Preview:

Today, Ryan’s taking us through some of the key concepts of The Psychology of Money by Morgan Housel. This book isn’t just about money strategies. It’s about why we make the choices we make, even when they don’t seem to make sense. You might find that your mindset is a bigger advantage than any investment tip.

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More About This Episode:

Ryan breaks down four powerful concepts from the book, including how our personal experiences shape financial behavior when it comes to real-world money decisions. He shares personal stories and client experiences that reveal how fear, greed, trauma, and even childhood memories can shape our financial lives more than logic ever could. You’ll also hear why having a margin for error in your plan is essential, and how understanding behavioral finance can be the key to long-term success.

Here’s what we cover in this episode:

📘 What Housel gets right about money behavior

🧠 The role of your mindset when it comes to money

🛑 The danger of “never enough” thinking

🧮 Reasonable vs. rational financial decisions

🚨 Why planning with a margin of error is non-negotiable

0:00 – Intro

1:15 – Financial Book Club: Psychology of Money

1:54 – Concept 1: No One Is Crazy

3:45 – Personal Experience Shapes Financial Behavior

6:16 – Concept 2: “There’s Never Enough”

10:50– Concept 3: Reasonable is Better Than Rational

17:19 – Concept 4: Make Room For Error


Resources:

Retire Pilots – https://retirepilots.com

Get your FREE Retirement Toolkit – https://bit.ly/3ZmZsaX

Pilot Tax – https://pilot-tax.com/

The Pilot’s Advisor Podcast is also on video. Watch & Subscribe on YouTube: https://bit.ly/3EIEBW2

Connect with Pilot-Tax: https://pilot-tax.com/

Episode Transcription:

(Note, this is an automated transcription. Please forgive any errors.)

Walter Storholt 

Well, today we’re going to kick off a little bit of a financial book club, if you will. And we’re going to break down for you some of the key concepts from the psychology of money written by Morgan Housel. It’s a great book about finance and the behavioral elements and aspects of planning for your financial future. There’s tons of retirement lessons in here, all sorts of good stuff. We’re going to break it down on today’s episode with Ryan, and don’t worry, you don’t have to have read the book, like most people who probably go to book club that didn’t read the whole book. No worries, we’ve got the cliff notes for you, and we’ll break it all down together today. Back for another episode. I’m Walter Storholt alongside Ryan Fleming, the pilots advisor, and Ryan, this should be fun. Have you ever been in a book club before?

Ryan Fleming 

I can’t say that I’ve been in a book club. I think most of the books that I read initially were when I was forced to read them

Walter Storholt 

in school. English class growing up was basically book club every day, right? Yeah.

Ryan Fleming 

One, you know, of course, I’ve read a ton of financial books because that’s what I’ve been interested in. Yeah. So this is a little bit more down my alley. But of course, yeah, all the English classes I had English literature what have you where I was forced to read some of those books that was pretty painful, but talking about what we’re going to talk about today gets me excited.

Walter Storholt 

Awesome. Well, yeah, we’re making a book club for ourselves here, and I think this will be fun. So let me give folks a recap. If you haven’t read the psychology of money by Morgan Housel. It is a best selling book. It’s all about how people think about and behave when it comes to money, and Housel explains that financial decisions are often influenced more by emotions, experiences and our personal history, rather than by logic or math, which is the way you think it would all come together. The book shares 19 short stories that highlight why each behavior is an important part of financial success. For anybody interested in reading it, we’ll link to it in the description of today’s show. So feel free to go check that out. We’re going to walk through a couple of the concepts and Ryan, one of the concepts from the book is that no one is crazy. Household describes how different financial backgrounds, generations, incomes and values all impact the way that people view and behave when it comes to

Ryan Fleming 

money. Well, I can only imagine, and I’m thinking like, all the way back. I mean, if you grew up during the Great Depression, you’re probably going to be a lot more frugal with your money than somebody who’s had a strong financial safety net throughout their whole career, or grew up, you know, with money, or if you came into the working world in a recession versus when jobs are plentiful, you’re probably going to hang on to that job and not not be ready to jump ship as quickly, because, because you’ve been burned before, and you saw when things were really, really bad and what could happen.

