The Most Basic Money Advice Ever is Also the Most Important Money Advice Ever

The risk of thinking you know everything

Medium has a super useful feature. It lets readers highlight portions of an article.

The “top highlight” from my most popular Medium article to date — Mark Cuban’s Most Recent Money Advice is Ridiculously Simple and Super Important — surprised me. It also helps inform the most important money advice you’ll ever receive. Many of us need to hear it over and over again.

This is the top highlight from that article:

Cuban suggests eliminating all debt, filling a 12-month emergency fund, and only investing after you have done these two things.

Pretty straightforward. (But it’s not the most important money advice).

By the way, to highlight a portion of an article, simply select a section of text and click the pencil icon you see in the screenshot.

More readers pulled that sentence from the article than any other line. By a wide margin.

However, I was mildly surprised by something that happened in association with that article. A Medium user responded with mad negativity. In my experience, this rarely happens on Medium. I won’t link to his response to spare him all-out embarrassment. Here’s how it started:

A couple of things about this story bug me. First the advice is so basic it is hard to imagine any American adult does not know this stuff.

The response got way worse from there. So, I blocked the dude. I don’t need that kind of sour in my life.

You Don’t Have to Imagine It Because It’s True

That guy’s response made me want to pull my hair out. My hair is one of the few things I’ve got going for me. So, when I want to tear it out, you know something’s gone horribly wrong.

I could dig for a thousand data points, however consider the following via the Federal Reserve:

In 2019, 37 percent of adults said that they would not completely use cash or a cash equivalent to cover a $400 emergency expense. For some people, this reflects that they did not actually have $400 on-hand to cover the expense. For others, however, it reflected a choice to borrow while preserving cash in their bank account…

Twenty-eight percent of adults indicated that they either could not pay all of their current bills in full or would no longer have been able to do so if faced with this type of modest emergency, with 2 in 10 deferring at least one non-credit card bill. This is similar to the 24 percent of households (that) had less than $400 in liquid assets after their monthly expenses…

And, of course, we know all about debt in the U.S.

According to Experian, the average American carries $5,338 in credit card debt and a personal loan balance of $16,257, as of May 2020.

The personal financial situation of many Americans sucks. Quite a few of us have been there before. However, that’s not what this article is about. It’s not about credit card debt. It’s not about saving. It’s not about spending. It’s about the things you need to do before you worry about the specifics of all that.

Thinking we know everything helps explain the financial messes we get ourselves into. So the most important piece of money advice you’ll ever receive isn’t subjective. It’s not my favored investing strategy or budgeting style. I enjoy writing about these things, and hope you get something out of them.

But the real advice — advice that’s difficult to argue with and super easy to follow — is:

Don’t be a know-it-all
Review basic personal finance every single day

Stop Acting Like You Know Everything

When I got into credit card debt, I was a know-it-all. I thought I could game any system, including the bank’s cruel social experiment. Proven wrong there, I refused to relent. Instead, I doubled down. I moved money from card to the other. I convinced myself that, as I made more money, I’d pay down the debt. I did make more money, however I didn’t pay down the debt. At least not right away.

I thought I was smarter than the people marketing to my weaknesses.

And I paid the price. Thankfully, nothing truly horrible ever happened. I was lucky enough to always bring in money. Without cash flow, I could have ended up homeless. And this is what you should focus on more than anything.

Even if you’re a millionaire, you’re a few unfortunate events away from everything falling apart. If you’re of more modest means, it can take less than that. You’re better off thinking this way than acting like you know how it is, without equivocation.

Don’t Overlook Seemingly Basic Information — Obsess Over It

The general, non-negotiable tenets of personal finance:

Eliminate debt
Fill an emergency fund

And, then if you are so inclined:

Invest the rest

All general and straightforward. And seemingly basic.

You can argue with the how of all three points. But it’s tough to challenge the why. Or even the when. If you do, you’re likely avoiding the hard work of setting your finances straight.

None of this is basic. It’s like saying having sex or brushing your teeth is basic. They’re two of life’s most important functions. If you go through the motions, you run the risk of disappointing yourself and others. Put the effort into things you can easily take for granted and you get a lot more out of them.

Personal finance and investing is no different.

If you wake up each day and recommit yourself to do the basics that keep you financially healthy, you’re going to be a lot better off than the person who tells others they’re idiots for writing or reading “basic” information. Obsess over the basics and put in out-sized effort to master strategies to execute them.

Don’t Be Born on Third Base Thinking You Hit a Triple

I guess the old football coach Barry Switzer said this. I thought it’s what the late Governor of Texas, Ann Richards, said about President George W. Bush. Either way, it’s a great quote.

“Some people are born on third base and go through life thinking they hit a triple.”

Maybe you’ve never had debt, make no mistakes, and have a ton saved and invested at the same time as more than meeting your expenses each month. People like this exist. Some people like this haven’t always been this way. Some have. In any case, these people probably have others to thank for their relative success.

As much as we like to think we do, we do very little completely and wholly on our own.

So act like it. Have empathy. Help others. Don’t cut them down.

Unless we’re dealing with human rights, equality, or interpersonal relationships, there’s not a more important space than money where you can take this mindset.

People struggle with money. When they struggle with money, they struggle with their mental health. If you operate from a position of strength, either because you’ve taken steps to improve your situation or you’ve never experienced issues, you can do others a service by sharing your knowledge and experience.

That’s what I strive for when I write. I relay my experience and what I have learned along the way because there’s a decent chance it’s shared experience. When we share experiences, everyone tends to benefit. The beauty lies not in the articles I write, but in the uplifting and useful discussions that develop around them.