I am a believer that good decisions in any area of our lives are based on having at least a basic understanding of that subject. Many times I meet new perspective clients who are miserable with their investments only to discover that they did not understand even basic concepts about what they owned. Imagine if you had no idea how a car worked – not even where the gas went… or understood that the car needed gas to run… and then got upset at the car when it ran out of gas and stopped. I think that is a good analogy here. Now, you do not have to be an expert in finances just like you do not have to be a mechanic with your car. That’s what professionals are for. But you should be able to recognize if the machine is running out of gas.
One area of our financial lives that we all need to understand is a basic idea of how the economy works. Ray Dalio, founder of one of the largest hedge funds in the world Bridgewater Associates, has put out various videos over the years on different financial concepts. The one below titled “How the Economic Machine Works” is a good one. It entertains and educates. So grab a cup of coffee and get comfortable. It’s about 1/2 hour long and worth the time invested.
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