60. Daniel Crosby Makes His Money Behave

This week, my guest is Dr. Daniel Crosby, psychologist, behavioural finance expert and Chief Behavioural Officer at Brinker Capital.

Daniel talks about financial sacrifice and the relationship between happiness and money (it might not be what you expect!). He also shares his ‘three Es’ when it comes to financial wellbeing: education, environment and encouragement.

An episode absolutely jam-packed with great insights and priceless gems from a world expert on behavioural finance.

Episode Transcript

0:05
Hello, and welcome to the Real Money Stories podcast. I'm Jason Butler. And I invite you to join me as I have intimate money conversations with people from all walks of life. Whether you're just starting out and your money journey, or well down the track, there's bound to be something you can learn from these stories about taking more control of your money, so you worry less, and enjoy life more. Real Money Stories is sponsored by Vanguard, bringing value to 30 million investors worldwide. Visit vanguardinvestor.co.uk for more details. And remember, the value of investments can go down, as well as up and you may get back less than you invested.

Hello, Jason here. Thanks for joining me on another edition of Real Money Stories. And before we get into this week's guest interview, just thought I'd share some thoughts, ideas and insights on money issues to help you have a better relationship with money and improve your financial position. So here goes. Now in the United Kingdom, last week, we had the government's spending review. And that's when the Chancellor of the Exchequer, that's the the guy who makes all the financial decisions, stands up and sets out the government's spending priorities for the next 12 months. It's quite interesting in the backdrop of the COVID pandemic, that basically it's having to spend a lot more money, the government in lots of areas, but it's also having to borrow a lot of money. So it's trying to protect the economy, fund the pandemic support, and make sure that the government comes out the other end solvent. So I got thinking to myself, have you done your spending review for 2021, because it's the time to do it is now the beginning of December, not when you get into the new year, if you want to have a good year, next year, you've got to sit down now work out your priorities, your values, your resources, what might happen sort of Wargaming as it were, and you might be that you certainly could you can spend more money, if you've got more money, you could buy, purchase things and buy things that you were thinking of buying parts, you're gonna get a better deal because of the situation. But it might be you need to play a bit more defensive and build up a bit more cash or pay down debt, or perhaps some think about a new job or trying to increase your income. But either way, it's time to be intentional. So perhaps do your own spending review for 2021. So you're in good shape. And you are, you're clear where you're going to be going next year. I got thinking there about a couple of things here about as we approach Christmas, I mean, you can't go anywhere without hearing Christmas songs. And when I heard the first Christmas song on the 20th of November, believe it or not on the radio. So it seems to get earlier and earlier. And I think people are probably a bit fatigued with the whole Coronavirus and the lock downs and the restrictions. And I think there's a temptation to sort of throw caution to the wind and spend money on things to try and cheer yourself up. But as we know, that doesn't work and just thinking about the whole Christmas period. You don't have to pay lots of money for things like champagne or sparkling wine or presents or whatever. You just have to be intentional. Because you you know if you spending carefully, but only things that matter, then you can have good fun. So here's a thought. Do think about whether there are things you can sell ahead of Christmas, you know, stuff that's sitting around, you haven't got but also, what about secondhand presence. So whether that's buying something online for someone who's selling gear they don't want or the charity shops, which are certainly in the United Kingdom are reopening next week, I think most of the UK, there might be some bargains and some nice stuff to have there. And that's the new movement that's happening about this whole idea of secondhand gifts. They're not it's not a nasty word, it's not a bad thing. Actually, you can get some really lovely secondhand things and certainly in the environment we're in now with sustainability and ethical investing and you know, environmental concerns that might be something to look at. Why not make your own gifts. I mean, for instance, a photo collage, we've all got photos that digital way but you know, printing out pictures and assembling them in a, you know, an inexpensive frame and giving them to someone new, you know, where it might have an emotional connection with them is a is a love to give to, to create, particularly for older people who are interested in looking back over their life that that could be something worth looking at. So do your own spending review. Now, I don't know if you're aware but last week was a was quite an interesting one for crypto currency. That's these digital currencies that are not controlled by any central bank and Bitcoin surged through $19,000 actually sort of flirted with its all time high that was originally set in 2017. But it did tumble back quite a lot as the Americans went into their Thanksgiving week. And in fact, the only Gee cryptocurrencies prices actually trebled since March. So therefore obviously its attractions a vehicle for speculative trading is is clear. But my friends over at Finimize, in which I actually am a shareholder should make that clear. But my friends over there and their analyst Andrew has argued it remains unclear whether Bitcoin actually fulfills any truly useful function, either as a store of investment value, or as a means of buying and selling goods. So, head over to venomized comm or go to the App Store and download their app, and they have both a free three minute daily newsletter that you can sign up to that doesn't cost you anything. But if you want to read that article and the analysis about Bitcoin, they're nothing you have to sign up for their free trial of their app, which is well worth doing just to do that. So check that one out. Very, very interesting subject. Now, how do you measure your money, progress your money, position your financial well being? And it's an interesting question, isn't it because in my latest blog, my website, Jason hyphen, butler.com, I share with you how I measure my financial situation, my financial progress, my financial well being Now, you may not agree with all of my measures. And that's perfectly fine. But the point is, is that if you have some range of measures that you use, it gives you a general context in which you make your day to day decisions, whether they're small decisions, or larger financial decisions. So check that out. And it'll be interesting to see what you think and do let me know what your thoughts are, if you've got other ways you measure your financial position, let me know and, and I'll share that in a future blog because no one's got a monopoly on good money ideas. And also, I did discuss that subject, the whole issue of measuring your financial position, what metrics you use, in my latest Instagram Live, I do a live every Tuesday night at 730 for half an hour. And if you'd rather listen to me explain how I do the measure my financial situation, then go to JB the wealth man, that's my Instagram page. And in fact, the previous week's Instagram Live was all about negotiating. I mentioned that in last week's pod, but actually got such a great feedback. And it's had so many replays, that, it may be something that can make a difference to you. Particularly if you're doing that spending review, or you're thinking about getting a pay rise or selling or buying something a house or car or whatever, do check that one out, it's only half an hour, and I just share the rules of the road, I give some examples and a real story about something I bought. And that might really help you. And if you can save money or make money from being good at negotiating, then that may be something that you can really give you some value. And I also did a what turned out to be quite an interesting interview, actually, for thenextchapter.guru, you go to their website, and you can watch over a 10 minute version of an interview I did with them, or a half an hour the whole whole interview. And they're an organization that sort of helps people at pivotal times in their life to sort of reimagine the future. And I just shared some my insights from some of my pivotal points in my career in my life. And I talk about things like colder sex, and career highways, and how how if you get stuck in a cul de sac, it can be quite, quite debilitating, and how I actually got out of some colder sex I had in my life. So do check that one out at the next chapter guru, interesting interview there with Peter heighten one of their directors. And I've got some loads of great guests for future podcasts coming up. So do make sure that you stick with the show and check those out. I do do my best to bring you great insights and ideas from interesting range of people old young, you know, some are super rich, some are more modest. Some people are, you know, living very alternative lifestyle, some more conventional families, single people, whatever. So if there's someone you'd like me to interview that really like the sound of and you think they'd be a great guest do let me know. And if there's any other things you want me to cover in the podcast that would help you. Again, let me know drop me a line at jason-butler.com, just to through the enquiry box there and be very happy to try and do what I can to help because I'm I'm all about sharing the insights and ideas here so that we can all have a better relationship with money and enjoy life more. So let's get into this week's interview.

