close to having done as well as they could have.
Obviously I'm not asking you to share any personal circumstances, and if you do so, please don't be too specific. But what do you think are the best things people can do to give themselves the best chance to reach their financial goals.
For example, here's one I like (and just to be clear, I'm not the one who came up with this):
- Every payday (or slightly longer, depending on fees to buy index funds), take whatever part of your income you can spare, i.e. you don't think you'll need to spend within the next couple of years or so.
- About 100-{your age} per cent of that new money goes into a low-cost stock market index-tracking fund, with as much diversification as you can get.
- The remainder goes into a low-cost bond market index fund.
- You don't sell anything unless you really need to access the money.
It's very simple, and over the long term will leave you in a pretty good place relative to your income. The idea is that you don't know what stock or bond markets are going to do ... but you do know what fees are going to be. So you minimise the fees, and lock in an about-average market return using the index funds. And by not reacting to short-term moves you take a lot of our inherent monkey brain biases out.
The reason I like this is because it is so easy that anyone could do it. But maybe you think this is too easy. Maybe you think one can do better by doing something else?
