Updated on 09.02.08

It’s Never As Hard As It Seems

Trent Hamm

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.

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  1. L says:

    This is so true. I thought I needed a new dryer when the plug for my dryer wouldn’t fit into the outlet in my new house. I’m so thankful I asked the appliance salesperson at lowes, who explained how to change the cord. It took 5 minutes, and only cost a few dollars!

  2. michael says:

    Best post ever, Trent. Very few things that we hire professionals to do actually require professionals. Yes, you’ll get a few responses to this post saying, “But she could get electrocuted! You’re being irresponsible!!” Nonsense. Find the instructions on a reputable website, follow the instructions, use some common sense, and you’ll save a bundle.

    But people who’ve decided that minor home/car/computer improvements are too dangerous or too complicated to do themselves are — in a way — a godsend. After all, I’d be a lot poorer if the friends and neighbors who hire me to help them fix (sometimes unbelievably) minor problems spent the 5 minutes or so needed to learn to do it themselves.

  3. Steve says:

    “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.”

    Ah, where is my copy of “Eye correction laser for idiots”. Here it is right next to my copy of “Heart surgery for dummies”.

    “Honey, are you doing anything for the next 2 hours? No but you have to leave at 3 for the optometrists? OK, be a dear and come in here with my dissection kit please – I should be able to get that sorted for you”

  4. Steve says:

    On the other hand, sometimes doing something yourself is more effort in the end. In theory changing my car’s oil myself is simple, and takes less time and money than waiting for it to be done somewhere else. In practice by the time I clean up all the oil I spilled all over the place I spent more time and money (on cat litter, paper towels, and wasted oil). I used to change my own oil all the time when I was in college, but when I graduated and got a real job I was sure glad to give that up.

  5. Anne says:

    Along the same lines, another question. Vanguard currently has a $3,000 minimum for Roth IRAs. $3k is a lot right now given my need to keep building up an emergency fund and paying down debt. Would you recommend

    1) …putting off investing for a longer period of time but going with the Roth at Vanguard (my preferred investment house).
    2) …going with another firm that I’m not as sure of but that offers lower Roth minimums.
    3) …starting with Vanguard STAR mutual fund ($1000) minimum and going from there.


  6. deepali says:

    I think the problem is sometimes finding a “reputable” guide, when there are so many NON-reputable ones out there…

  7. djc says:

    I did this a couple of weekends ago, when I replaced my Powerbook hard drive with a larger one, and restored my files from the Time Machine backup I’d taken just prior. I needed some special sized screwdrivers, and found the instructions on the web at iFixit.com. It took most of a Sunday afternoon, because I took my time, but it was a very satisfying job to do.

  8. With the trusty Internet, people have to realize that almost ALL knowledge is available to do almost anything! Want to learn to play better tennis? The Internet can show you how. Want to learn how to build a tree-house? The Internet is there.

    Why people are so scared to at least attempt to do something is beyond me. That is half the fun in life!

  9. Onaclov2000 says:

    I drive a nice car, and rather then let the shop do all repairs on it, they just did an inspection did some of the “major” stuff that I didn’t want to have to try to do such as replacing a seal and some other stuff, but I was able to buy the parts and am replacing a few of the other things so rather then a $1500 dollar bill, I got away with a $1000 bill.

  10. Ron, that is so true. The internet has a vast wealth of information just waiting to be used.

    As to why some people don’t try…I think some of it is just a lack of confidence. My siblings and I were raised with an, “Of course you can do this new/hard thing! Go ahead!”, and as a result we are all very confident people. Some people haven’t been so blessed and are much more cautious about their abilities.

  11. Lurker Carl says:

    I think many people are afraid of taking responsibility for their actions. Hire a professional and it becomes someone else’s fault if it doesn’t turn out right. I try to learn as much about something before hiring someone, then I know if the pro is truly a professional or a scammer. Most jobs we hire out can be easily done ourselves provided we have the time, appropriate tools and some basic skills.

    Beware of relying on the internet alone, it contains at least as much misinformation as it does fact. Just like with doctors, seek multiple opinions.

  12. michael says:

    Roth IRAs all follow the same rules, so there’s no need to prefer any one company over another.

    Just open a Roth IRA at Scottrade and, if you like, purchase Vanguard funds that way. This allows you to get around the minimums set by Vanguard — you can buy a single share of VFINX, for example, if you like (although I wouldn’t recommend buying less than $1000 worth at a time, to avoid having brokerage fees eat away at your returns).

  13. Andie says:

    I like the DIY approach, but I also recognize that time is money. If I take something on myself, often I’m already interested in learning it and I anticipate that the time won’t be overwhelming. However, I don’t take on everything because there are somethings that I’m not interested in learning about or the amount of time I anticipate it will take to learn enough is quite high or the amount of upfront costs for tools is too high for something I may never do again, or in my case I also have limited storage space for tools in my apartment.

    So yea, DIY. But there are legit reasons to not.

