[#37] The 4 Money Tendencies: Avoidance, Worship, Status, Vigilance

Plus: Bitcoin Futures, Tips from Wealthfront CEO, Credit Scores and Cheaper Prescription Drugs.

written by oz chen

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Edition 37 personal finance newsletter money beliefs

Money Mantra of the Week: You have a healthy relationship with money.

This week we’ll dive into money beliefs without having to pay a money coach. Plus: Bitcoin Futures, Tips from Wealthfront CEO, Credit Scores and Cheaper Prescription Drugs.

⛏ How to uncover your money beliefs

When I was younger, I used to think people who ordered drinks and appetizers were wasteful. That’s because I didn’t grow up with a lot of money. My single mother would teach us about the merits of cooking at home and saving money. The rare time we’d go out, we’d skip the drinks and desserts.

For years, even when I had more disposable income, I felt guilty when my friends and I would go out to eat and order more than what my 12 year old self was used to.

These are money habits driven by money beliefs. When these beliefs go unchecked, we end up carrying financial baggage that no longer serves us.

Now, swaths of self help gurus and money coaches offer to help clients eradicate limiting money beliefs and change toxic money mindsets.

Before you spending a bunch of money there, you can self diagnose money beliefs for free.

How to uncover your money beliefs

Kansas State University psychologists developed the Klontz Money Script Inventory. This assessment that helps people identify their relationship to money across 4 distinct areas: avoidance, worship, status, and vigilance.

Money avoidance: “It is not okay to have more than you need.”
Money avoiders tend to think that money is the root of all evil and that they don’t deserve money.

Money worship: “Money would solve all my problems.”
Money worshippers obsess about money while deprioritizing other things life like health or relationships. The flipside? The worship of money is usually driven by a scarcity mindset that there will never be enough money.

Money status: “Poor people are lazy.”
This is the tendency to define self worth by net worth. Money status usually looks like signaling one’s position in society through material purchases and self comparison.

Money vigilance: “It is important to save for a rainy day.”
This is the tendency to protect, guard and save money. They tend to be frugal, but may also save too much, lose out on riskier investment opportunities, and are more protective of discussing money with others.

I ranked highest for money vigilance, followed by money worship. Logic checks out, I blog about money.

It’s likely that most people fall on a spectrum. The research shows that ranking high on the first 3 money beliefs is juicy – you’ve identified some toxic mindsets to work through. Apparently money vigilance was the only quality that wasn’t identified as problematic.

You can read the full research here—even just reading through the 30+ questions are helpful. Because the actual assessment is so hard to find for free, I had to construct it myself.

If interested in taking a free money beliefs quiz? Reply with “money quiz” and I’ll send it out next week.

🏪 Bitcoin Futures ETF: Driving Future of Bitcoin Price

Last week I talked about how the upcoming Bitcoin Futures ETF has been bullish for the price of Bitcoin. This week, Bitcoin reached all time highs of ~$66,000, and the rest of the crypto market jumped as well.

The whole Bitcoin futures news is bullish, but it’s commonly misunderstood. A quick breakdown:

  • Futures contracts = financial vehicle to guess the future price of any asset.
  • Futures ETFs do not own the underlying asset, so a Bitcoin Futures ETF like BITO does not own actual Bitcoin. That would be a “physical” Bitcoin ETF.
  • While BITO is the first futures ETF of its kind in the U.S., international Bitcoin ETFs like BITC have been around for a while.

What this all means from an investment perspective: a maturing crypto market + growing adoption.

This gives big funds and money managers a way to play the Bitcoin game without actually owning Bitcoin. The SEC approving a futures ETF paves the way for a “physical” Bitcoin ETF.

For example, the popular Grayscale Bitcoin Trust is planning to convert to an ETF. Other attempts that got denied, like this one from the Winklevoss Twins, will be knocking on the SEC’s doors again.

Once physical ETFs get approved, that means those funds have to buy physical Bitcoin on their client’s behalf. Institutions that don’t want to bother with managing Bitcoin will want to buy physical Bitcoin ETF to get indirect Bitcoin ownership. Even an allocation from 0% to 1% will be huge. I don’t think it’ll be a stretch to imagine that in a decade, most modern portfolios will allocate 5% to Bitcoin or crypto.

There are only 21 million Bitcoin ever…so this buying pressure will be positive for the price. And it hasn’t even happened yet. As I wrote in the previous article, it’s not too late to get into crypto.

While institutions play catch up, it’s just much easier to buy Bitcoin directly—and even earn interest on it from platforms like BlockFi.

Note: this is not investment advice. Cryptocurrencies and investing is inherently volatile and risky.

🎙 Podcast: Wealthfront CEO dishes financial advice

There’s a great new finance podcast called All The Hacks. I got some tips from listening to an interview with Andy Rachleff, the CEO of the robo-advisor app Wealthfront.

  • Wealth advisors and financial advisors not worth their fee (at least 1% of your portfolio); instead he recommends tax accountants and estate planners. For a one time consultation at a fraction of the price, you can get most of the benefit that financial advisors will give you. Remember, even most finance professionals do not beat the market.
  • Financial advisors are only worth it if you are too scared to even start investing; then the fee can make up for the money you’re not making by avoiding investing
  • Some of the biggest gains you can make is by reducing fees and losses. Obviously Wealthfront’s CEO touts his own tax-loss harvesting tool, but you can also get this feature for free with M1 Finance, which is what I use.

⏳ Financial history: Credit scores are not uniquely American

There are at least 15 countries including Canada, Germany, Spain, and China with credit scores systems.

While the concept of credit has been around for thousands of years (linked to agriculture), the U.S. has pioneered the use of credit scores. In the 1890s, the Retail Credit Company, based in Atlanta, kicked off the era of credit reporting. In 1976 it rebranded as Equifax, one of the Big 3 bureaus alongside Experian and TransUnion.

If you’re a nerd, check out this neat infographic about the history of credit.

By the way, there’s almost no reason to ever pay for a credit report. All the bureaus will give you one free report a year, banks are starting to offer it for free, and you can always grab a free updated scores from Credit Karma, which provides free Equifax and TransUnion reports.

💸 Money tip of the week: Cheaper Prescription Drugs w/GoodRX and Drug Coupons

Got a prescription that’s expensive to fill? Don’t just pay the list price—there are often 3 things you can try:

  1. Ask your physician if there’s a coupon or cheaper alternative
  2. Often times, they may point you to GoodRX, which claims to beat prices at online pharmacies 92% of the time, saving consumers an average of $30.
  3. You can even try contacting the manufacturer of the drug for a discount. Many drug companies have underused Patient Assistance Programs (PAPs)

There’s no reason to pay for higher than needed drug prices.

Just for fun: This is my free time, g’dammit

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