Walter Storholt 

Yeah, I think that’s a great point, given that takeaway, no one is crazy. How have you seen that play out a little bit with your clients?

Ryan Fleming 

I see this a lot. I can even talk about my childhood growing up. I mean, I grew up very, very poor, living paycheck to paycheck, and I knew that I never wanted to live that way again, which is really why I got so into finance and investing. Because I was like, Hey, how do I get out of this? Can I and, you know, and starting to invest money and let it grow. But what I realized from that was I had a lot of problems getting past the I need to hold on to this one penny and letting my money grow for me, you know, so, like, what I think about is there’s a lot of people that will just pile up their money in a bank account or checking account or a savings account where it’s not even growing, they’re not even keeping up with inflation, or they’re going to pay cash for everything, because you know that they they’re never going to use credit cards. We’re going to pay cash. But that’s not the best way to build long term wealth. Sometimes it makes sense to use the bank’s money to leverage yourself, use your money to invest and make it, make it happen. And I see it a lot with my clients, where they might have still have that broke mindset, and we have to break that so that they can allow their money to work for them. Or the other side, I see it as maybe they’ve been burned before by some investment they made you know they were speculating and gambling with their money, and it really didn’t work out for them, so you got to ease them back into getting exposure in the market. I think

Walter Storholt 

that’s a great perspective. I feel like I’m in the same way when I think about what really shaped me in life, I think of two things. My grandmother was started talking to me about investing and saving for retirement when I was like five, as a little kid, I’ve shared her story before with you, where she was would never gift us kids normal gifts. She would always give us stock in companies. So she would gift us 10 shares of Disney back in the day, or 10 shares of Hershey bar, you know, Hershey and things like that, things that would be in products that would get us excited as kids, but also teaching us those financial lessons. And that stuck with me forever. And also, I graduated in 2009 from college, at the bottom of the barrel when it comes to the market. And what had happened with the, you know, 2008 you know, market meltdown. And. All of the hiring crises and all those kinds of things. And so I think that kind of bore a little bit of an entrepreneurial spirit in me. And you know, had me on the lookout for opportunities to kind of work for myself. And because I was shaped by seeing all these people getting laid off and having no control over their over their job and their in their direction in life, and I was scared to have that be me, and so I went after the, you know, own, your own business route eventually. And I think maybe that doesn’t happen without that 2008 2009 experience at such a formative moment, entering the workforce and having such a tough time. Well,

Ryan Fleming 

I think it is amazing how any experiences you have, any of your life experiences, truly push you in a different direction and have a different feeling about things my mom. I talk to her all the time, and, of course, I try to help her with some of these financial concepts. But, you know, she grew up on a farm, she has a garden, and my stepdad calls her the biggest miser ever because she won’t spend anything, and she’s like a constant saver. And what’s really happening, I’m a very good saver because of her too, because I realize I just don’t need stuff. Yeah, like, stuff doesn’t make me happy. So I’m not, like, one of those people that just buys things. I’m much, much more of a saver than Well, per se, I hope she’s not listening, but my my wife,

Walter Storholt 

uh, we won’t send her this episode. No worries. Okay. Yeah, perfect. Perfect. You dovetail nicely, though, into another concept in the book, and this one is that it’s the concept of never enough. And Housel gives examples of wealthy men who end up in prison because of insider trading, and their careers and their reputations are ruined forever. The big question is, why? Why does this happen? And Morgan Housel points out that they just kept reaching for