  14. Nick says:

    @michael #9

    I have a Roth IRA at Scottrade and it is very easy to do. I actually prefer it to Vanguard as you have the option to buy other funds/stocks if you like. You can of course just by vanguard though if that is your cup of tea.

    One correction though on your recommendation. The minimums from Vanguard are there no matter what. You cannot buy just a single share of VFINX. Scottrade, or any brokerage, still makes you adhere to the minimums set by the fund. I’m 99% sure that is the case unless they changed something since the last time I bought a fund which was less than a year ago.

  15. Jillian says:

    Yesterday I completely ruined a whole bunch of curtains by washing them without checking the care label. When I went to the store and compared the price of ready-made curtains vs. the equivalent amount of fabric, I rapidly came to the conclusion that I was going to be doing a crash course in curtain making!

    A little bit of research plus 3 hours of sewing and I have a room full of brand new curtains for the price of a single ready-made set. Plus, now I know how to make curtains. And how not to wash them.

  16. Todd A says:

    As a guy who spent an entire year finishing his basement, and, more recently, the Labor Day holiday making wooden property signs (instead of paying roughly $30/each for them), I generally agree with the DIY mindset. That being said, though, I think it is equally important to know your limitations. We recently had a lot of exterior work done on our house, which included some stone work around the garage. Of course, that meant new exterior light fixtures. After a few hours of planning, picking up materials, and wrenching my body around in unnatural positions, a thought occurred to me; “Even if I do manage to get this to work, there are aspects of the installation that will cast a doubt in my mind every time I throw the switch.”.

    And, at that point, understanding my limitations, I hired a professional. And, I love to throw the switch now !

  17. Alex H says:

    I just started my Roth IRA with Vanguard last Friday. I had all of this extra money laying around for years but I had no idea what to do with it and no matter how many books I read I couldn’t build up enough courage in any one thing to actually do it because of the reasons outlined above. Thankfully, I stumbled onto “The Simple Dollar” about 5 months ago and ever since then I have learned more than I ever did from reading finance books. I have also convinced my girlfriend (and future fiance) to invest her extra savings into a Roth IRA with Vanguard too. Thanks so much for the help! Keep up the GREAT work.

  18. Jen says:

    Okay, I tried the DIY route with a motion-sensing floodlight above the garage. I bought a fixture at Lowes. Got the electrician to come out and run a wire from an existing outlet to the eaves over the garage door (no attic access). Light kinda worked for 1-2 years inconsistently, burned through $7 light bulbs quickly, then died. No prob! Went to Lowe’s, bought a new fixture, flipped the breakers, installed it (despite really badly written instructions), and it worked. Not bad! Patted myself on the back. Two days later, wouldn’t work. Called home warranty handyman-type. Charged $50 to push reset button on outlet. Argh. Canceled home warranty in disgust, waste of money anyway. The light worked well for 2 more days. Called original electrician, no longer under warranty, of course! Turns out, I installed the light sensor upside down, allowing it to fill with rainwater and it was shorting out. He installed a new fixture, and $90 later, I have a light over the garage that clicks on when I pull into the drive. Lesson learned: keep your day job and let the professionals do what they know how to do, because even though I did such a great job, I thought, when instructions are poorly translated from Chinese, you can’t tell there is a right-side-up! :)

  19. Anne says:

    @ michael #9

    … I totally did not realize it worked like that. And I thought I was doing so well. Proof that maybe I need a little more than Suze Orman and a few Motley Fool articles. I think perhaps it’s off for a few more articles and maybe a trip to the library. Many thanks :)

  20. James says:

    Commercials like that are a little irritating, but to be fair, it’s reasonable for Chuck to imply you should be using his services in an ad for Chuck. And as you point out, at least it raises a good point about watching fees (haha, though I haven’t done any research to see if Chuck has the right to make that claim). But have you seen the Edward Jones commercial with the man sitting in his kitchen with a knife talking to his surgeon on the phone about how to perform a surgery? Then the man asks “shouldn’t you be doing this.” The implication in that one about doing your own finances being as insane as performing open heart surgery on yourself makes me absolutely irate.

  21. neilo says:

    The funny thing with DIY car repairs is that confidence breeds confidence. My father-in-law talked me through a basic oil change, then brake pad replacements. I asked his advice when a rear shock failed (about replacing them as a set). A few months later, I’ve replaced the front shocks myself, oil changes are routine on both cars, I recently replaced the brake pads and discs, and I’m seriously thinking about doing the next automatic transmission service myself.

  22. Matt @ SF says:

    I couldn’t agree w/ you more Trent. I can’t count how many times I’ve done this for family, friends, friends of the family, and on and on. I always compare people and their investments to kids jumping off the high dive for the first time… you kinda want to b/c all your friends are doing it, but a nagging voice in your head keeps you from trying it yourself. In many cases (just like Joel), they’re afraid to even step up to the diving board.

