Tag Archives: Personal Finance Animals

Posts discussing the different animal personas of people and their finances.

Revisiting the Rattlesnake

When discussing the different personal finance animals, we took quite a harsh stance on the rattlesnake. Looking back, I thought it would be a good idea to discuss them a bit more, and explain why there is such a harsh attitude.  There are some good points to the rattlesnakes. The fact that they carry very little debt, if any is certainly a great quality, and something many people strive for in their personal finance goals.  The biggest issue is that they leave too much on the table for their own good.  Below is a side-by-side comparison of the tiger and the rattlesnake, and their financial decisions:

  Tiger Rattlesnake
Interest Rate – Savings/Checking 1.5% 0.0%
Real Compounded Average Investment Return (Tiger – Stocks, Rattlesnake – Gold) 1980-2010 7.7% annually 0.3% annually
Value of spending rewards 1.75% 0.0%

 

The worst part of this is how much money the Rattlesnake loses to inflation.  Notice in the second line of the table, we’re using Real Compounded Average Investment Return. This means that, after adjusting for inflation over the time period, this is the growth of the investment.  In the meantime, over a 10 year period, the Tiger has seen his investment grow to more than double in terms of real value, while the rattlesnake would have been better off keeping his money in Treasury Inflation protected securities (TIPS) that provide a protection from inflation a small premium (normally ½ of 1%, or 500 basis points).

The most important thing to take away from this is that the rattlesnake doesn’t just hole up in his house every day and skip work from fear that he’s going to get hit by a bus, but he does that exact thing with his money.  If the rattle snake sent his money to work, it would mean that soon he would be able to be the one that stays home.

The Six Personal Finance Animals

I’ve spent a few years around personal finance. Between going to the seminars, reading books, and seeing people online, it quickly becomes apparent that there are six kinds of people you’ll see around personal finance, all of them with their own animal personas:

The Mouse

Shy and quiet, the mouse is generally embarrassed to even be in the room with people. The Mouse is the person that usually comes from an upbringing where his parents have told him that it’s impolite to talk about money. A mouse is more likely to suffer in silence about his financial woes than he is to seek help.  Nearly everybody was a mouse at one point, but once a mouse gets over his skittishness, he’ll usually pick up the traits of one of the other animals.  The only way it could be worse for a mouse is if they are a cow.

The Cow

In some parts of the world, cows are sacred, in other parts they are slaughtered. When it comes to personal finance, cows are the ones that follow the herd, and when they get spooked, they stampede.  When it comes time to invest money, cows are usually the people who shout “sell” and panic when the markets make a slight correction.  Most of the investment advertisements you can hear on talk radio is aimed at the cows, as they want them to come together, get spooked, and start a massive sell-off, or stampede. You can reason with a cow, but they won’t always listen.  To get them to respond, you have to motivate them with fear.

The Rattlesnake

We all know a Rattlesnake or two. The rattle snake is the person that it wouldn’t surprise you if they had a fully stocked bunker in their basement, with a “Don’t Trust Anybody” bumper sticker on the door.  Rattlesnakes will preach about how personal finance is all about going to only pay cash for anything, and keeping gold and other precious metals as an investment vehicle. The reason I call these folks rattlesnakes is because like a rattlesnake, they’ll sit there, coiled up and making noise, causing other people to worry. Be careful with the advice of rattlesnakes – all their worrying is like a rocking chair: it’ll give you something to do, but it won’t get you far.  The best thing to do around rattlesnakes is true in both cases:  just get away and let them be. You can’t reason with a rattlesnake, and it’s better not to get bitten.

The Peacock

If you hang around a personal finance forum or blog, you’ll run into a peacock sooner or later. Normally, they’ll start a post with something along the lines of “How Am I Doing?” and then discloses that he has several million in his retirement accounts now.  It’s hard to feel sorry for the peacock, but they are typically looking for acceptance, and are probably just trying too hard.  The peacock will generally have his finances in order, but he’ll be rich and lonely (and possibly poor later in life) because of the way he flaunts his good fortune.

In general, the peacock is either a liar or a jerk, sometimes both. Don’t be a peacock. Tigers will eat a peacock for lunch.

The Turtle

Slow and steady, the turtle is trying to win the race. Paying off debt and being conservative in his investments, the turtle is moving himself towards a retirement, albeit slowly. The turtle has likely read several personal finance books, and has taken the general advice to heart, thinking that live is long and hard, so you should keep your nose to the grindstone. Turtles will clip coupons, save hard for their house and car, and save any tiny slice of their salary that remains into a 401(k) plan. A turtle will pray that nothing goes wrong in the 50+ years of career work that it will take to get himself enough savings to enjoy a brief retirement. There are worse animals to be than a turtle, but like turtles, the plans they make would be better suited to them if they shared the same life span.

The Tiger

Prowling through the jungle of personal finance is the tiger. He is savvy and always looking for new opportunities to increase both his savings and cash flow.  Credit card companies will call him a dead beat, and he wears it as a badge of honor.  What sets him apart from the other animals in the jungle is his cunning. A tiger will not just save money, but he will invest it and pounce on every opportunity. Every now and then, you’ll hear news about Tigers making attacks on unsuspecting victims, and think two things at the same time, “Why didn’t I think of that?” and “Man, somebody always has to go and ruin it for the rest of us.”

Being a tiger is one of the greatest financial feelings in the world, but it doesn’t come easy. A tiger won’t go and waste money, but instead plans his early retirement by knowing that if he saves 50% of his take-home pay, he could retire in 17 years, or if he saves 75%, he can retire in just 7 years. Knowing this, and knowing the rules of the game make a tiger the force to be reckoned when it comes to personal finance.

***A great example of a tiger attack is what happened when the U.S. Mint sold dollar coins direct to consumers online, in boxes of 250. With no shipping or processing fee, tigers would use their rewards cards to get the airline miles or cash back, and immediately deposit the money in the bank and pay off their credit cards. With the only costs being a trip or two to the bank, they were able to rack up millions of airline miles to be used for things like lifetime status, trips to Tahiti, and free flights all over the world. Unfortunately, the U.S. Mint put an end to the program.

Until next time,  snack on some more debt!