And this week's guest is someone who is an author, speaker. He's a world expert on behavioral finance, which means that he understands the whole issue of how humans make financial decisions, the biases, we have the shortcuts we use. And he's a he's a really gracious guy really good fun, really interesting. And his interview, which is about 30, 35 minutes long, it's packed full of insights. I mean, literally loads of them, and I think you're really going to enjoy it's Dr. Daniel Crosby. Great guy really worth listening to. I'll see you at the end. Wherever I'll summarize what I think I got from it. But it's absolutely jam-packed with great insights and great gems. So I'll see you at the other side.

Dr. Daniel Crosby. hi Daniel.

10:16
Jason, great to be here. Thanks for having me.

10:17
Good. Before we get into your backstory, and your own money story, Daniel Jones just tell everyone in case they don't know what you do and who you are.

10:28
Yeah, so I am the chief behavioral officer at Brinker capital. If that titles a little confusing or new to you, no surprise there, there's not many of us. There's only about a handful. So really, I'm in charge of helping our clients understand the intersection of mind and markets. So my PhD is in psychology. But I've spent my whole career working in Financial Services, helping people sort out sort of this this messy intersection of of our minds and our makeup, and how we make investment and personal finance decisions.

11:01
Yeah, and as you know, this podcast is all about breaking the taboo of talking about money, but also sharing both not just successes of people, but also where they made mistakes or where they went wrong, or where there were shortcomings. So that hopefully, by sharing that, and letting some light into it, we can all realize Hang on, we don't come out of the box wired to be good with money. But we can learn right? Yeah, good. Just a couple of shoutouts here, um, great book here. One of Daniels books, they're the laws of wealth. But he's got an even better book, which I can't for the life of me lay on my hands on my extensive library here, called the behavioral investor, which is, which is just as good even I think slightly better. So, but you've written God knows how many books and I think every two or three years you come out with another nugget, so very, very well recommended to get those books should be in your library if you're serious about being better with money. So Daniel, um, take me back to your sort of your childhood when you were growing up. I mean, what were your early, early sort of experiences of money and what you learned about money when you were very young?

