Yesterday, I had a long IM conversation with a reader (that I’ll call Joel) who was asking for advice on how to invest some extra money for retirement. I suggested that they open a Roth IRA with Vanguard, pointed to some of my articles on Roth IRAs and Vanguard, and then helped them walk through it.
After some discussion followed by about ten minutes of filling out some simple forms online, Joel had himself a Roth IRA set up with some conservative investment choices and an automatic investment plan.
He was done with it, and he was relieved – and even excited. He planned on printing off some information about the account to show his wife – to demonstrate he had finally been proactive in setting up some sort of additional retirement savings.
I asked him why he had put things off so long, and he had a very simple and straightforward answer:
It seemed way too complicated. Every time I had a question, I found fifty different answers from fifty different places and most of them tried to make it seem as hard and confusing as possible.
Joel’s absolutely right. There’s a lot of money to be made in making something seem very hard and complicated. When something seems hard and complicated, you need help getting through the murky waters, right? And, of course, that help is going to cost you money.
I think this Charles Schwab ad is illustrative of what I’m talking about.
Here’s a link to the ad for those who can’t see the YouTube embedding.
Obviously, the point here is that high brokerage fees are a bad thing and the implication is that Schwab’s fees are lower, which is a reasonable claim.
However, the entire commercial assumes that you should have a broker managing your money. The ad portrays a normal guy who makes it seem completely normal to have a stockbroker managing your money for you.
The question isn’t whether you can manage your money yourself – of course not. Your money’s too complicated, right? It’s something that needs to be left up to a broker.
Nonsense. Absolute nonsense. Money management, just like most other things in life, is something you can do yourself. Even more important, once you do it, you realize that it’s not complicated at all.
This concept isn’t just limited to money management, either. There are countless relatively simple things in our lives that we’re told are just too complicated and that we should leave to “experts” – which come with a mighty fee, of course.
How about changing your oil, for example? A person can do this in their driveway in about fifteen minutes, but many people are told it’s too complicated and take their car into an auto repair shop, where they vigorously try to upsell you on other repairs you don’t really need (hot tip: stick with that automotive maintenance schedule in your car’s owner’s manual, and do as much of it yourself as you can).
Another example is basic home repair. Most of the tasks a person needs to do are actually quite simple and not difficult at all, but many people convince themselves that it’s scary. One of my closest friends wound up calling an electrician because an outlet in her home wouldn’t function. Instead of attempting to do a basic investigation herself, she decided that throwing a breaker, turning a couple of screws, twisting a few wires, and using a tester was too complicated, so she hired someone to do it for her. Of course, she devoted more time to waiting for and watching the electrician than doing it herself, and it certainly cost her more money.
Here’s my suggestion. If you’re convinced a task is just too hard for you to do, step back and go to a very simple do-it-yourself guide. Figure out for yourself how to do it, and give that plan a reasonable attempt. If you succeed, great! You learned something new in the process. If you fail, at least you learned that it actually was complicated.
In either case, you still win, because you swept away the clouds of mystery around something and learned more about it for yourself. You’re more prepared to tackle similar things in the future, and you actually know whether or not you can tackle a common task. Even better, you can apply what you’ve learned to help out others in a pinch.
The harder something seems to be, the more money others can make by doing it. Don’t fall into that – give it a serious try yourself before calling in the help. You’ll save yourself money quite often and always learn something in the process.