Summary — Get Smart with Money
“Your money will never do better than what your mindset will allow"
|| I recently watched the Netflix movie, Get Smart with Money and found it informative.
The story introduces us to the journey of five individuals at various stages of their life, trying to get their finances under control. They are mentored by 4 successful finance gurus for a year, who have made it big in the world.
Teez
Teez, a basketball player, got big money quick and was spending it even quicker. He got Ross as his mentor who introduces him to investing in Stock Market.
Teez is cautious at the beginning and wants to start slow so he invests in index fund via SIP.
During one of the conversations, Ross explains to Teez the concept of inflation and its impact on money. “You are effectively losing value of your money if you keep it in your bank because the savings return is lower than inflation.”
Lindsey
An aspiring artist, Lindsey is working two jobs and living paycheck to paycheck. She is paired with Paula to break out of this cycle.
Paula understands Lindsey’s skills and advices her on how to use her skills to start businesses.
One of the important concept explained by Paula is scalability of a business — multiply your income without multiplying your efforts. This will make a business profitable, faster.
Ariana
With over $45K of credit card debt and a surmounting education loan, Ariana seeks help from Tiffany to rein in her spending habits.
Ariana’s goal is to be not afraid of money.
Tiffany asks Ariana to categorise her purchases into the following:
- Needs — what is necessary for living (mortgage, grocery, etc)
- Loves — what will be fulfilling (vacations, better education for kids, etc)
- Likes — impulse buying (most of what’s purchased online), and
- Wants — things which you would like to buy but can do without (3 types of detergents when washing can be done with one)
Tiffany advises that one should spend more on Needs and Loves because that helps in living more of life and cut down on Likes and Wants because that hampers having a fulfilled life.
Ariana achieves this discipline by splitting her paycheck into multiple buckets as per her requirement. This ensures she is spending only what’s left after saving.
Kim & John
The last storyline introduces us to a couple — John is an engineer who was laid off during covid and is now a stay-at-home dad. His wife, Kim is a Psychotherapist whose practice is thriving. Their problem is that the more money they make, the more they end up spending.
For this exercise, they are paired with Pete Adney a.k.a. Mr. Money Moustache.
Pete understands their spending habits and mentions that for their goal to retire early, they need to save atleast 25x of their living expenses in investment. Not income, but expenses. Terms like PJM (Purchase Justification Machine) and FIRE (Financial Independence Retire Early) or early retirement, also appear during their conversations, but the bottom line is to reduce their expenses and increase their savings as to have more time and financial independence.
My take
The central idea of the movie is to create a healthy relationship with money. Few advices that I follow diligently to manage my finances are:
- Income — Savings = Expenses
- Save 5x of monthly expenses as emergency funds before starting to invest
- Ensure to keep topping up investments (SIPs or direct investments) annually as your income increases
Everybody talks about retiring early, but the real goal is to have the freedom to choose when to work, where to work from and who to work for.
