You can learn a lot from a tweet.
Especially if that tweet is from New York Times columnist, author, and financial planner Carl Richards.
He’s made a career out of exposing and analysing what he calls the “behaviour gap” — the gap between what you should do with your money and what you actually do.
In his “napkin sketches,” he boils these insights down to a few drawn lines that are simple enough to fit on a napkin. He’s gathered many of these in his books, and via his site, Behaviour Gap. In anticipation of his next book, on overcoming imposter syndrome, he’s also launching a free email course on November 1.
Below, take a look at nine sketches Richards has shared with his 24,000 Twitter followers, covering everything from psychology to financial advisers to why there’s no such thing as a dumb question about money.
In an episode of Behaviour Gap Radio, Richards explains a recent realisation: 'Any time there is extra -- time, money, or energy -- I spend it. You know what I mean? I don't reinvest it.'
He refers to this extra as 'slack in the system,' and explains that it applies equally to energy, time, and money. When there's a day off, a rest, or a budget surplus, he's always viewed it as a reward.
'I realised that space in the schedule, blocks of unstructured time, is not a reward for doing good work,' he says. 'If you want to do good work for a long career, it's not a reward, it's a prerequisite. You have to build slack into the system in order to continue to do creative work for the long haul.'
When it comes to money, Richards says, traditional budgeting advice usually revolves around creating scarcity: making the most of every dollar, keeping your checking account low to keep you afraid of overspending. However, building some slack into that system, realising that 'just because it's there doesn't mean it has to be spent,' Richards says, 'was a huge breakthrough for me.'
'Next time you find yourself with a little bit of slack in your system,' he advises, 'you could do two things: You could say, 'OK, this is what I've worked so hard for. It's a reward. I'm going to take a day off.' But I think you should flip it on its head and say, 'I've got to take this time. This slack has to be in the system, as a prerequisite for continuing to do the type of work I do.''
'While humility is a virtue in all parts of life, when it comes to making smart decisions with money, it serves as a vital layer of protection,' Richards writes in The New York Times. 'When it comes to our money, there are no dumb questions.'
Richards writes in The New York Times that when a friend asked his advice on how to invest so the money would definitely be there in three to five years, when it was time to buy a new house, Richards advised keeping it out of the market -- and his friend felt that it was 'wrong' to work so hard for that money and then let it 'sit there doing nothing.'
Reflecting on this reaction, Richards writes:
'In a situation like this one, it's helpful to recall and repeat Mark Twain's advice to be more concerned with the return of our money than the return on our money. For things that are really important and less than five years away, like buying a house or taking a big trip, the return doesn't matter. All we care about is making sure the money is there when the time comes.
'So I'm over the idea that a big pile of money has to generate a big return. We could invest that money, but we'd also have to accept that three years from now, all the money might not be there. Any investment could come back later, but maybe not in time for the big, emotional goal we set. I'm betting at that moment, we'd feel even worse about less money or no money than no gain.'
Richards isn't on board with the spending-money-to-save-money strategy. In The New York Times, he writes:
'I've seen it happen most often with individuals who are in the top tax brackets. They want a way to lower their taxes. They also know from their accountant or something they have read that, in many cases, you can deduct mortgage interest on your primary residence. 'Well, now there's an idea,' they say. 'We need a bigger house because we'll get a bigger deduction.'
'So why don't we all buy bigger houses, pay bigger mortgages, and save more on our taxes? It sounds brilliant. It's also known as 'letting the savings tail wag the spending dog.''
At the end of the day, he points out, whether it's buying a house to save on taxes or buying a bike on sale when you only meant to buy a carton of milk, you've still spent more money.
Writing in The New York Times, Richards says feeling constantly competitive with and envious of the people around you leads to an 'Instagram life,' not a 'real life.'
'Thinking we have enough is also rare if we're leading an Instagram life. It comes in large part from the stories we tell ourselves that feed the envy.
''If I only had a little more money…'
''If I only had a nicer car…'
''If I only had a bigger boat, then I'd be happier.' But that's the problem.
'They're only stories. Let's say all those things happened. By making these stories our focus, we'll never be satisfied. There will always be something else we don't have that someone else does, and our envy becomes a trigger for all the bad behaviour we're supposedly trying to avoid. After all, it's really hard to focus on saving as much as we can and sticking with our financial plan if those things get in the way of having what we think we want right now.'
For years, we've been told to avoid talking about $$. We actually need more thoughtful conversations about $$. https://t.co/zq65DGYRLs pic.twitter.com/NGYGHUUq69
-- Carl Richards (@behaviorgap) October 10, 2016
In an episode of the podcast Behaviour Gap Radio, Richards points out to advisers that it's their job to help clients talk about one of the only topics that still remains largely taboo: money. He says that he's been travelling the world, and no matter where he's gone, it seems to be the case that people recognise money as a topic to be avoided.
However, whether you're a financial planner or just the regular recipient of a paycheck, you can't make any progress with something you refuse to acknowledge.
Talking about money is a hot topic for Richards -- he expanded it into a series of short podcast episodes, which you can listen to for free on Soundcloud.
In The New York Times, Richards writes about his friend Tim, who realised he could stop having $50 lunches with a friend and go hiking together instead, because his lunches weren't about food. They were about friendship. And his friend loved hiking just as much as he did. He could take that $50 and put it in an index fund instead, and be just as happy, because he was aligning his money with his values.
'This may sound a little bit like boring financial adviser talk, but it's actually quite amazing. Just imagine if I told you that you could have an extra $50 and two hours each month to invest in things you really care about. Would you sign on the dotted line? I bet you would.'
Many of us assume anyone called a financial adviser does largely the same things the the rest, and that he or she is using their expertise in our best interest. But that's not always the case.
'Many of us have learned that we should never judge a book by its cover,' Richards writes in The New York Times. 'In that same vein, we really shouldn't care about titles, job descriptions or even where someone works. What we should focus on is what someone actually does.'
He provides three questions to ask a financial adviser -- including the details of how they get paid -- at The New York Times.
Richards uses a story about learning to kayak while writing about financial obstacles in The New York Times. Ignoring a more experienced friend's advice to focus on the river, not the rocks, he paid too much attention to the rocks and flipped the boat.
'Look,' he writes, 'obstacles will exist no matter what path we choose. But we can decide to look past the rocks to the spaces in between and find a way that takes us beyond the obstacles. Yes, the financial version of kayaking takes practice. It starts by learning to see what opportunities exist and acting on that knowledge.'