Ryan Fleming 

more. Well, the hardest financial skill ever is to, you know people. I call it moving the goal post. Of course. You know me being a football player, you know? It’s like, oh, well, if I get a million dollars, then I’ll be happy. And then you get to a million dollars, and then you move the goalpost to 2 million, you know? And, and I know I’m guilty of that. It’s amazing, because when I deal with clients, fear and greed drives everything. I mean, when the market’s good, people want more, you know, when the market’s bad, they don’t want any of that downside, and the fear sets in. So, you know, I see, I see this all the time. And the weird part is, those that have the most money, those that shouldn’t have a care in the world, actually stress out about it, lose sleep over it, more than those that have nothing. They have more to lose, right? I guess so. I mean, it’s, it’s almost counterintuitive, but I see it all the time in many of the conversations I’m had. You know, one of the things I find myself saying a lot with some of these individuals that have saved very well over their careers is, Hey, you, you know, you don’t have a money problem, but you’re going to have a big tax problem. Yeah, versus the individual that maybe didn’t save enough, and they need to be more aggressive, but it, it is truly counterintuitive for those ones that that worry if they’re not the ones you think you think would, or or even, let’s talk about Warren Buffett. Warren Buffett just decided to walk away from Berkshire, that’s right. He still lives in that same little house, and he’s never upgraded, and I don’t even know how many billions of dollars he has now, right? But is enough? Ever enough driving

Walter Storholt 

his old truck around. Yeah, it’s crazy. He seems like somebody who never moved his personal goal posts. Besides, you know, beside the fact that he built this humongous business and one of the most successful investors of all time, he knew what made him happy, knew what he was shooting for, and when he achieved it, he didn’t just constantly keep chasing that carrot. I think that’s really important. Your comment on fear and greed, I feel like we all need this filter, right? And I try to do this with any decision that I go through, pretty much in life, but especially finances, is saying, okay, am I making this choice from a place of fear or greed? And if so, I go back to step one and start the decision making process over again. And if I can honestly say it’s not from a place of fear, and it’s not from a plate place of greed. I know I’m thinking clearly, and I know I can move forward with whatever I’m trying to do, so maybe everybody just kind of needs to put some some sort of filter like that in place

Ryan Fleming 

well. And you know, we always talk about emotions with investing, and I think the one thing that I’m I’m very good at, is I have zero emotion when it comes to the market, because I realize how that I get to watch it, how it hurts people all the time, and so controlling some of your actions, or like you talking about how you have a process to think about things, to make decisions, I think that goes right back into making sure you have a system, you know, some unemotional system, so that you’re not going To make the mistakes that people make with investing

Walter Storholt 

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Ryan Fleming 

I think this is where it gets Gray, you know, because there there’s a balance, right? Yeah, perfect example. There’s a ton of people now that got refinanced their house or bought a house with a very, very low interest rate, and you have to ask yourself, Hey, do I want to pay this house down, or do I want to take my money and go somewhere else? Well, it’s a very black and white thing to me. If you have a 3% mortgage, you don’t want to pay that thing down, you know, faster at all, because you can take your money all day long and make, you know, allow it to work harder for you over here, however, people still just drastically want to pay off that house. Because it’s that, that peace of mind, it’s that, uh, that helps them sleep at night, yeah. So, you know, many decisions in in finance are all about the numbers. I mean, it’s unemotionally, well, here it is, and you do some math, and you do, you know, do some equations, and it’s like, well, here’s the decision. But when you think about behavioral finance and how people make emotional decisions. You got to bring those two things together and actually talk about them so, you know, things that are important to them away from the numbers, just to have peace of mind,

Walter Storholt 

that’s really point. I mean, I would, I’m getting the stage of life where you the old saying Time is money is ringing more and more true every day, right? I think anybody, as you age, you start feeling the importance of that. Or, hey, this convenience, this makes my life more convenient, or this makes my life a little bit easier. We pay for those comforts, and I think that’s okay, and because we see that, you realize the value in sleeping better at night, even if it didn’t make the most financial sense. So that makes a lot of sense when you see that in situations like paying off that mortgage, I think that’s a great example, because who doesn’t feel good with a paid off mortgage going to bed

