Being bright isn’t a requirement to being successful with personal finance and investing. I speak from personal experience as I don’t consider myself to be overly bright. There are many people in my circle who are much smarter than me and who learn things much faster than I do. Their net worths are not necessarily larger than mine. It’s taken me a long time to accept the fact that being bright has very little to do with whether someone will succeed in the realm of money.
Those who’ve read this blog for a little while know that I’ve erred during my investment journey. I’m the first to admit that I’m not the smartest investor in the room. I’ve made so many mistakes!
- When I first started investing years ago, I put my money into mutual funds instead of index funds and exchange-traded funds.
- Investing in mutual funds instead of index funds & ETFs means I paid higher management expense ratios than I needed to pay.
- I invested in dividend-based ETFs instead of buying equity-based ETFs.
- I didn’t earn as much as I could have during the 10-year stock market bull run that ended in February of 2020. (D’oh! How I would love to be able to unwind that mistake.)
- And I don’t increase the rent on my rental property every year. I’m sure there are some in the real estate investment community who see this as a very grave mistake.
Despite these mistakes (and I’ve made way more than 5), I’ve learned that you don’t have to be all that bright to do well in personal finance. You do need to have disposable income, since you can’t invest what you don’t have. I’ve crafted a list of traits that I believe are essential to successfully building wealth.
Being smart is not one of the traits!
You have to start from where you are. No investor has ever made money without starting to invest. Thinking about investing is great but people don’t earn 7% returns on investments they only dream about. They only earn returns on money that’s actually invested in real life, whether that’s in the stock market, in real estate, or in a business. Investing your first dollar isn’t a function of being bright. It’s a function of taking action.
Consistency isn’t dependent on how bright you are either. I’m a huge fan of automated transfers. Every time I get paid, some of my net income is siphoned away from my chequing account. That money is invested to pay for my future goals: retirement, travel, house renovations, whatever. If the money is for a planned purchase that’s not part of my day-to-day basic life, such as groceries, gasoline, and utilities, then the money is automatically whisked into various accounts and it stays in place until it’s time to make those future purchases. Automated transfers have ensured that I’ve always had money going towards my investments.
No one needs to be all that bright to be disciplined. You’ll need to be disciplined if you’re going to stick to your priorities. You’re the only expert when it comes to how best to spend your money because only you know what’s most important to you when it comes time to spend it. It also means that you’re the only one who’s responsible to say “No” to the things that don’t move you towards your dreams. Believe me when I say that there is alway someone who wants your money. Being bright is not a pre-condition of only spending your money in ways that align with your priorities.
Finally, never stop learning. Like I said earlier, I’m not particularly bright. And it takes a long time for me to learn new things and for concepts to sink it. THAT’S OKAY!!!! Learning at my own pace isn’t an obstacle to achieving my goals. If anything, it’s a benefit. Once I’ve been exposed to a new concept, I can learn it as thoroughly as I want to. And once I’ve done that, I can determine whether it will help me meet my financial priorities.
No one is grading your progress.
I’m not in school anymore. There’s no teacher under a time pressure to get through a pre-set curriculum. I’m my own teacher now. Taking as much time as I need to teach myself a particular concept is a good thing in real life. Unlike a school setting, there isn’t a fixed number of hours to be spent teaching one concept before the teacher moves on to the next one. I’ve been investing for over 25 years, and I still don’t understand how Price-to-Earnings ratios work. Is it better if they’re high or low? What exactly do they mean? Do they fluctuate every day? What are the factors that impact them?
Hear me now: I’ve been investing in the stock market for 25+ years, and I did not let my ignorance about P/E ratios stop me from building a solid portfolio that kicks off a nice amount of dividends each year. Admittedly, I’m not a stock-picker. In other words, I don’t buy individual stocks after analyzing their annual reports and doing research into both the company and the industry. If I were an investor who had gone the stock picking route, then I would have learned a lot more about P/E ratios and other nuanced stuff. The information is out there and I would have spent my time learning about it.
When it comes to being good with your money, habits will always beat brains in the long run. Being smart isn’t what helped me the most. Having the investing habit and putting automatic transfers in place has been my secret sauce. Together, these tools have been tremendously more beneficial for my portfolio and for meeting my short-term goals. Once I had prioritized how to spend my money, relying on habits and tools propelled me towards attaining my goals.
Being bright is not an indicator of whether you will be successful in handling your money. Again, speaking from personal experience, you can make stupid money mistakes and still set yourself up for future financial success.