🍺 The Laws of Financial Health

Author

Jordan Batchelor
October 22, 2024

Happy Tuesday! Welcome to the Poor Boy Report. Let’s get this knocked out before your next Instagram notification distracts you!

Today's Report: The Laws of Financial Health by Mark Newfield
Read the original article here.

Author’s Poor:

Mark draws parallels between long-term health and financial well-being. He emphasizes that while the principles of financial health are simple, the challenge lies in consistency and discipline. His key financial health principles include:

  1. Spend Less Than You Make: This is the core rule, though many struggle due to societal pressure to spend. It's essential to make saving automatic.

  2. Define Financial Independence: Know what "enough" means to you and create investment strategies aligned with your goals and tolerance for risk.

  3. Maintain Cash Reserves: A strong cash reserve protects you from market downturns and empowers you emotionally.

  4. Save and Invest Automatically: Set up automatic systems for saving and investing, removing the need to constantly make decisions that could be emotionally driven.

  5. Never Interrupt Compounding: Compounding is powerful, but it requires patience and resisting the urge to time the market, as doing so often results in suboptimal returns.

Newfield also touches on the emotional complexity of financial health, urging readers to:

  • Ignore others’ financial decisions (e.g., “Keeping up with the Joneses”).

  • Recognize and manage emotional reactions, particularly during market downturns.

  • Save a portion of any income increases to avoid lifestyle inflation.

  • Stick to a plan, revisiting and evolving it over time, but avoiding knee-jerk reactions based on fear or panic.

My Poor:

Look, the principles in this article aren’t exactly groundbreaking. They’re common sense, and Newfield’s not the first to say them—won’t be the last, either. But let’s be honest: staying consistent with these rules for 50 years? That’s a marathon, not a sprint. It’s one thing to nod your head at “spend less than you make,” but then that shiny new car or dream trip to the Bahamas starts calling your name. Yeah, you could afford it, but the real question is: are those dollars meant to grow your retirement, or fund your piña coladas?

The trick is wiring these principles into your brain so that you can stick with them even when life throws temptations your way. Consistency is key, but it’s a lot harder than it sounds.

Now, figuring out what’s enough is crucial. If you don’t have a clear goal, your target’s going to be moving all the time. For some, that’s the whole game—amassing a kingdom of wealth. But here’s the catch: energy spent chasing that never-ending target is energy drained from other areas—family, relationships, your health. So, knowing when you’ve hit your version of "enough" keeps you from running yourself ragged.

And as for the whole "cash reserves are king" bit? Yeah, inflation does take its toll, but here’s the deal—I probably hold way more cash than any financial expert would recommend. Why? Because it lets me sleep at night, plain and simple. Maybe I lose a little to inflation, but at least I’m not losing my mind wondering if I’ve got enough to weather a rainy day.

Thanks for stopping by for a PBR Pint. Catch you next week!

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-Jordan Batchelor-

Disclaimer: The content provided in The Poor Boy Report (PBR) is for educational and informational purposes only and should not be considered as professional financial advice or investment recommendations. All information presented is based on personal opinions and research and may not reflect the most current developments in personal finance.

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