Dear Reader

Welcome to the April edition of the Money Mentor monthly newsletter brought to you by Vantage Financial Planning where we examine all things personal finance education, coaching, advice and technology.

The Status Quo

Inertia the tendency to remain unchanged and apathy the tendency to be indifferent typically lead to instant gratification and lifestyle creep; spending what you earn or more than you earn. These powerful natural defaults compound over time resulting in future financial regret:

There are numerous excuses to chose from when deciding to neglect our personal finances:

Blissful ignorance.

I've no time or am too busy.

Too much hassle/stress.

Where do I start?

I won't stick with it.

I know what I'm doing and don't need help.

I distrust the personal finance industry and the people who work in it.

People have an innate capacity to rationalise the irrational. We predominantly pay attention to what we want to see/hear and discard the rest (confirmation bias).

It is perfectly normal to have a healthy level of delusion, aka your ego. However, people can go to tremendous lengths to protect their egos from reality. Denial, rationalisation, projection, blame shifting, overcompensating and avoidance are all hallmarks of a defensive ego.

Taking responsibility for your personal finances means confronting your reality and potentially facing uncomfortable truths that dent our ego. This happens in one of two ways, proactively or reactively. A proactive approach is a conscious consistent discipline whereas a reactive approach is when a decision is forced upon you. Most people are reactive when it comes to their personal finances:

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Lifestyle Design

In theory financial planning aims to enable lifestyle design for clients. In practice financial planning often falls short bridging the gap between money and lifestyle design. Part of it is the industries shortcomings, preferring to adopt purposefully opaque financial products to mask conflicts of interest due to misaligned incentives that deliver little to no added value for clients.

Part of it is clients not knowing who they are and what they want today and into the future. The answer to who you are and what you want usually evolves as we move through life's stages and so beyond a small number of constants the answers depend on our current circumstances and age.

In the absence of specific personal goals I default to financial goals so clients will have the freedom and security to explore who they are and what they want when they're good and ready. Exploring who you are and what you want is a journey and not a destination.

If you believe in proactive lifestyle design here is a TedTalk video on 5 Steps to Designing the Life You Want presented by Bill Burnett Executive Director of the Design Programme at Stanford University in California:

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Good lifestyle design has problem solving and regret minimisation at its core. If a problem is not actionable it's a circumstance. Seek to connect the dots between who you are, what you believe and what you do.

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The Curious Case of Compounding

Compounding, touted as the eighth wonder of the world is a hard sell. This is due to the time it takes for compounding to start having a meaningful impact on your investment portfolio. It typically takes 20 years until there is sufficient invested savings for investment compounding/return to deliver more growth than your contributions:​​

Compounding requires a level of consistent discipline, foresight and long-term thinking that is abnormal to our innate wiring. It requires behaviour and belief in a future you might not yet value:

The thought of saving a sizeable amount of money consistently over an abnormally long period of time (multiple decades) is unappealing for many, especially younger professionals. This impatience leads to investment return chasing hopping from best performing active funds or asset classes or concentrated holdings of individual stocks. The logic being larger investment returns will expedite their journey to financial success and wealth. However, this also increases the probability (risk) of partial or permanent loss of invested funds.

The first rule of investing is do not lose money. The second rule of investing is don't forget the first rule. Whether you're an index or active investor the inputs and outputs may change but compounding principles never do. Warren Buffett at 94 years of age has a net worth of $166 billion. He is among the best investors of all time with a decades long track record. An all too often overlooked aspect of Warren's investment success is the multi decade uninterrupted compounding accumulating 90% of his wealth over the last 25 years:

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I cannot emphasise enough the importance of starting your investment journey early. The more time one has the less expensive financial independence will be whereas the less time one has the more expensive financial independence will be. Compounding takes time to work but once it does it is staggeringly powerful.

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Investment Market Volatility

Temporary stock market declines are never pleasant and will test your nerve and resolve with negative emotions rising as the value of your portfolio falls. Being optimistic about the future can be easier said than done:

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There have been and will continue to be countless negative world events such as economic crises, health crises, political crises, environmental disasters, conflicts & terrorism. People and businesses have been and will continue to be tremendously resilient and adaptable:

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A stock market rising in price is falling in value, a stock market falling in price is rising in value. Corrections are to be welcomed if you are regularly contributing to your portfolio as the price of global businesses is currently discounted:

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The real risk to your personal finances is inflation which increases your spending, reduces the value of your income, slowly erodes your savings and investments with many sliding into debt:

The opposite of wealth is poverty. The opposite of financial independence is financial dependence on work, the government &/or your family/children. Poverty and financial dependence are certainties if you don't invest, there is no alternative.

Trumps tariffs announced on April 2nd and marketed as “liberation day” have wreaked havoc on global businesses, particularly manufacturing, which were taken by surprise at the size and suddenness of the much-touted reciprocal tariffs. International business and consumer confidence has taken a considerable hit which is likely to manifest itself in pausing business investment and a drop in consumer confidence/spending. A distrust in political leadership coupled with a geopolitical reorientation of global trade and increased economic uncertainty can cause a potential recession to become a self-fulfilling prophecy. Potential high inflation, rising interest rates and rising unemployment are a real possibility.

Bond market vigilantes have been the only group keeping Trump’s tariff plans in check, forcing him to pivot to a 90 day pause on the implementation of tariffs for all countries that did not impose retaliatory tariffs (China). Liz Truss is a prime example of what happens when markets don’t believe in the sustainability of a political party’s fiscal plans. The bond market has demanded an increase in the yield to hold US 10-year debt given the unsustainable trajectory of US fiscal spending. If US economic growth declines in 2025 there are increasingly troubling financial times ahead given it is among the last tools in the toolbox to avoid facing their long-term economic challenges. Supply of US debt is increasing considerably while demand may not continue to meet supply.

Given it is only 100 days since Trump took office it is impossible to know how markets are going to perform to midterm elections in November 2026 and across the rest of Trumps presidential term. I’m anticipating a tumultuous market ahead and am fearful the economic war between the US and China is a prelude to military conflict in the South China sea.

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Recommended resources

JP Morgan Guide To The Markets (EMEA Monthly):

​​​JP Morgan Guide to the Markets EMEA 31st March 2025.pdf​​​​​​​​​

Monthly podcast recommendations:

The Morgan Housel Podcast: Compounding Optimism

Listen on Spotify

Patrick Boyle On Finance: How Trump's Tariffs Will Transform Global Trade?

Listen on Spotify

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If you are interested in personal finance education, coaching, advice or technology, please reach out to me on my contact details below.

If you found this month's newsletter useful, feel free to share it with family, friends and colleagues. Constructive feedback is always welcome! If there's any personal finance topic you'd like covered please let me know.

Until next month.

Kind regards,

Ken Mason CFP®

Tel: (01) 539 2670

Mobile: 083 803 2008

Email: ken.mason@vantagefp.ie

www.linkedin.com

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