Agent of Wealth Episode 176 – The Cure for Money Madness, Cultivating “Enough” With Spencer Sherman

This podcast is for informational purposes only. The opinions expressed are not the opinions of Abacus Wealth Partners, the firm that Spencer Sherman founded.

In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by Spencer Sherman (MBA CFP®), founder and former CEO of Abacus, author of The Cure for Money Madness, and a public speaker renowned for his mindfulness-based approach to money. Spencer leads guided meditations on money, participates in transformative events and attends several week-long silent meditation retreats each year.

He’s transformed the lives of his clients and helped them achieve financial success. Today, he’s joining us to discuss the concept of money madness, and how we can break the taboo around money.

In this episode, you will learn:

How to overcome your limiting beliefs about money.
How “small and boring” can help you outperform top investors.
How to cultivate an “enough” mindset.
How to make smarter financial decisions.
How to break the taboo around money.
And more!

Resources:

Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.

Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. On today’s show, I’m joined by a special guest.

Spencer Sherman (MBA CFP®) is the founder and former CEO of Abacus, author of The Cure for Money Madness, and a public speaker renowned for his mindfulness-based approach to money. Spencer leads guided meditations on money, participates in transformative events and attends several week-long silent meditation retreats each year.

He’s transformed the lives of his clients and helped them achieve financial success. Today, he’s joining us to discuss the concept of money madness, and how we can break the taboo around money.

Spencer, welcome to the show.

Oh, it’s so wonderful to be here. Thanks for having me.

Understanding Your Money Beliefs

In your book The Cure for Money Madness, you explain how “money madness” comes from unproductive messages that we’ve all heard. Such as:

“It takes money to make money.”
“Paying rent is just throwing money down the drain.”
“Don’t talk about money.”

How do we challenge – and stop spreading – these messages?

The first thing is to gain awareness of these beliefs, many of which we take on early in life.

What’s curious about the beliefs we take on is that we can have a sibling close in age who experiences the same financial conversations – or lack thereof – with opposite money beliefs. For example, I have two sisters as clients. One of the sisters told me that because of the Holocaust her family experienced, she knows that anything can happen at any moment. Therefore, she’s all about saving money. The other sister told me that because she knows anything can happen at any moment, she’s all about spending money.

We develop these beliefs as to what’s a rational response to the emotions we felt when we were young. So the first step is gaining awareness of the benefits, but perhaps surprisingly, I say let go of trying to get rid of the belief. I haven’t gotten rid of my beliefs, so I don’t even know if that’s possible.

What you can do, which is even more powerful, is loosen the grip on that belief. Choose not to believe it’s so wholeheartedly.

Using that example of the two sisters, they can start by opening up to other ways of looking at money. I call this “trying on a belief.” This exercise can help us soften our relationship with these beliefs.

For me, a belief I developed in my childhood was that money is more important than anything. This belief got me in a lot of trouble… It led me to participate in impulsive investing. It led me to run into a building that was unsafe to retrieve a worthless laptop. I mean, I did a lot of crazy things for money. That belief still arises in my mind, but I no longer am fixated on it. It’s taken some compassion towards myself because I was so locked into that one belief.

At what age do you think this awareness typically happens? After all, these beliefs form when we’re children, but children or even adolescents are probably not capable of realizing them. When does it make sense to go back and work through our money beliefs?

Correct, the wisdom comes to the adults. I’ve seen money beliefs grip financial experts, colleagues of mine from business school, and so on… Many times, we don’t know we have these money beliefs – we think we are objective. I didn’t realize I had my belief that money is more important than anything until I was an adult.

One thing that really helped me with this is the image of an iceberg. When you think about the tip of an iceberg, what’s visible are all of the tangible financial elements:

Budgeting
Investments
401(k) Plans
Taxes
Mortgages
Insurance

… And so on. But we forget that there’s this submerged part of the iceberg, which is where our fear and anxiety is. That’s where these fixed beliefs lie – the things that drive our money behavior.

That’s why it’s so important to gain that awareness.

There’s another concept from your book that I really enjoyed. You talked about how “small and boring” can help you outperform the top investors – without watching the market. Can you talk a little bit about your thought process there?

How to Outperform Top Investors

What we find in the investment world is that markets have been incredibly consistent over time. So I think that there’s a high probability that the markets will, in some ways, repeat themselves. What the historical evidence of investing tells us is a couple of things…

Stay Invested

One, stay invested. Don’t get in and out of the market, even though it’s appealing when there’s all this noise. If you can stay invested, you’d make a lot more money. But hardly anyone has been able to do that consistently.

“Small But Boring”

Secondly, there’s this rule to invest in “small but boring” companies. Usually, these companies do better over time than the more popular ones.

Now, this rule hasn’t been as true lately, which makes me think that it’s probably a good time to be in them… But, for example, investing in a manufacturing company rather than a tech company. People tend to underprice the boring companies and overprice the tech companies. But because people overprice tech companies, it actually can become harder to make money over time.

I’m not saying that a company like Apple will go out of business, what I’m saying is that over time, Apple will get priced so high that you might be better off buying some Apple stock as well as some Johnson and Johnson or Minnesota Mining and Manufacturing stock (these are all just examples).

We still buy all kinds of company stock for our clients – including in technology – but we’re working to emphasize the “boring” companies, because over the last a hundred years, they’ve performed a lot better.

Makes sense. I recently read an article in the Wall Street Journal that discussed if Apple will become the next IBM… A lot of people forget that at one point, IBM was never going to stop going up. But things changed.

