Updated: Mar 31
This is the introduction for my book coming Summer of 2023! For more information, check out the book website at jeffhulett.com.
Also, this article kicks off the Personal Finance Journey.
Coffee-nomics and Making Money
Allow me to illustrate the idea of making confident financial decisions with a simple example: buying a daily cup of coffee. If you’re not a coffee drinker, you can substitute any “want” or “non-need” product you regularly purchase. My intention here is to help you understand and manage the impact of fixed purchases over a long period of time.
Let’s say you have a habit of buying a Starbucks venti café latte for about $4 every day. This habit costs you $20 per week. You think to yourself, ”I can afford this, I’m worth it!” All decisions you make have an emotional element to them. You “feel” them in your gut, and you use this gut feeling to gauge any actions you may take. But when you think like a stoic—practical, action-oriented, knowledge-seeking, confident, calm, and collected—your new thinking approach sends up a red flag: “Why am I deriving my self-worth from a cup of coffee?”
Herein lie the basics of my approach to wealth building. Stoic thinking fuels personal power, and emotional intelligence and education are the greatest sources of that power. Stoics provide kindness to others and consider kindness a source of strength. Applying a stoic’s mindset provides you with focus and tools to successfully navigate the complex consumer finance landscape because you are not allowing your emotions to alter your decision-making. Although thinking like a stoic is not always intuitive, with practice, it is very achievable! If you can implement the following behaviors and attitudes, you can build wealth:
Be content with yourself, don’t spend money you don’t have, don’t buy things you don’t need, and don’t focus on impressing people.
Have a long-term focus (and long-term is not merely two or three years). Wealth and security are built over decades, not months.
Save → Invest → Evaluate → Re-balance → Repeat
Compare your coffee-buying habit with the first two points of the wealth-building approach, and ask yourself these questions:
Do I need a Starbucks coffee drink? Or perhaps I am trying to impress someone, including myself?
Is this action consistent with my long-term focus?
Now, let’s take a closer look at the long-term impact. It’s an arbitrage, a fancy term we economists use to describe buying or selling assets in different markets to take advantage of price differences. My approach is to compare your financial decisions to your retirement aspirations, usually considered the longest-term focus of your life. How bad could a $4-a-day coffee habit day be? A 22-year-old spending $4/day, five days a week, would forgo almost $400,000 at retirement throughout his or her working life! A stoic would bring a reusable cup of coffee from home or get free coffee at the office instead.
You may still believe purchasing a coffee drink is worth it. People buy “non-needs” all the time. I’m not suggesting you never make a non-need purchase—of course you will. This example illustrates how the sum of your small decisions adds up over the long term, and how your feelings affect the decisions you make.
Making Money Starts with Making Confident Choices
I’ve been asked, “What is the secret formula to financial success?” The truth is, there is no single secret formula. But there is a great opportunity to widen your knowledge base regarding personal finance so you can make decisions—financial and otherwise—with confidence. Whether big or small, you make choices every day, and although not all of them are strictly for personal finance, all significant decisions you make throughout your life have a financial impact. The connection between financial success and decision-making is iron-clad. Your decision-making process might seem a like a detour along the way to “how do I make money,” but it’s critical to understand that your choices and the “why” behind them have an impact on how you make money throughout your life.
I think of financial success as the long-term outcome of a series of small but optimized financial decisions (such as buying or not buying a $4 cup of coffee every day). The challenge is, you often don’t realize financial success until after you make all those small financial decisions. Behavioral economists say that decisions lacking salience—whether personal finance or anything else—are significant impediments to reaching long-term success. Confident decision-making is about making the best choices with the information you have; these choices include trade-offs and even may go against popular opinion.
Confident decision-making is about making the best choices with the information you have.
The good news is that with a little preparation, your financial success is very achievable. Your road to personal finance success is about personal discipline and broadly applying personal finance concepts to your life. Your ability to manage your emotions, stay focused, and be disciplined is the key to victory. It has little to do with your knowledge of business, math, or trading strategies. Knowing yourself, being patient and persistent, and applying discipline will power your long-term wealth.
You may be thinking, “This doesn’t sound too difficult, but I’m not very financially literate.” Personal finance and general financial literacy are critical for making the most of your financial resources. Unfortunately, financial literacy is often neglected because unfortunately, the human brain is not wired for long-term savings. This means retirement savings and other personal finance decisions must be intentional because they are not in your natural “default” wiring. It’s a whole lot easier to buy that $4 daily coffee than think in terms of it costing you $400,000 in retirement dollars.
Tools You Can Use
Why is making long-term decisions so difficult? From an evolutionary standpoint, our brains are still wired to make decisions typical of those during caveman days. Back then, simple decisions were life-and-death: “Should I run from the lion?” or “Should I fight this person from a rival tribe?”
