Scott H Young

I’m now rounding out the third month in my year-long project to improve my foundations.¹


This month’s focus was money. In particular, the keystone habit I asked students of my course to work on this month was setting up a system to track their expenses and reviewing it at least monthly.

Monthly expense tracking has been a habit of mine for almost two decades, so my personal challenge this month was to:

• Improve my tracking. Prior to this month, my wife and I tracked dozens of different spending categories. We reorganized our system so we have main categories and subcategories, making it easy to see how much we spend on “big picture” items while also having enough detail that we can get specific in any particular area (for instance, how much of our food costs is due to eating out versus groceries?)
• Get term life insurance. I applied for term life insurance for myself. I decided to get a policy that would cover our outstanding mortgage balance, since the other financial assets I have should be enough to cover any other expenses.
• Rebalance my assets. This was a concern of mine as I don’t feel my asset allocation so far has been done in a particularly principled way. However, reading dozens of books (including the better part of a 1000-page textbook on investing) didn’t really persuade me to change my strategy much. I probably want to start shifting some of my assets into a bond index, but I’d rather do that with newer savings rather than rebalancing the investments I already have. I still think, given my age and work flexibility, an 80-90 percent equity portfolio is the way to go.

Overall, my money foundation month was more about deepening my knowledge base rather than radically changing my habits. Going in, I felt pretty good about my overall savings levels, investment strategy and money management in general, but it was nice to dig a bit deeper into this topic and affirm some of my long-standing commitments.

Planning for My Financial Future

Another step I took this month was to do some explicit calculations of my financial goals. I ran a few scenarios looking at what I can expect long-term under different future conditions based on my current assets.

This exercise helped me see what my financial position would be if I tried to retire immediately, in ten years, or not until I’m in my seventies. I don’t plan on stopping work anytime soon, but sometimes misfortune strikes and we’re not given that choice. It was a useful exercise for seeing how my financial foundation could support my family in the case that my business failed or I somehow became incapable of earning a similar income.

This kind of analysis of net worth and retirement goals is not complicated to do, but I had never actually done it before.

Feeling Good About Money

Another thing this month helped me with was with feeling better about my money, in general. For years, I have been comfortably saving more than I was spending, so I didn’t think much about money at all. But my wife and I bought a house two years ago, and the combined pressure of watching the investments we had for the down payment take a tumble, having a mortgage, and seeing interest rates rise² added some financial stress.

I don’t say this as a complaint—I’m acutely aware of how fortunate we are. But it was stressful, nonetheless.

Doing the work of comparing our actual spending to our current financial picture, including the variety of possible future scenarios for investment return, interest rates, and even my ability to work and continue this business, made me a lot more comfortable about our plans going forward.
While there’s a stereotype of the person who doesn’t look at their bank accounts to avoid financial anxiety, I think I tend to be the opposite. If I can’t see what my goals are and whether or not I’m reaching them, I get more anxious about spending, especially when things like my mortgage payments jump up considerably.

Being Committed to the Strategy

The other lesson I took from my extensive reading this month was the importance of emotional resolve in one’s financial plan. It’s relatively easy to describe an investing strategy, but it seems it’s much harder to commit to a plan when it’s losing money in the short-term, even if it is a good strategy in the long-term.

I decided not to alter my asset allocation considerably, despite all my reading. One reason for this was simply that I feel like the informational bar for making changes to your investing strategy needs to be relatively high, otherwise there’s a temptation to panic when the market crashes, or chase winners when the market is irrationally high. In this sense, I feel like a relatively simple strategy with fewer funds and choices is probably better for me, even if it isn’t completely optimal from a theoretical perspective. Simplicity is easier to commit to intellectually and stick to in practice even when it doesn’t look like it’s paying off. It’s hard to have the discipline to rebalance your portfolio *into* the “losers” year after year to stay consistent with a strategy, so having fewer items to rebalance seems valuable  from a behavioral standpoint.

Time will tell whether my particular choices were correct, but I have become more convinced that commitment matters more than cleverness when it comes to managing investments.

Updates to Fitness and Productivity

In addition to working on my money this month, I also sustained my previous two foundations, fitness and productivity.

Fitness continued to go well. I’ve now had my third month where I haven’t missed a daily workout, although a couple of those defaulted to a low-intensity stretch. I now feel like my cardiovascular fitness is about as good as it’s ever been. I’m still rebuilding my strength to get to my past peak of about 5 years ago, but I haven’t plateaued yet.

I’m also about 10 lbs. lighter than when I began three months ago. Losing weight wasn’t an initial goal, but it’s been a nice perk.

The productivity system I initially set up continues, although I still feel like there are a few kinks that need ironing out. I think being more consistent about the weekly and daily reviews, especially the collaborative ones with my wife at the end of the week, are essential for getting the system to work smoothly.

Still, I feel like productivity was already a solid foundation for me, so this is more of an effort to smooth off some remaining rough edges.

_ _ _

With the first quarter of the year-long project concluding, I’m feeling good about going into the next nine months. Next month focuses on food—I’ll share my opening update for that one next week!