Things change, and of course it’s sort of obvious when a company becomes so big that it owns more of the market share. At that point, how much more can it grow?

But, while there’s a limit to the number of people that Apple can sell new iPhones to, it doesn’t mean they can’t grow – they might introduce a new product or service. I’m not saying they won’t be successful, but these kinds of companies are the A+ students. A+ students have to do exceptionally well for people to be impressed, so I encourage people to put some money into B+ students, who don’t have to do as well to look good.

That reminds me of one of William O’Neill’s theories, which was: It’s easier for a 5 billion company to double in size, versus a 500 billion company.

Exactly. The market is so much about expectations. A company could be doing really well, and will continue to do well for the next 30 or 40 years, but if they’re not growing as well as what people expected, the stock price will go down. That’s a very hard thing for investors to understand.

The good news about investing is this: The New York Times released an article that found that the people who know less about investing tend to do better. They called out the fact that women not only perform better than men in the stock market – but much, much better. Their theory is that women follow the simple rules of investing, whereas men tinker with their portfolios too often. That tinkering ends up eroding returns over time.

Similarly, there’s a Fidelity study that found that the people who have the most success within their 401(k)s are ones that either died, or lost their password to their online portal.

Yes… One of the questions I often ask clients is: “How often do you check your portfolio, or the stock market?” Because the more often you check it, the more conservative your allocation needs to be.

Daniel Kahneman just did a study that found that checking your portfolio actually costs you money. He confirmed that people who check their portfolio more often have more conservative allocations – more money in bonds than they do in stocks. It makes sense… If you’re seeing all of that volatility, you’re not going to be as adventurous.

Yeah. I know you promote this concept of “enough.” What is “enough” and how does it relate to money?

How to Cultivate An “Enough” Mindset

Our culture is so driven to accumulate more. John D. Rockefeller, the world’s first billionaire, was asked in 1916 for the definition of enough and he said, “a little bit more.”

I think that is still the culture. We want more: More money, more time, more friends, more house… I encourage people to have intentions and goals, but I don’t encourage this expectation that if someone gets more, their life will be different.

When we think this way, we set ourselves up for this continual cycle of reaching for more. In that reach for more, we’re producing fear.

The Scarcity Mindset

When we’re always going for more, we’re living in a mindset of scarcity, because we’re telling ourselves that we don’t have enough.

So, we have to find peace in what we have – that it is enough. Ironically, more will likely come when we leave that place of desperation.

This is easily understandable in the dating world. When we are desperate to find a new relationship, we’re not very attractive to potential partners. But, when we’re at ease about it – not fixated in this life or death way – we’re more likely to meet someone.

Enough is not just about money. It’s finding this place of enoughness with who you are as a whole.

How do you recommend that people figure out how much is “enough” for them?

I’m going to answer this question in two ways…

On a financial level, it is a great exercise to figure out how much money you need at a minimum for your lifestyle. What do you need to deliver a basic level of satisfaction? Let’s say your answer is $100,000 a year. Now, let’s say you’re going to have $30,000 a year from Social Security. So, when you stop working, you’ll have a net need of $70,000 ($100,000 – $30,000). Then maybe you do a part-time job and earn another $20,000. Now, you have a net income need of $50,000 ($70,000 – $20,000).

So what do you need in terms of assets to supply that $50,000? I usually say it’s about 20-25x the number. In this case of $50,000, it’s about $1.2 million. Now, there’s a couple of assumptions in there, but that’s is about how much money you would need in this instance.

Let’s say that you don’t have anywhere near $1.2 million… I certainly encourage those people to start saving money – it’s never too late to start. But, we would need to come up with a plan B. Maybe it’s decreasing your living expenses when you retire. Maybe it’s living with some friends or family members. Maybe it’s taking on additional work when you retire…

I like the idea of all of us finding a way to reach “enough” within ourselves. And, if nothing else, can you find a moment of enoughness in this very moment? That’s a very good exercise to start moving from this idea of needing into this place of this sufficiency.

I know you lead guided meditations on money as well. What are some of the topics of the meditations?

Yeah, I have a bunch of meditations available on the Abacus website for your listeners to take a look at.

One of the meditations is on resilience and equanimity. With finances, things inevitably go up and down. But what’s funny about us human beings is that when it happens, we go into shock mode. We’re like, I can’t believe the markets went down. Well, I’ve got news for everybody. The markets are guaranteed to go down over your lifetime, guaranteed it’s going to happen. You know what else is going to go down over your lifetime? Pretty much everything. In that meditation, I try to enforce a sense of equanimity.

Another meditation deals with this finding enoughness within ourselves. That includes finding that we have enough intelligence, enough sense of humor, enough house, enough money, etc. This helps us move towards a life of enough.

These are just two examples, but all of the meditation are designed to resolve an emotional dilemma that we have around money.

That’s great. Well, Spencer, we’re just about out of time. I want to thank you for being on the show today. You provided some great insight on how people can take a mindfulness approach to making financial decisions. How best can people find out more about what you do?

I have a free set of resources on my website at spencer-sherman.com/free. I also have a 24 hour mindfulness device-free retreat coming up in Northern California. You’re welcome to join me there if you’re a lawyer, CPA, financial advisor or therapist. It’s just been great talking with you, Marc.

Great, we’ll link to all of that in the show notes. Thanks again, Spencer. And thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.

Schedule an Introductory Call