12:03
So I was very lucky. I am very lucky. My father is actually a financial advisor. So money. Yeah, money was something that we talked about all the time at home, we talked about investing around the dinner table. My father taught me early about the power of compound interest. And in sort of one of my formative early childhood memories is my dad. My parents were young when they had me. So my parents were 20 and 23, respectively, when when I was born. And so when I was young, we were struggling, you know, he was a he got his job as a financial advisor, the day I was born, actually, and the first few years of building that practice are tough. But one of the things that he was so passionate about was paying off the house. In our house debt was a bad word. I mean, my dad would not would people think I'm joking, my dad would not let us say the word debt, you know, he considered it a swear word and sort of this thief of wealth. And so I remember as a child, skipping vacations, eating beans and rice for every meal, just so my dad could sort of obsessively, you know, chunk money away at the mortgage. And I'll never forget, he had this poster board up in his sort of walk in closet. And it was a picture of a house that had been kind of blocked off with a ruler, and each little block was $1,000 that he owed on the house. And so he would sort of tick that box shade in that box every time he you know, put another thousand dollars. So I grew up in a house where money was discussed. thrift was was first and foremost getting out of debt was was critical. And investing was talked about around the dinner table. So very unusual, relative to most household. Yeah.

13:54
Just before we move on from that, and that is incredible. You know, children young people learn by example, right? Regardless of what you tell them or what you you know. Why? What impact did you did it have on you of seeing the picture of the house with all the thing did you actually did your dad explain it to you? Did you ask him Did you realize the significance?

14:13
Oh, yeah, yeah, yeah, I mean, it was like it was this is this is our paying off of the house his paying off the house was like another member of the family. It was it was an obsession. And he just felt shackled by you know, even sort of reasonable debt. And so we we definitely talked about it and I mean, it's the reason it's the reason I eat a lot of canned tuna fish for years as a little kid and why I won't eat it now. But But yeah, we It was very much front and center and our family.

14:48
So okay, um, and again, not wanting to probe too much, but was your mom a willing participant in this or did she go along for the ride? Or was it her shared dream as well or she not as obsessed with it? Perhaps she was supposed to But not not driven.

15:02
Yeah, that's well put, I think she was, you know, they were supportive. They did and do have a great relationship. But I mean, they have very sort of different money scripts. My mom, interestingly, my mom grew up in a family with money, my dad grew up in a family without money. And so my mom just sort of came to the conversation with it with a different set of values, right? I mean, her thing was always kind of wanting the best of everything. My mom, you know, my mom is a real Epicurean, like, she doesn't, like she doesn't have a lot, but what she has is excellent, you know, if it's like, if I'm going to bother to bring something into my house, it's going to be the best of the best. And so they're very, they came from very different worlds. And, you know, I knew that about them and saw them try and navigate that was probably the, their defining disagreement, even though there were plenty civil about it. I mean, that was sort of the defining difference in their character, and definitely saw them trying to work that out as a

16:07
kid. So so your mum was about quality and she couldn't have quality she'd rather go without on, but still valued nice things, but didn't wasn't perhaps obsessive about money, perhaps because of her script and where she came from, it was probably always your dad, whatever the background, he came from probably a bit more modest by the sounds of it. But he saw debt as a threat to his freedom and probably part of his identity, like almost like a slave to identify, he was religious. But you know, a lot of religious people do feel that, you know, the the, the borrower is a slave to the lender, and that's a very strong and it's in the Bible isn't it's very strong, biblical term.

16:43
Sure, yeah. I mean, a lot of a lot of religions, you know, prohibit usury. And you know, I mean, Islam and others are very, very vocal about, you know, you serious debt, and then the shackles of debt. I did grew up in a religious household. I think that was part of it. I think part of it was just growing up so poor, I mean, my dad understood, he's a very mathematically savvy guy, he understood the power of compounding, and understood how debt is sort of compounding in reverse. And he wanted, you know, wanted to get out of that as quickly as he could. for him. My dad is a funny guy, you kind of can't tell him anything. He's very independent. And for him, I think the faster he could build wealth, the faster he could tell other people to get lost and do what he wanted. And I think that was very, you know, very important to him tonight be beholden to other people.

17:40
So okay, as you grew up as you became a teenager, did you have paint jobs did you do jobs around the house and get money for I mean, what was your How did you gradually evolve you're you have this background that mom wants quality and won't accept anything less Shriver go without very Epicurean stoic, you know, wanting what she's got, rather than, you know, so as not having what you want, but wanting what you have. Sounds like your mom, your dad was this grafter very principle driven, you know, wanting to be in control of his future and taking responsibility for it. And the house paying off was the big thing. Unbelievable role models. So there's an interesting tension between the two of them. How did that influence you in your teenage years? As I say, so did you do paid work? Did you do you know, what, what was your? What was your own agency around money

18:26
then? So it's interesting, my parents, the rule in my home was you worked in the summers, like your education was very highly emphasized, you know, as evidenced by me going to lots of college, but education was was sort of the first priority. So during this school year, we were not to have a job. But during the summer, we were definitely to have a job. And the rule was for my parents, you get a job, you do the best you can in the summer, you you know, work full time you get a job, you give us half of that money. We were going to take half off the top, and if you do and we're going to set that into a college fund. And if you give us that half no matter how short you are, we will pay for all the college you want to go to. So my parents paid for my bachelor's degree my PhD they paid for you know, eight years of college based on my scooping ice cream in the summer. So um, it was a good it was a good trade off. But you know, the, the the idea was this, you're going to work you're going to sacrifice and if you do those things, you know more will come to you then you set aside I mean, it's kind of an early lesson in the power of compounding and investing. You invest this labor, you invest the sacrifice now and if you do that, in return, we will see you through whatever college you you want to go to.

