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Too Old to be Famous

At the ripe old age of thirty I decided to take my rhythm guitar skills on the road. I wanted to join a band. My youthful guitar teacher had informed me that all good musicians make it in their early twenties, and that the really good ones, (Jim Morrison and Kurt Cobain for example) die at twenty seven. He then wryly informed me that I was “too old to be famous.”

This turn of phrase “Too Old to be Famous” seemed like a great name for a band full of aged hacks such as myself. I set about trying to build a dive bar band for some fun weekend nights. My voice, which is quite bad, would suffice to serenade some barfly drunks. My meager guitar skills would serve for a few chord progressions. Dick, a forty something drummer, thought the idea sounded great, and offered to be rhythm. All we needed was a bass player.

We decided to approach Chad, a co-worker of ours. Chad had been in and out of the music scene since before he could drive. An excellent bassist, he had been in many bands and on many stages. He was also in his late forties, balding, and out of shape, which in our opinion made him a great candidate for our musical adventure.

When we first approached him and asked him to be in our band, his face lit up. He was very happy.

“What kind of band?” he asked.

“Drunken dive bar.” We replied.

“Great, what’s the name?”

“Too Old to be Famous” we answered.

With that, the smile washed from Chad’s face, and was replaced by a frown. He replied emphatically that he did not want to be in our band, because he most certainly was not too old to be famous. With that, he turned his back on us, and walked away.

What does this have to do with finance? You ask. Well the answer is simple. Be realistic. There is a cold, hard reality to money. If you don’t face it, you are likely to find yourself on the losing end of some bad financial decisions. It is obvious to just about everyone that the odds are against a forty something, balding, out of shape man becoming a rock star. Chad could have had some good times with our band, but because he was unrealistic, he lost out. The same can be said for finance. If you are unrealistic, you will lose money.

For example: Warren Buffet has earned an average of 21% return on the stock market for the last forty or so years. He is widely considered the best investor in the world. That makes him one in six billion. If you are realistic, you will recognize that your odds of beating or even matching him are very small. In other words, if someone shows you an investment they claim will make more than 21% annually, odds are they are lying or don’t know what they are talking about.

Another aspect of this is to be realistic about your limitations. If you are having trouble making ends meet every paycheck, it is probably not the best time to buy a new car, or put that wide screen TV on your credit card. Similarly, if you earn 5% in stocks while the market averages 10%, you will probably be better off recognizing that your stock picks aren’t that hot, and it would be better to invest in an index fund.

The money game is one of hard truth. In the end, there is only one person who can see to your finances correctly. Believing someone who says you can beat Warren Buffet’s returns is fantasy. Telling yourself that your crushing debt will work itself out without hard work on your part is a path to financial ruin, and is also fantasy.

Assess your situation and your investments with an eye for truth.

Be realistic.

Author: Aaron Ross                                    March 07, 2009