Money Talk

David and I participated on Stop 19 of Phroogal’s Road to Financial Wellness in downtown Denver Friday, June 19th. It was a rewarding and exciting experience. As we shared in our June 22nd, Monday Money Minute video, we were most excited to learn that despite it being taboo, people want to talk about money. People feel as though they aren’t educated, nor well versed enough about money to be successful with it. For these reasons, they want to have a conversation about money. They want to talk with their friends, family and colleagues about money.

Probably due to the “yellow car effect”, since then I noticed a recent study performed by The Wharton School’s Pension Research Council. The researchers studied 401(k) investor’s behavior relative to their peers. Two trends were noted. The first is that participants who talk with their peers about their 401(k) allocations increase their equity exposure by as much as 5 basis points, or 0.05 percent, if they learn their peers have 1 percent more equity exposure than they do. The second is that participants increase their equity allocation by as much as 9 basis points, or 0.09 percent, in their 401(k) when their 401(k) performance lags that of their peers by 1 percent.

This reinforces are anecdotal findings that people want to talk about money and will use those discussions to dictate how they manage their money. The research didn’t study the performance of the participant’s portfolios after the increased equity exposure. However, one can assume that with ever-increasing stock valuations over the last six years that the results of these discussions was improved performance. Likewise, when equity valuations decrease, the results will likely be decreased performance, unless similar discussions lead to defensive investing.

Of course, the herd mentality in the investing world can bite the investor. Hello, Holland! The bubbles created by the herd mentality can be mitigated with pragmatic investing focused on individual risk tolerance and asset allocation. The benefit of these discussions is keeping people engaged with their money. The same can be said about non-investment related money discussions.

We can all learn from our family, friends and colleagues. As we challenged you on June 22nd, let’s have those discussions. Below are three soft questions to kick start any money conversation.

  • I want to make sure I’m on track with my financial goals. What have you found is important to properly managing your money?
  • I watch more portfolio regularly. What do you use to manage your investments?
  • I’m always learning. Where do you get your information about managing money/investing for retirement/saving for college?

Start talking about money. Use tools, such as www.DebtFreeGuys.com, to give you the information and confidence you need to engage in money discussions. You’ll be surprised how much those conversations help you with your money, in addition your investments.

If you need help getting the discussion started, download the money movie Maxed Out on Netflix. It’s a great conversation start. Here’s our review of Maxed Out.

Again, let us know how your money discussions go. If you have other questions to share, please do so.

 

Are you ready to start the conversation? Begin your path by reading our short and simple book Do You Know How to Be #MoneyConscious, where you will find a guide and worksheets to help you start.

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Comment List

  • Brian @DebtDiscipline 08 / 07 / 2015 Reply

    Money is a topic of discussion often in our home. We are teaching out children more than we ever learned about money at their age. We want them to be prepared as they begin their financial lives and understand its okay to talk about money.

  • I have a daughter and as early as I now, I already teaches her about the difference of needs and wants. I also told her that having a savings is really important.

  • John Schneider 08 / 07 / 2015 Reply

    That’s great to hear. Maybe there’s a sea-change happening. You’re children will be all the better for it.

  • Stephen 08 / 07 / 2015 Reply

    My parents taught me the value of money at a very early age. I always thought they were financially savvy, but now I start to wonder at times if they’re as well off as I think.

    • John Schneider 09 / 07 / 2015 Reply

      I hear you, Stephen. That’s why it’s so important to talk with friends and family. Not only can you learn something about how to manage your own money, but you can make sure your parents are okay. If nothing else, it may provide peace of mind. Thanks for reading and commenting.

  • David Auten 09 / 07 / 2015 Reply

    John and Clarisse, we couldn’t agree more. I have been talking to my step-son for the past few years. It’s amazing what they pick up. I hope that it carries through to his adult life.

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