19:48
That's an amazing, I mean really wonderful example and thanks for sharing it. But did you get Did you drink the Kool Aid quickly on that, did you really because let's face it when you're young and you can see lots of temptations And friends no matter what's going on at home, did he did you really willingly embrace that and and it become part of who you were? Or did you just accept? That's the way it is. Or did you feel some resentment? I mean, you know, did you push back against as teenagers do?

20:12
Yeah, no, I was a horrible teenager. I mean, I was a real pain in the butt as a teenager. So I definitely, you know, I definitely, definitely pushed back against it. And I mean, the jobs I was doing were miserable. I mean, I worked when I was 15. I got specially in the US are not supposed to work until you're 16 I got special permission to get a job when I was 15. Just doing like heavy manual labor in a warehouse. The next youngest person was 23. I learned I learned a lot about I learned a lot about life that summer, I learned some things I probably shouldn't be working with a bunch of guys, you know, yeah, you grew up quick, right? Yeah. Yeah, I grew up quick that summer. So, um, no, I hated it. You know, a couple of years after that I worked at an ice cream shop in my hometown, which was, you know, you know, miserable is not fun. You know, it's not fun work. So I definitely pushed back. But you know, later was, of course, very grateful for it. And it was an incredible bargain. But you don't you're an idiot, when you're 15. You don't have any of that perspective. So I definitely pushed back.

21:20
Yeah. So. Okay, so you you were you were you were perhaps, at the time, a more belligerent participant when it came to the whole, the whole learning of this stuff, but you eventually saw it for what it was that we all do with parents and things are doing in our best interest. So what was your and you were doing unglamorous jobs and understanding time, money and stuff? So was the education was the desire to invest in yourself your human capital? Because you know, a lot of young people often think, Oh, well, I'm, I'm in debt, or I've got to know that. But they're actually they've got an enormous amount of human human capital. Was that something your parents pushed? Or suggested or promoted or encouraged? Or was that something you had within you? Or was it a bit of both?

22:00
So I had a bit of an interesting story. So as a as a young child, I was an exceptional student, I was very diligent to the point of access, I would get migraine headaches and things I was so worried about, you know, my performance on my test. And then at some point, something snapped, and about the time I was probably 13, or 14, I just stopped caring. I mean, I just at least two outward appearances. I stopped caring, I just stopped trying. I think I sort of burned out at an early age. And so all through high school, I was a horrible student, I was a horrible student, I got terrible grades, I had to go to a junior college, my first year of my, I got provisional acceptance to a junior college, my freshman year, my first year of college, because my grades were horrible. And it was really when I turned 18. And I didn't get into the colleges that I had always wanted to go to, because my test scores were incredible, right, my test scores were great. My grades were terrible. I had done no extracurriculars. I mean, I was sort of nothing to look at, from a resume standpoint. And it was really, it really took me going to college, not getting into the colleges, like thought I could, you know, slip into based on my test scores. Um, it really took that to say, Oh, my God, like, if I don't, if I don't get it together, I'm gonna, you know, I'm gonna be sleeping under a bridge or something like, this is not gonna work out for me. So it took years of sort of ignoring my human capital before I reengaged. And then when I did I, I loved learning. I was an exception, you know, as a great student, I, I loved it. I wish I could go to school all the time. But yeah, I had about a four or five year period of just wilderness there where I did not, did not put forth my best effort.

23:55
That's an interesting couple of points that's worth bringing out for any listeners who aren't aware of it is, is the concept of the fixed mindset versus growth mindset. So Dr. Carol Dweck, he is one of the world's world's leader in this, she wrote the book called mindset. It often happens from people who are very, very bright, who are gifted, who've got an amazing ability who haven't had to put so much effort in certainly early on. And what happens is the first sign of a setback, even if it's hormonal, or whatever, and they just crumble. Whereas people who've had to sort of have a growth mindset and just sort of think, Okay, what I learned to embrace behavior, failure, even if they're not gifted, and often they have to work hard because they're not they actually end up often getting more results. So if you can be gifted and get the growth mindset, then you can take over the world which I think you did behavioral, why didn't you sign so? So there's, there's there's a light at the end of the tunnel for people. Okay, so you, you've got your you put yourself around and you eventually then got into what do you redo your grades and get into the college that you wanted to go to? Uh,

25:00
what I did, I did I did one year at junior college and then got where I wanted to go. So for my grades around and and then there was smooth sailing from there on out. Hmm.