Ryan Fleming 

at night? Yeah, and I have these conversations all the time. I’m like, you know? Well, here’s the numbers, here’s the best financial decision, you know, so they at least know, or we had that conversation, but if it’s going to make you feel better, or if, you know, paying off that little bit of that car loan just to make it go away, so there’s not that one more payment you know is going to help you feel better about things, and then you got to do it. But it might not be the right, you know, prudent financial thing to do. You

Walter Storholt 

hit the nail on the head when it comes to cars. I’ve always tried to pay off any cars we’ve bought over the years off immediately, as fast as I can. It’s a challenge. It’s exciting to see that number go down and make it go down as rapidly as you can. So that’s something that I’m always that’s one thing that I’ve always seen. I know that the financially this doesn’t make as much sense, but man, it feels empowering and it feels good. I’m getting this off the ledger, one less thing to track in the budget feels good, so I like well,

Ryan Fleming 

and it’s amazing. How are I mean, I you know you, you hope that you grow like anything else. You want to get better as you get older and have experiences. And talking about cars, I think could be a valuable conversation, because I know my I was really, really smart early on by buying that used car that had 170,000 miles, and then I would drive it into the ground, because I was always able to pay cash for that car, right? And cars are not investments, and so I can think about the pieces of crap that I drove around. It’s almost embarrassing. But, you know, a car for me didn’t define me.

Walter Storholt 

Yeah, my old cars with fondness. I loved my old years.

Ryan Fleming 

You went through a lot together, right? Yes, absolutely. And then I can also, you know, everybody in their 20s pulls the trigger at some point, makes a bad decision. One of the worst decisions I ever made was I was finally, you know, a lieutenant making some more money, and I went and bought. That first new car, okay, you know. And so I felt good about it, but it was, like, the worst financial decision I ever made. You know, it’s like, Why did I do that? You try to drive it off the lot, and you lose like, 20 30%

Walter Storholt 

right away, yeah, you check the value a year later, and you’re like, what? Yeah,

Ryan Fleming 

well, and then, you know, do as I say, not as I do. But that was a valuable lesson for me, yeah, you know, just to have done that, and you know, did I learn from it? I don’t know. Well, it

Walter Storholt 

points back to to concept number one, right? Our personal experiences shape a lot of our attitudes and decision making in retirement and financial planning. And you experience that personal experience with making the mistake with the car. And you know, hopefully you weren’t doomed to repeat it, and sounds like you weren’t from there? Well, sadly,

Ryan Fleming 

we have to screw up or get knocked down, in many cases to actually learn, yeah, now it’s a lot easier to learn from other people’s mistakes. I could sit up here and tell you all kinds of stories about bad financial decisions or stock picking, where somebody lost a lot of money, or, you know, where it was too good to be true and it was you know, and so it’s always better to learn from other people’s mistakes, but as humans, in many cases, we have to screw it up ourselves to truly learn. Reminds me the little boy, you know, don’t touch that stove. It’s hot, yeah. And you know, the boys gonna touch the stove because he’s got to learn it firsthand, because he’s, you know, not smart enough to listen, and not that I was at that little boy, but I probably was little hard. I

Walter Storholt 

still touch the stove, even when it’s hot. It must be a it’s I’m not the only guy who still does that, right? Like, oh

Ryan Fleming 

well, and it’s amazing to me. Like, a lot of time, I call it the myths to investing. And when I’m meeting with a prospect, I will actually go through the myths of things that people do to hurt themselves, and why dal bar shows that people earn much less than market returns. And and as I go through those myths to investing, it’s amazing how everybody has a story like, oh yeah, I did that one, or, Hey, I’m still doing this one, which is why I’m calling you Yeah. And I think the most dangerous thing is that those people that don’t even know what’s going on, or won’t admit to what they’re doing or that it hurt them. So it’s very interesting. So

Walter Storholt 

at least I can admit I’m still touching the stove at 37 years old. That’s good. At least know I’m aware of my problem. Let’s talk about the last concept from the book, and this was about room for error. And household says room for error is underappreciated and misunderstood, but that there is so much power in having a margin of safety or room for error in your financial plan. Well, I

Ryan Fleming 

that’s fine, but I want that room for error to be on the top side, meaning, hey, guess what? We over save versus under saved, right?

