How to tell someone something they don't want to hear

Some people blog twice a week, some twice a month, me, I guess twice a year is good enough. Introspection time; two thoughts about human interaction that led me to a three-pronged pitch.

First thought: when other people don’t have the same views as I do, it doesn’t really bother me. Some of my best friends are on the other side of the political or religious spectrum. As long as we can agree to disagree, and not be afraid to have an occasional fair debate where we are not threatened by the other, then we can vehemently disagree but not be upset. When it comes to personal finance (or, for that matter, religious beliefs or political views or whatever else people get excited about), should we just avoid these arguments and discussions. When someone makes a bold statement about their beliefs that you disagree with, it often seems best to give them a “well there you go” and change the subject. But, on some level I feel we have an obligation to have debates.

My prime example, a couple that I care about. They are recently “retired” although the husband works part time, more to keep busy than for the money I think. The other day, they say to me something like “our 401k is earning more than we are spending, so we took a little more out this year.” I want to go into how the S&P 500 PE ratio is around 20 and the monumental “gains” of the stock/bond market of the last two years cannot sustain, in fact we are set up for another market reset. Instead I bite my lip….

Second thought: I am a lousy salesman, but I recognize the importance of being able to sell something, even an idea. One of the tricks I have learned recently is to only give someone enough information to spark an interest and have them ask questions. When I say “I learned,” I mean I have head knowledge of this, but not heart knowledge. Meaning, I know it works, but can’t seem to help dumping all my thoughts on someone before even giving them a chance to breathe.

So, with these two thoughts, here is the pitch. This pitch can be used to provide people (who are ready to hear) with your knowledge about personal finance and investing in order that they might use that knowledge for their own good. It can also be used to raise capital for real estate deals you are working on. It is a work in progress so please provide feedback.

About ten years ago, I made a commitment to myself to spend at least a couple hours a week studying personal finance and investing. I find this topic fascinating, so this was an easy commitment. It is almost like committing to eat ice cream once a weak, easy commitment, just have to keep track in case you forget. In the last ten years, I have read a lot of books, attended seminars, tested theories by investing in different types of investments, and visited with active investors. I have learned a lot, but probably three things that shook my understanding the most.

1) Most people know almost nothing about personal finance and investing. This includes the “so called” experts and advisors. What I learned in my public education about personal finance and investing is almost nothing (I have a PhD by the way).

2) Most people invest most of their money in paper assets. A paper asset is a piece of paper that says you get some share of some potential future cashflow. But that future cashflow is not guaranteed and if it does not materialize, the paper becomes worthless. There is no real tangible thing of value behind the paper. Paper assets include stocks, bonds, mutual funds and … the US dollar.

3) IRAs and 401ks can be a tax advantage for some. But for most people, it is actually a tax liability. By investing in 401ks and IRAs you are giving up freedom and flexibility to do what is best for you you’re your money in order to pay more taxes.

That’s it. Usually one of these spurs a question, or discussion or something. For the three of you reading this (thanks mom and dad by the way), let me know if you think this is a good pitch. Also, vote in the comment box about which one you disagree with or are curious about and I will focus on that one for my next blog.