25:12
And what did you do your, your undergrad doing? What was that? What will come out? So you were drawn to psychology then? Yeah,

25:22
I was drawn to psychology, I took a psychology course I went into college thinking I would do what my dad did, right, I thought I'll be an investment manager, I'll be a financial advisor. And then I took general education psych 100 courses in my freshman year and just absolutely fell in love with it. So I, you know, got through college quickly, I started my Ph. D. program three days after I finished my bachelor's degree. So you know, straight on to grad school, and about two or three years into my Ph. D program, which is, you know, a four year degree in a one year residency. So about about halfway through my Ph. D. program, I just completely burned out on on doing clinical work. I was training to be a therapist, right, I was training to be a psychotherapist, and I just couldn't do it anymore. I you know, I was working with people who were incarcerated. You know, I was working with pedophiles. And just like it was not. It was not. It was so taxing on me personally, you know, I said, I want to think deeply about why people do the things that they do. But I don't want to do it in this context. And so that long story short is where I rediscovered behavioral economics, behavioral finance, you know, my dad effectively said, Look, there's a lot of psychology in markets, which when I first heard it was, you know, dumbfounding to me as What do you mean their psychology and markets. And you know, lo and behold, that's, that's how I kind of found this world of wanting to study human behavior, but wanting to do it in a way that wasn't sort of medical or clinical.

27:04
Got it. So when you you are going through college, I mean, that's often a difficult time for people with their personal finances you ever come out of complete train wreck, some of my daughter's just graduated as a classic student. And she said many, many of our friends have just got no idea even how much their overdraft is let alone whether they should have fun or get rid of it. And then now where she came out, obviously, as you'd expect, with with no overdraft, no debt, you know, very, very strict on what you expect, you know, but I'm just interested is how did you navigate the you know, sort of dealing with finances? What score Did you mom and dad just write all the checks and you didn't have to worry though? no constraints?

27:44
Yeah, my Well, I mean, my mom and dad supported me all through college. So in that respect, I was incredibly fortunate. And that's No, no, that's no skill of my own. That was just good, good fortune. But you know, what I will say is that I was thrifty and sensible with money. I mean, I was never it's not like they were sending me a lot like they were sending me enough for you know, for noodles and pizza on the weekend or whatever.

28:10
No, Ballinger and caviar and all that. Yeah.

28:14
I had enough ramen, right? I had enough I had enough instant ramen. So, but I was sensible, right? I mean, I never I was never prone to extravagant spending, I lived like a poor college student. But I mean, I lived like a poor college student who is backed by his, you know, now successful parents. So yeah, it was not as hard for me as some but I was I was thrifty sort of within the bounds of the the money I was given.

28:42
So you You didn't take the Mickey basically, or we say, take the pay you, you you are gracious with your parents support that was helpful to either get in the hole, but you didn't overreact. Or, as our chief medical officer says, we didn't rip the pants out of it is a rather colloquial term. We didn't make it. So when you left, when you graduated, you did a PhD? Did you? Did you work when you were doing the PhD?

29:03
So the way that PhD programs work in America is that or at least in psychology, the entry that the classes are enormously small, right? They're very small, usually three to a small, jumbo shrimp, right? No. So they're very, they're very small, right? There's, there's three to five people typically, in your class. And the reason that they keep the classes so small is in part so that everyone in the class can have a research job that is sufficient to meet their financial needs. So yes, I worked as a researcher all through my PhD, you know, basically as part and parcel of the program, and you get paid whatever, 15 or 20 bucks an hour, which seemed like an enormous sum of money at the time. So

29:56
So you came out of your when you when you qualify people PhD, you came out in reasonable shape financially. You weren't in a big black hole as it were.

30:06
Yeah, I so I had, I had no money, but I had no debt.

30:12
That's okay. That's good. So okay, you didn't have any money, but you didn't have any debt. So did you go straight into the workplace? Or did you have a job lined up? Or did you go traveling or what? No, I

30:21
went straight into the workplace. So I was, I was married by that point, I was newly I was newly married. And so I went straight into the workplace. My wife, you know, I'm what, at this time 27 I guess at this time newly married, my wife's working. And I'm working. My first job was at a consulting firm here in Atlanta, that actually did pre employment vetting of bankers. So before this bank would hire, you know, an executive, they would bring me in to do IQ tests, personality tests, like, you know, talk to them for four hours and see if they're gonna be a good fit. But that was fun. But that was fun, wasn't it? Well, being a 27 year old punk kid, and like talking to some zillionaire banker, and being the thing that stands between them in a job, it's, you know, it's, it's a position of power. And I mean, I didn't I didn't abuse that or anything. But yeah, it's a great, it's a great first job to have.

31:17
And what did you learn about the role of money in people's lives? Because you're, you're actually vetting people who are very, very interested could be linked with money, money's their identity, they're measuring the score, what did you learn about people and money and behavior from those early interviews you were doing?

