Dazed and Confused, Part I
by Richard
So, would you like to know how the average person deals with extreme complexity?
Easy…they just tune out.
I spent the weekend shopping for a starter house in Dallas with one of my adultlets…there are just under six months remaining to qualify for the first time buyer’s rebate credit, so we are dealing with a time certain deadline.
Fortunately, we found one of the top Realtors in the Dallas market, who was remarkably well informed and efficient in dealing with the local market. In passing, I remarked that the first-time buyer’s credit must be pulling in a great number of new buyers.
Much to my surprise, she said hardly anyone had mentioned it to her, and were genuinely surprised when she told them it was available as free money, simply for doing what they were going to do anyway..buy a house in a buyer’s market.
There are several possible explanations.
- Gen X and the Millennials get most of their news from cable comedy shows…when they are not getting directly streaming video.
- If the buyer’s credit does not have its own MySpace or Facebook home page, it never shows up on their radar.
- If you can’t Tweet a summary of the credit in the allotted 140 characters, the word will never get out.
- These kids would die of embarrassment if they were ever caught reading a genuine, dead tree, ink on your fingers, old fashioned newspaper.
- Perhaps they are so cynical they would never believe anything the government says or promises.
- TMI overload. They’d rather download tunes to their I-pod, plug the buds in their ears, and not be bothered with boring trivia.
In fairness, it’s not just the first-time buyers.
The government has introduced layer upon layer of complexity in designing incentives for thrift and savings, including:
- Regular, Roth, Rollover, Coverdell, Simple And SEP IRAs. Not counting the now defunct SAR-SEPs.
- Traditional or Roth 401ks. Employer Matching and non matching 401ks. Solo Regular or Solo Roth 401ks. or 457(b)s. or 403(b)s.
Unless you stoically sat through the CFP required classes, the MEGO syndrome takes hold. (My Eyes Glaze Over)
Each of these plans were designed to appeal broadly to the working segment of the population most likely to benefit from enrolling…and each offer substantial up front, or eventual, tax benefits.
But the proliferation and arcane distinctions among these plans serves to dissuade and discourage those for whom they were originally intended.
I suppose I should remain philosophical….and grateful. After all, its the stupefying complexity that drives clients to wealth managers and financial planners to draw order out of the chaos, and guide the uninitiated through the financial thicket.
And so I return to a recurring theme.
There are life skills that you must master to navigate successfully through education, career, family formation and prosperous retirement.
If you learned how to drive a car, apply for and keep a job, and find a mate…you can become financially literate, and acquire the life skills needed to unlock all the doors that impede your progress.
You say you hate to lug books around? Time to get a Kindle, then.
, then.It may be one tech gadget that preserves the written word while preventing limited attention spans.
And it arrived on the scene in just the nick of time.
June 11th, 2009 at 9:56 am
Since I am a bit younger than Richard, I remember a tad better what it was like finishing college, starting a career, and buying a first home. It wasn’t the cable comedy shows, Facebook and the like that made it hard to pay attention to all the life skills that Richard justly advocates. Nor it was lack of a savings mentality and planning for the future, both of which were well drilled into my head by my parents. It was, very simply, lack of time.
At that age, my effort was spent on starting a career and finding a companion. These are foundational decisions that are even more important than the life skills of 401(k)s and the like: gotta have a job first and build a reputation before you have an income and can think about 401(k)s; gotta have a spouse to have emotional balance in life and, in due time, have kids and worry about their education. Once you are older, one forgets the time, effort, and energy we all spent in those early years dating and career-building, leaving little or no time (and certainly no energy) to navigate the maze of financial planning.
There is also another factor: the expert culture. Drilled into our heads was the idea that some things are too complex to worry about learning: better hire someone else instead. So, in those days, I would let my financial advisor pick an investment vehicle, or trust my real estate agent’s advice on home buying. In retrospect, it was a better option than either keeping my money in a CD (the only option I knew of at the time) or following stock tips from random friends or buying a house without a buyer’s agent. But, also in retrospect, it was a worse option than educating myself first — because such middlemen often have conflicts of interest and are not always looking for what’s best for me. Still, overall, a DIY approach is best only if one takes the time to educate themselves; an advisor, even with some conflict of interest is second best; and an uneducated DIY approach is probably worst.
What I never did, and I very strongly encourage EVERY young person to never do, is hire someone else to do your taxes for you and never look over them. That’s because only by doing them yourself (and maybe have a parent or an accountant look them over before filing them) do you learn about all the deductions available to you and how to structure your income. As you feel the pain realizing how much you need to give the US Treasury, you are incentivised to seek the gain by learning how to adjust your life decisions to minimize your taxes. In my experience, I learned about IRAs, 401(k)s, HSAs and all that from the IRS tax forms.
Of course, that cannot be the sole learning method: if I found out next April about the first-time home-buyer credit, it would be too late. But it’s a great incentive to cultivate an interest in financial planning. Once the fuse is lit, then one seeks out Wall Street Journal of their own accord.