These are simple yes or no decisions. Today, decisions are often multi-criteria, multi-alternative complex decisions. Take, for instance, buying a car. Choices such as, “How should I evaluate my 10 car-buying criteria?” and “Which of the 20 car models should I buy?” are surprisingly complex. You have tens of thousands of combinations of decision factors, and they are all as unique as the individual making them.
Critical tools, such as this book, can help you make complex decisions. To that end, I also provide this book with free companion smartphone apps, Definitive Choice and College Xoice, which will help you implement many of the personal finance decisions I discuss throughout the book. Find them wherever you download your favorite apps.
Personal finance is best understood through the decision-making lens. Being good at personal finance starts with being a confident decision-maker. The skills you will learn for making good financial decisions will absolutely be helpful to all your other life decisions. Understanding how your brain operates (here’s a hint…we humans are emotional creatures) will help you appreciate how human neurobiology impacts your decisions, including your personal finance success! “Know thyself” is the gateway to great personal finance outcomes.
Being good at personal finance starts with being a good decision-maker.
Because people are emotional creatures, our decisions tend to be colored by our emotions whether we realize it or not. Harvard University neuroanatomist Jill Bolte Taylor said, “Most of us think of ourselves as thinking creatures that feel, but we are actually feeling creatures that think.” This is an important perspective because we process our emotions first. It takes skill, training, and tools to properly integrate emotion into making confident personal finance decisions.
I call confidence the “decision emotion” because it provides us with a feeling of certainty regarding the decisions we make. Ever experience “buyer’s remorse”— that feeling in the pit of your stomach that you didn’t choose wisely—or conversely, total satisfaction in what you buy? Yup, that’s confidence at work. Having conviction in your confidence is important because it powers and motivates us to make good decisions and feel good about them. All of us are subject to knee-jerk reactions—also known as “fast-brain responses” or “cognitive biases,” the processing shortcuts our brains take when interpreting information. These reactions and biases affect the decisions we make—especially high-value decisions—and have the potential to strengthen or chip away at our confidence. When our confidence erodes, we don’t feel so good about our decisions; when we have conviction in our confidence, we feel better about our decisions.
Throughout our lives, we will face many high-value choices—those high-stakes choices we make throughout our lives, such as spending on a college education, choosing a career, buying a house, and investing for retirement—and they begin with confidently evaluating your preferences for a decision. These are the various “what is important to me” preferences that go into making a choice. Economists call a weighted set of preferences—the measure of how important each aspect is to you—your “utility.” To assess value, you compare your utility to the cost of tradeoffs, then make your high-value choice.
But those choices require action! Confidence in a good decision process will help you act. Your personal finance journey is lifelong. Think of it as a series of regular, smart, and positive habit-forming financial decisions that lead to significant long-term value. Personal finance success is merely the cumulative value of those regular, smart decisions.
Confidence in a good decision process will help you act.
Throughout this book, I’m going to cover why making decisions is so critical, and how to arm yourself to make the best decisions when presented with choices. I’ll provide tools and strategies to help you:
Identify and address biases to build confidence,
Manage data curation challenges,
Understand the impact of different mental processes, and
Provide structure to make great decisions.
Providing good decision tools is one thing, actively using them is another thing entirely. Recognizing and internally constraining cognitive biases, belief inertia, or emotional responses, which I cover more in-depth in subsequent chapters, is not easy. I’ve come to appreciate most people are good at making certain kinds of decisions. However, as your choices become harder when the stakes are high—especially in a world teeming with undependable (known as “uncurated”) data—your challenges to address and overcome your habitual thinking decrease the accuracy and precision of your decisions. The best decision-makers use self-awareness to recognize their internal challenges and prepare themselves by establishing a decision-making process (known as “choice architecture”).
Choice architecture tools help us configure and curate the information we have available so we can make the best choices for ourselves. The best part about these tools is they are easy to use. After getting to know them a little, you will become your own choice architect! A good decision process starts with good habits, routines, and understanding.
As part of my goal to help you make high-value personal finance decisions, I prioritize the decision process. If you embrace the decision process, you’ll improve your personal finance or any future decisions. Any book on personal finance would not be complete without “how” resources that provide more mechanical details, such as “how to open a savings account” or “how to get a mortgage.” On this, I make three commitments:
I describe higher-level “how” in subsequent chapters.
I suggest resources where you can read further for more complete information.
I suggest the best questions to ask your favorite search engine to find the best “how” resources.
Why Personal Finance Success Is Needed More Than Ever
Having a great decision process enables you to achieve a reliable conviction in your confidence, thereby providing you with the assurance that you made the best decision to drive your personal finance success. But why does this matter? Why does your long-term financial wealth depend so much on making good decisions today? Because the small decisions you make today have long-term implications on your financial health as you age toward retirement.
The small decisions you make today have long-term implications on your financial health as you age toward retirement.