31:33
Yes, it's a great question, I learned two things. The first thing I learned is that there were a lot of miserable rich people. So you know, I met a lot of people who had, you know, so much money, who's whose personal lives were just a shambles, right? People who had not taken care of their health, people who had ignored their spouse or their children, just people who had people who had lived such an extravagant lifestyle that they were required to do work they didn't care about, to sort of keep up there, to keep up appearances. So really, early on in my professional career, I was able to decouple money and happiness. And that was an important that was important for me personally. And then the other thing, this is gonna sound terrible, this really did embolden me as a professional, is that I learned that a lot of really stupid people are very rich, like I learned. I learned that a lot of not that nice, not that smart, not that talented people. Because I mean, this is I was put in a position to to directly measure their intelligence and their personality. And I met some pretty rotten people and some pretty stupid people who had been quite successful. And so I entered with like, great, ah, you know, I was young, I was new to the business world, and I would meet these people who I've done to sort of risen to such heights professionally, like, wow, they must be brilliant, they must be so good with people. Not often the case, definitely not always the case. But it so it kind of emboldened me to say, look, if this, if this person can do it, then I can do it.

33:15
So great. So to pick two big takeaways there, you're learning now. One is that money, more money doesn't necessarily mean more happiness, although we'll come back to that. And also talent doesn't, you know, money doesn't always go to those who deserve it, or talented or delivering value, right? It can just be a situation. Okay, good. So, interestingly, you were young, quite young to get married in your 20s. How did you and your wife in those early years, those early married years kind of approach your finances because they're always someone who's a bit more interested or got more capability? And we we settle into roles? Don't we? Not without having a big interview about it? But we sort of how did you divvy up the jobs? And the and the decision making? How did that did that just evolve? Or was there a big sort of sitting down in a big old meeting about it?

34:01
I think it kind of evolved. So I got lucky. I mean, I'm lucky in many respects with who I married, but my wife's dad is an accountant. And so she grew up in a household, very similar to my household that valued thrift, a household where, you know, she entered the relationship with no debt. So we were poor, but we weren't in the hole. And we were really very much on on the same page. early on. So our biggest, our biggest, I think, when early on is that we decided we would live on one income, you know, so both of us were working, but we wanted to set a precedent of saving, you know, a large percentage of our money, we wanted to buy a house we wanted to, you know, have a family eventually. And so from from a very, you know, from those first those first days, we always saved you know, one, one of our incomes? No, it wasn't a huge income. But we got in the habit, even in those early days of living off one salary, and it's served us well for the rest of America.

35:09
Now, that's a fantastic tip, which I've not heard on. I've done 50 6065 episodes of this show. And I've interviewed well over 1300 people in my career. I've never heard anyone mentioned that when you come together as a couple, just live on the salary of one. It's so simple. It's so such a simple idea. But it's it's, it's obvious, isn't it? So did you? Did you find it constraining? Were there any tension points sometimes when you had to go without to enable that to happen? Because lifestyle creep is disability to spend everything that's coming in? Right?

35:40
Yeah. So one of the reasons we did this, candidly, is because we're such bad budgeters. But we've tried a couple, you know, we've tried a couple of times to just like, okay, let's set a budget, let's do this. And we just neither one of us are very detail oriented. Neither one of us like the constraints, neither one of us likes to think about it. So it's like, if we just knew that one income was going directly to the investment account, you know, from day one, it's just like, spend the rest. And so for us, that was that was easier. Now, I think the early tension, the early tension was when we didn't share values, like I, I love going to the movies, or at least before Corona, right? So I love I love going to the movies. And it's expensive, like I mean, if you get a coke and a popcorn and go watch a movie, it's 25 or 30 bucks. And that was a lot of money to us, you know, in those early days. And so, you know, having to say, you know, ah, like, why did you go to a movie? Because that's not important to me, you know, why did you go see a movie? I don't value that, or why did you buy these shoes, I don't value that. And so, you know, learning to give each other, the benefit of the doubt learning to just, I don't know that we ever had a big sit down about it. But I think we just got more comfortable with it over time. But that that living on one salary, and living on the smaller salary was what we chose to do from the outset. And it served us really well.

37:08
What you've done there, as you well know, as mental accounting, you've siloed your money, you've made it actually easy for you to do the right thing rather than have to think about it because you're spending down to zero the money that you are allowed to have and you're forgetting what you haven't had you don't miss so fantastic. Some of the simplest ideas or the best, right? We don't have to have a PhD to know that. But as you say you'd worked out. Okay, so. So just sort of take us through sort of a brief canter through kind of some highs and lows. So what what do you think one of your better financial decisions were and what do you think was one of your in hindsight, not so good financial decisions?