  23. tadeusz says:

    Just one thought came to my mind about IRAs. All the investment options are about assessing risks the investor is willing to take. 401(k) and Roth IRAs have one more risk that hasn’t been mentioned on this site.

    In my country (Poland, member of European Union) there are two common options for government-regulated retirement investmenst:

    OFE (IRA-like, compulsory, banks invest your capital only in government bonds and local stock exchange market)

    IKE (optional, quite exact copy of american Roth IRA, weaker tax protection than in USA).

    Recently the government decided, that the only possible way to withdraw money from OFE is via government agency ZUS (Social Security Office). You will be paid annuity, minus any handling fees, minus any capital gains (who heard of compound interest?!?). Not a chance for your grand-children to inherit a cent. Forget about buying beach house on Bahamas, too.

    More fun: ZUS already is on the verge of collapse. It needs *half a billion USD a week* of extra tax-payers money just to stay afloat and keep on paying state pensions (for which everybody in the work force is to pay (insufficiently?) big tax).

    The chances for people our age to get any (better than pathetic) state pension: 0.0%. The chances of getting any capital accumulated in OFE: maybe twice as much? ;)

    The second investment vehicle – IKE – will be robbed as OFE rather sooner than later.

    The moral is: investing in IRAs is a bet that for the next 30 year there will be no incompetent morons and bandits in the government. I pass the chance despite capital gains tax.

  24. I’m not from America so 410k doesn’t mean a thing to me.

    But today I set up a high interest online savings account which is earning me about 8% per year.

  25. GettingThere says:

    One of the biggest mistakes we make is to assume others share our same abilities. We’re all different, and one man’s “no problem” is another person’s nightmare.

    Trent, I’m glad home and auto repair is simple for you. It’s not for me. I’ve tried a bit of it and rapidly (and expensively) learned it’s just not one of my skills. It’s not a moral failure if you can’t rewire an outlet; the failure is in assuming that everyone should be able to do all the same things.

    Yes, people should give it a try. If it doesn’t work for them, however, call for help. I’m not going to drill my teeth, or take out my appendix, or represent myself in court. It’s not what I do. However, when you need a sermon preached (I’m a minister), a hand held, or even a corporate marketing plan developed (I’m also an MBA-toting management consultant) I’m your woman.

    To each their own gifts; to each their own experts.

  26. On Scottrade and Vanguard Roths: I started with Scottrade and once I had enough money to buy the funds I wanted in Vanguard I switched over and it was very easy. I actually left some of the shares I wanted to own (Berkshire Hathaway) with Scottrade because owning shares with Vanguard would be too expensive for me. I didn’t know you could have two Roths like that, but you can.

    As for the “trusty” internet — I know what you mean. It’s trusty to us, but most people feel the opposite about it. They still see the Internet as a bunch of nobodies posting intentionally fake information online. They think blogs are online diaries instead of actual, valuable information.

  27. Rebeckah says:

    Thank you for this thought provoking article. I appreciate the information you share each day. You are a blessing to many people.

  28. mjukr says:

    Re: the Schwab ad… the power of presupposition is indeed a juggernaut!

  29. Kevin says:

    This blog’s comments are a perfect example of information and misinformation. Anne @ 2:52 asks a question about Vanguard Roth IRA minimums, then micheal @ 4:17 gives her an incorrect answer that all Roth IRAs are the same.

    They are not the same. Vanguard has a $3,000 minimum on certain funds, where other firms do not. For example, my wife had a T. Rowe Price account that let her invest $50 min each month with no other minimum investment. When that account was large enough, we transferred it to Vanguard so all our funds are in the same place.

    Hope that helps Anne.

  30. O says:

    Before the internet exploded, I taught myself to bake bread using a children’s library book. The adult books seemed too overwhelming, but the kid’s book broke it down to very simple steps and explanations. That doesn’t work for highly complex “adult” tasks (eg. fixing a computer) but still might be a step to comtemplate for some activities.

  31. randy says:

    “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”

    i love your web site and i visit often. 99% of the time i agree with your every opinion. i am bothered however by this very broad and negative opinion of auto technicians.

    my family owns a repair shop and has for years. prior to working with my father, i worked in two automotive dealerships and then managed a import repair shop in my town. i can honestly say that in my years of having been in the business, the dis-honest technicians i encountered i could count on one hand. i now work as a tech in the HVAC field (just about to open my own place – yeah!) and i can say the same for the people in this field.

    if the shop(s) you frequent are trying to sell you things that your vehicle doesn’t need, then one of two situations exist. either you actually do need (or will, possibly prior to your next time in the shop) whatever the repair is or you need to find yourself a mechanic you can trust. the public is smarter than your giving them credit for here and as a result, most dishonest persons in ANY field can have their intentions exposed if common sense is used in dealing with them.

    there is plenty of legitimate work to be had out there. never once, ever have i ever attempted to sell work to someone that wasn’t needed and in the customer and their vehicles best interest.

    and there is plenty more like me than not.

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