There was a time in the United States when financial literacy was not as critical as it is today. Most companies provided a pension program (a “defined benefit” as we economists call it). You did not really have to think about retirement because your employer took care of it for you through a pension. Today, pensions are almost gone, replaced by portable, self-service-oriented 401(k) programs (called “defined contributions”). Today, there are even more “gig workers” today who completely self-service their retirement.
Unfortunately, many are falling through the cracks. According to the St. Louis Federal Reserve, 35% of American households had no money saved in any type of retirement account. It would seem the switch from pension to 401k has caught entire generations unprepared.
Also, the student lending crisis continues to grow. Bloomberg News stated, “The student debt crisis is one that spans generations, with about 8.7 million Americans aged over 50 still paying off college loans.” Although education can be an investment in your future, the risk of overpaying for the education investment is high.
So whether you’re 15 or 55, the bottom line is you should think about your finances in the long-term, and how your daily habits and attitudes affect your long-term financial success. It’s never too early to start. Today, the need for self-driven financial literacy is greater than ever.
The “Why” of It All
What is the purpose of building long-term value using this book? We economists generally believe people are motivated by their self-interests—the “what’s in it for me” in how the decisions we make today affect us and others tomorrow—and leave these sorts of “why” questions to philosophers. However, because we’re discussing personal finance, you’ve got a vested interest in being clear about your self-interested long-term value motivation—you will find this very helpful when setting personal finance goals. The good news is that this book will work for anyone, regardless of your motivation for long-term value creation.
I offer my personal “self-interest” statement to encourage you to contemplate or create a personal statement as well.
I believe kindness to others is central to life. Building wealth and living a value-focused lifestyle enables your capacity for kindness to others. Although there are certainly other means to provide kindness, wealth will provide options to deliver kindness to family, friends, and/or my community. Many world religions often share a common humanity. In terms of “kindness to others,” one of my favorite teachings is from the Bible: “Each of you should use whatever gift you have received to serve others, as faithful stewards of God’s grace.”
When our children were young, my wife and I committed to teaching them good financial habits and decision-making skills. We quickly realized three big challenges:
How little educational support was available for personal finance as a decision-making discipline.
The challenge goes beyond education. Good personal finance decision-making requires good tools that implement that education. Those tools were often not available.
The consumer marketing culture promotes messages that “buying today” is better than “saving for tomorrow.”
As parents wanting to impart financial wisdom, we had the feeling we were swimming against the cultural tide. Think of this book as the gift we gave our children. We’ve field tested and fine-tuned many of these concepts with ongoing feedback from our children and others appreciating the value of good decision-making in their personal finance lives.
I’ve organized this book as a series of “bite-sized” chapters and sections. Certainly, it is beneficial to read through the book from beginning to end, but you’ll also find value in each stand-alone section as it applies to the season of life you’re currently in. I’ve organized chapters around key life events or needs, such as choosing a career, choosing a college and its financial implications, buying a car or a home, and investing in retirement. You will be able to refer to the book when the need presents itself. No matter when you start, this book will inform your personal finance success journey. At the end, I shine a light on the consumer finance products and services offered in the marketplace, which require thought and decision-making on your part should you partake in them.
It is my hope that when you finish reading this book, you will have gained conviction in your confidence when it comes to making good financial decisions. A person who has successfully made good decisions in the past is more likely to confidently make good decisions in the future and will be in a better position to give to their friends, family, community, and country.
 Benartzi and Thaler suggest the most effective financial training is provided on a “just in time” basis—right when you’re about to make that financial decision, which can be difficult when thinking long-term. Shlomo Benartzi and Richard Thaler, “Heuristics and Biases in Retirement Savings Behavior,” Journal of Economic Perspectives 21, no. 3 (Summer 2007): 81–104).
 Jill Bolte Taylor, My Stroke of Insight: A Brain Scientist’s Personal Journey (New York: Penguin, 2006).
 In its Private Pension Plan Bulletin Historical Tables and Graphs 1975–2020 report, the U.S. Department of Labor presents striking charts and graphs that show the chasm between defined contributions and benefits. View the report at https://www.dol.gov/sites/dolgov/files/ebsa/researchers/statistics/retirement-bulletins/private-pension-plan-bulletin-historical-tables-and-graphs.pdf.
 Greg Cancelada, Ready for Retirement? A Question That Nags America, Federal Reserve Bank of St. Louis (August 29, 2018), https://www.stlouisfed.org/open-vault/2018/august/ready-retirement-question-nags-america.
 Alexandre Tanzi and Madison Paglia, Older Americans Are on the Front Line of the Student Debt Crisis, Bloomberg.com (June 17, 2021), https://www.bloomberg.com/news/articles/2021-06-17/student-loan-growing-share-of-1-7-trillion-debt-pile-held-by-older-americans.
 Holy Bible, New International Version, 1 Peter 4:10.