37:39
Yeah. So we've always been really aggressive savers. I mean, we we To this day, we save at least 50% of my salary. Um, and again, I mean, that's a, that's a, we're lucky to be able to do that. I've been, I've been lucky with work. But we've always been big savers. We've always just dollar cost averaging averaged, we've diversified. We haven't overthought it, we've spread the money around, we've contributed every month, we've saved aggressively and we've just let it ride. I mean, it's simple as can be. But it but it works. The worst decision. It's funny, the worst decision we've we've made, I would have said early on, you know, we moved into this house five years ago. And I would have said that buying a big house was the worst financial decision I made at the time. And there were a couple of years where it was stressful. We had two houses, we were having trouble selling the other one. Um, and it was just more house than we need it. But it's funny. Now, in the time of COVID, having a big house has been an absolute gift, you know, and now the house is paid off, like, you know, now it's that the house is paid off. It's got lots of room, we're homeschooling our three kids now because the schools are shut down. And we use every inch of a big house. So there was a time though we we we let lifestyle creep into the conversation that when we bought the house, we shouldn't have bought the house. We bought it too early. And the research shows that that house doesn't really give you happiness. Because the first time that I saw my house, I was blown away by it. I love the neighborhood. I loved the view. I loved everything about it. Now my house is just where I throw my dirty socks. Right? Like very quickly your house becomes no matter how nice it is, your house just becomes the backdrop against which you live your life. And so I think that's probably been our biggest mistake, even though in the age of COVID. It's it's less of a mistake than it was previously. Brad

39:51
comm good. Yeah. So when you think about all the work that you've done and your own experiences in life, you've been an aggressive saver, you Lift on, you've been quite frugal, you've kept your lifestyle costs under control. Um, how have you negotiated trying to I don't know how old your children are, but how are you negotiating, trying to teach them both values, how to prioritize and the value of money? How are you? Is that are you? Are you? Are you thinking through carefully? Because they're growing up in a different age than you did? There's a lot more temptation. How do you approach that? or How are you intending to.

40:26
So I think there's things that we've done well, and things that we've done poorly with our kids. And some of this is kind of a work in progress. So we I have three kids, my youngest is four, my oldest is 11. And so um, one of the things that we've done well is we've just been very candid with them about money, like money is an open topic, we discuss it with them, we discuss which jobs, you know, a different careers they would like to have how those would set them up or not set them up financially. Also understanding that that's not the most important thing, like I want to I want to help them understand that too. Like, I hope, with all my heart that at least a couple of my kids do something deeply meaningful for the world that's not especially remunerative. But just helping them understand, you know, like, what are the trade offs there? I've taught my kids a lot about investing all of my kids have investment accounts, they're active participants in the decisions they make their way even the four year old, right? Yeah. I mean, to the extent right, to the extent like, but she knows she owns part of Disney, right? She knows that. Yeah, yeah. Right. And she knows that the stuff she likes to use, she can own a piece of that company, and that, that they will send her like a little

41:43
private conversations about the context of money, right?

41:46
Sure. Sure. And with my 11 year old, who is sharp, you know, I've, I've helped her think through how would you evaluate a stock? Why would you get a you know, a stock over an ETF or an ETF over a stock. So I think we've done a good job with those things, where I'm where I think there's some work to be done, and where my wife and I are trying to put forth some some thought and effort is, you know, a fish doesn't know it's wet. So my kids are growing up in an affluent community, sort of insulated from the realities of, of other people's money struggles. And so helping my kids to understand, like, what they have isn't normal. And that what they have comes with the responsibility to help others who have less, that's something we're really, really trying to drive home, and really just trying to help get them involved in volunteer efforts, trying to give them some perspective. So they don't think that what they've experienced, is just the way the world is, right? Because I think that's, um, I think entitlement is one of the ugliest things, that a person is one of the ugliest personality traits in a person. I think a lack of perspective is an ugly personality trait in a person, and I don't want my kids to grow up with those things. You know, you you want to give your kids a great life, but you don't want them to grow up to be entitled, or aloof. And trying to walk that line is, I think, a constant struggle.

43:28
Yeah. Well, you know, what was the thing the world owes? I'm 11 IVs. So one of the things that we did with our children when they're younger, and very quite young, you know, they were 789, we would say, look, we will give to two charities, one has to be in the UK, one has to be International, one has to be big one has to be smaller, don't care, which you have to do the research you have to do is one page, you know, analysis of, you know, go into the internet and everything. And for every pound that you you are prepared to take out of your piggy bank, your savings and give to it, we will get 15 or 10, or whatever the figure was, at the time, 10 1520 pounds, dollars, whatever. And it was amazing how they were at the process of actually doing the research and then explaining why and then having to give up some of their money. But then they realized that they would leverage mum and dad's money about our charitable trust. We found that was a way of getting them engaged now not saying he's going to stay with them forever. But there's there's just different ways. So everyone finds their own way on this. Daniel don't think anyone's got a monopoly on the ideas. So let's just think about now all the research you've done and you've written God knows how many books and you've met some of the most brightest brains in the business. What do you think the key? What do you think the key fundamental principles are for people to develop a better relationship overall with money? So in other words, whoever it be controlling spending, whether it be deferred gratification, whether it be understanding about stuff versus experiences, whatever, what would you say from your experience are the key, the key foundations that that people need to be aware of and focusing on

