The Diet Pill Mentality

As I talk with people who are in the process of building wealth, I often sense an underlying hope for some magic financial strategy they can use which will propel them to wealth sooner than all of their friends and colleagues — some sort of financial fast pass that no one really knows about.

I understand the desire for this to be true. This mentality is fed by mainstream financial advice which is often premised on getting rich with a few simple tips. No one wants to hear that you need hard work, consistency, patience, and maybe a little bit of luck to build wealth. That doesn’t sell.

Unfortunately, there are no top-secret financial strategies. If there were, everyone would already know about them. And if building wealth was quick and easy, we would all be rich by now.

In this sense, I see a lot of parallels between getting physically fit and getting financially fit.

I’m not a personal trainer or a fitness guru, but I feel comfortable saying that the keys to getting and maintaining physical health are to eat and drink properly, get enough sleep, and exercise consistently. This seems like common knowledge, yet almost 40% of Americans are obese and another 32% are classified as overweight.

Although the steps to living a healthier life are straightforward and well-known, doing them is anything but easy. They require large amounts of discipline and patience. Because it’s not easy, there’s a massive market for health and nutrition advice for people who are searching for a shortcut or a magic weight-loss pill.

Every year new fad diets arise and people will latch onto them in hopes of finally getting into the shape they want. Those who are involved will swear by them and back it up with “science.” It may work for a short period of time but most diets are extreme enough that when the popularity wears off the participants will revert back to their old habits.

This same sort of thing happens with money as well. Spending less than you make, diligently saving, and consistently investing for a long time is the foundation of becoming financially healthy. Yet, people seem eager to disregard the well-established solutions in search of a quick fix. Instead of becoming proficient in the basics, they would much prefer to speculate on a shiny new investment product, try out an extreme tax strategy, or buy into some exclusive real estate syndicate.

As with diets, financial fads will come and go. Wealth is built by creating good habits that will last. The best financial strategy is the one that you can stick with.

The following is an excerpt from Morgan Housel’s new book The Psychology of Money:

“More than 2,000 books are dedicated to how Warren Buffett built his fortune. Many of them are wonderful. But few pay enough attention to the simplest fact: Buffett’s fortune isn’t due to just being a good investor, but being a good investor since he was literally a child.

As I write this Warren Buffett’s net worth is $84.5 billion. Of that, $84.2 billion was accumulated after his 50th birthday. $81.5 billion came after he qualified for Social Security, in his mid-60s. Warren Buffett is a phenomenal investor. But you miss a key point if you attach all of his success to investing acumen. The real key to his success is that he’s been a phenomenal investor for three quarters of a century.

Effectively all of Warren Buffett’s financial success can be tied to the financial base he built in his pubescent years and the longevity he maintained in his geriatric years. His skill is investing, but his secret is time.”

The secret is there are no secrets. Don’t discount or overlook the impact that good saving and spending habits and consistent investing will have on your wealth because of its simplicity. While the process may be well-known, it’s certainly not well-practiced.

Thanks for reading!