Walter Storholt 

Oh, biggest area definitely, a very important distinction, yeah, yeah, absolutely.

Ryan Fleming 

And the biggest thing I see is, hey, we didn’t plan for inflation. We didn’t plan for taxes. Well, guess what? Those things are massive. Okay, and the other part about it, it’s unknown. I don’t know what your taxes are going to be in retirement. And I also don’t know what inflation is going to look like. So I guess this is where I’m always we’re back to enough is never enough, because I have no clue what the future is going to be, and I know I don’t want to be that person greening people out Walmart, because I have to, you know, when I’m in my 70s, yeah. So I’m definitely more conservative when it comes to this. I want to be ahead of the game and be able to pull the throttles back as I’m nearing retirement, versus the other way around. I’ve

Walter Storholt 

heard where some I’ve heard stories of folks who will get a financial plan, and then they’ll go get a second opinion, and it’ll find out that the advisor or broker, whoever put it together for him was only assuming a 1% inflation rate, and they’ll go to another advisor who says, well, we’re not leaving much room for error by assuming only 1% here is that an example of where you want to like as you’re running case scenarios and trying to figure these things out, where you want to say, no, let’s assume the worst. And that inflation stays at I don’t know what that 3% or

Ryan Fleming 

whatever, I’m always on the conservative side. And yeah, 1% inflation is almost criminal. I mean, that’s not going to

Walter Storholt 

happen. It makes the plan look really good, right? When you say it’s 1% the numbers basically

Ryan Fleming 

lying to your clients at that point, like, oh, yeah, you got a problem. You know, 100% probability of success, but the the assumptions that they put in that plan are just wrong, right? So,

Walter Storholt 

or if you’re a 10% return on your investments, or 15 or obviously, then you’re getting into that territory where you’re definitely not planning for the best case

Ryan Fleming 

well, and that’s why you need to under, under promise and over deliver. But anytime that I’m looking at numbers with a client, we’re going to be be conservative and pull back. You know, what’s the annualized rate of return over that time period? You know, taxes, I want to assume the highest inflation. I mean, three or 4% so then you can always be in the on the good side of things, regardless of what happens.

Walter Storholt 

Yeah, great points. Ryan, well, good breakdown today. Definitely check out this book, folks. If you found today’s pie. Cast interesting. Certainly recommend it. You can find Morgan houses book linked in the description of today’s show, as well as all the great resources that Ryan has put together. In fact, speaking of books, you can get Ryan’s books, special reports, all sorts of great stuff packed into his retirement toolkit. It’s specifically built for pilots who want to plan for a better financial future and retirement. Check that out. We’ve also got it linked in the description of today’s show. Get the toolkit for free. Just put it in some basic information, order the toolkit. And then, when you do that, Ryan, you offer kind of a special opportunity for folks to get an analysis of their financial situation and their plan, and kind of take that to the next level, right? Yes.

Ryan Fleming 

And I would say you don’t know what you don’t know. And if we’re going to analyze your portfolio, we’re actually going to go back and pull your historic returns, and we can see what I’ve done for my clients. And I think if everyone did that exercise, they’d really have a better picture of what’s really going on, what markets look like, or even how much more efficient we can allow your money to grow by making sure that we’re investing it properly. So take advantage of that free portfolio analysis. Once again, it’s free, and you might not know what you don’t know, right? So I think I’m amazed more people don’t take advantage of that.

Walter Storholt 

All you have to do is get the retirement toolkit, and that’ll unlock that portfolio analysis. Just grab it in the description of today’s show. All right, good enough, Ryan, thank you for the help today. This was fun. We’ll talk again soon.

Ryan Fleming 

Take care. Walter, have a good vacation with your family. Will do see everybody soon.

Speaker 1 

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