45:00
So I think if people are going to make good financial decisions, I kind of think about it as three E's, right? So the first thing they need is education. They need to not only know about how money works, but they need to know about themselves. You know, you and I have talked today about money, scripts, values, you know, this whole podcast is about the home you grew up in, and how that informs, you know, the way you think about money. And so again, it again, back to the fish not knowing its way, we all grow up with money scripts, that just seems second nature to us, and they just seem right to us. And then when we get married, or move in with someone or encounter other people in the world, we see that, oh, like, this isn't gospel, this is just the thing that I learned and other people have different ideas. So education is the first piece with a strong emphasis on self awareness, you know, self awareness. The second thing that people need is the right environment. So in an investment context, that's the right portfolio, from a happiness context that's living in the right neighborhood, we know that people who live in the smallest house on the block, you know, tend to be less satisfied than than people who live in the biggest house on the block. So the thing to do is to get a nice house in a not so nice neighborhood, right, instead of getting the smallest house among a bunch of mansions. So just, you know, the people you surround yourself with, matters, the way that you invest your money matters. I think, for me, working in finance is a little disorienting, you know, because I know that I'm, I know that I've been financially successful. But you know, when, when some of the people you work with have hundreds and hundreds of millions or billions of dollars, it becomes disorienting. So, you know, surrounding yourself with with a right reference group, I think is an important way to be happy. And then the last he is you need encouragement. Um, this is like you need someone to keep you on the path when you feel like leaving the path, right. So this could be a financial advisor, this could be a podcast, this could be a coach, this could be a friend or a spouse, but you need the education, you need the environment, and you need the encouragement. And if you got those three things, I think you can be happy and make make good decisions with your money. Great stuff.

47:24
Daniel, I can talk to you all day. You're a busy man, I know. We've been very privileged to have you on the show. I really appreciate your insights. If people want to hear and read a bit more about you, obviously, they can check out your books on Amazon. So the behavioral investor is the latest one, isn't it really, really worth reading? But you've written several, all of them are great. Where can I? Is there a website? They can look at it? What's the name of your? Yeah,

47:48
so the best place, the best place to find my writing is to go to Twitter at Daniel Crosby on Twitter, or Daniel Crosby PhD on LinkedIn, I share all my writing and stuff, I write for a number of news outlets, and for of course, my company. So that's the best place to sort of follow what I'm up to

48:05
great stuff. All right, Daniel Crosby superstar behavioral finance expert, it's been a lovely privilege to have you on the show. Thanks for your time.

48:13
My pleasure. Thank you.

48:19
Wasn't that a great episode? Didn't Daniel, you have some great insights? I mean, I love the idea of the picture of the house that his dad had, and shading in below each thousand dollars of the mortgage that he paid off, what an amazing way of thinking about things, what a great goal. So perhaps try that if you're trying to get rid of your mortgage or any other kind of debts, great, great idea. Then there was that idea wasn't there. He worked in the summer, he had to work in the summer, that was the expectation by his parents. And he had to give his parents 50% of everything he earned. But in return, they would underwrite all of his college education. Now, we're all in the fortunate situation of our parents or being able to support our children in that way. But the principle there was that he had to have some sacrifice. And he had to work hard to get the things he wanted. Really great one there. And that was also interesting, wasn't it, his insights when his he was working in the early years of his psychology career, that money doesn't always equal happiness, because he met lots of miserable rich bankers, didn't he? And also that he, he observed that there were plenty of rich people who weren't particularly smart, and were particularly hard working. But that's just, that's just life but interesting. And interesting, when also he got married. him and his wife got used to living meeting their lifestyle needs by just taking into account one of their incomes. And that gave them lots of flexibilities, should one of them want to stop work or they're out of work or start a family or whatever. And the idea that he says 50% of his single income now seems to me like he's got a real handle on what's important, and building more resilience. That's a good one. And finally, there were, Daniel's three E's were one there, there was the education that's there being self aware, and being aware about financial issues and the impact that they have on your well being. That was the environment, you know, who you hang out with, where you live, what you invest in. And then finally, it was the encouragement that was the 30, wasn't it? as well as having a coach or a partner, your spouse and advisor, podcast book, will just a friend. So to keep you keeping on going and keeping on the straight and narrow and things are tough. So yeah, I really, really enjoyed that episode. And I hope you got some good stuff out of that as well. So until next time, see you then.

Thanks for listening to Real Money Stories with me, Jason Butler. If you like what you hear, please do tell your friends. And more importantly, please rate us on your preferred podcast app, because it really does help us get the message out there. So until next time, good luck with your money journey. Real Money Stories is sponsored by Vanguard bringing value to 30 million investors worldwide. Visit vanguardinvestor.co.uk For more details, the value of investments can go down as well as up and you may get back less than you invested.

Transcribed by https://otter.ai