Released in 2019, Your Rich Life offers a roadmap for achieving financial wellbeing, providing a crash course in behavioral finance with simple steps to develop the right mindset to maximize lifetime returns.
Jonathan M Satovsky shares key habits to form in the New Year to achieve financial success, and how SAM can help guide you.
Good afternoon. This is Jonathan Satovsky of Satovsky Asset Management. December 2019 with a video blog update at the end of a decade.
And, I wanted to talk, going into the new year, about habits.
How do we take knowledge and information and form habits that can incrementally improve our lives?
So I spent some time trying to write a book. Teaching people about financial literacy and behavioral finance.
But knowledge without action isn’t very helpful.
So hopefully our team can help our clients and future clients to get into better habits; 1% improvements every day, every week, every month, every year to make a tremendous impact over a lifetime, and/or multi-generational lifetimes.
So for those that haven’t had the luxury of reading the book, I thought I would distill it down to a couple of slides, and share some of the images of Your Rich Life.
The problem I am trying to tackle here is the behavioral gap.
Why is it, I pondered, that investors perpetually underperformed the investments that they make?
And so, immediately I had to think of a solution – How can I solve this for people over a lifetime?
Well let’s think about every individual family, as if they were endowment and have a principal of a 3% spend rate.
Why is this important? It’s important because at a 3% spend rate, you have a very high probability of sustaining your finances over a lifetime net of taxes and inflation. And, for setbacks during the course of a lifetime.
But if your spending rate is too high, your probability of success goes down materially. So the important thing to reverse engineer that thought is to put yourself in a mindset of taking an ownership stake in businesses that you can derive income to replace your salary so you could spend time with who you want, when you want, where you want, without apology.
But to do that, you have to get in really good habits early to save 10-20 percent of your income, and set it aside and live with the late gratification for your future self.
And in terms of developing a personal philosophy, you should know the evidence and know the facts.
The facts are that with ownership stakes and businesses you’ll make more money if you lean on cheaper companies and profitable companies you’ll make more money over a longer period of time.
This philosophy has been shown to work everywhere – in the United States, in developing markets and emerging markets all around the world. It’s logical whether wherever you are.
So, realize that whatever philosophical path that you’re on, if you tend to be very conservative or you tend to be aggressive, there will be periods of time that you’re going to be uncomfortable. So get used to that concept. And, in that realm you have to be very wary of something my friend Blache Levine called “laughing tickets”.
What is that? Your friends social media someone is gonna tell you about them getting rich.
You know everyone thinks that they’re beating the market and outperforming everyone else. Everyone thinks they’re generating alpha.
The reality is, very few people do. The math and the arithmetic of money doesn’t lead to the fact that most people are outperforming but, as Blanche said, most people hide their losing tickets under the bleachers and only highlight their winners.
So why is that important? If you can put earmuffs on and ignore the people around you, the sirens that are calling – you may need a behavioral coach; our team tries to help people set up a structure and a discipline in order to ignore the sirens that are calling to tell you to adjust your path, or adjust the ship – you’ll have an increased probability of success.
And to highlight – the greatest example is the Oracle of Omaha over the last 50 years, having been one of the greatest investors widely known, has had 40% of time that they’ve either lost money or underperform the financial markets by magnitudes of 20-59 percent.
So you have to get comfortable with a bumpy ride, whatever path you’re on.
But the evidence is very clear – if you own equities and you own ownership stakes and businesses over a long period of time and you ignore the sirens, you will have a very high probability of compounding money tremendously over a lifetime and multi generations.
So with that, have a happy healthy holiday and a wonderful new year and a great decade ahead.