Practical analysis for investment professionals
15 May 2014

Have You Made a Profit on Your Life?

Posted In: Philosophy

Personal finance can at times seem less scintillating than the world of high finance that is sometimes covered on these pages, but in many ways it’s much more important.

There is simply no way to make money through investing without already having money, and I’ve got bad news: There’s no better way to accumulate money than earning it, saving it, and not spending it.

Why is that so important? Well, investment media occasionally does a poor job reminding its readers that, as far as their wealth is concerned, the most recent high-profile earnings announcement is a passing distraction compared to their savings pattern.

This post’s title offers a simple way to think about it. Imagine that your personal life is a business. Are you profitable? If you’re neglecting your loan balances and buying expensive things on credit, consider how you would react if one of the companies in your portfolio was doing the same thing. What about a company that managed to go a whole lifetime without ever generating a meaningful amount of cash?

We Do This for a Reason

We often rationalize economically destructive decisions by imagining we will clean up our messes in the future. Things will change. Our ship will come in.

People who ignore their economic reality have been characterized as “temporarily embarrassed millionaires,” and the descriptor fits quite well. After all, how easy is it to imagine that things will get better when one of many possible good things happen in the future? All too often, we deny economic reality thinking that a raise, inheritance, or investment gain will offset our bad decisions.

This is pure inertia. It is difficult enough to find motivation for fun things. What about avowedly less fun things, like not spending money? Since none of the other investment advice on this site (or any other) will be of much value until your finances are in control, what sort of steps can you take to bring yourself on a path towards personal profitability?

You Need Big Discipline and Little Tricks

This is a meaningful separation. No matter how clever the personal finance trick, there will always be a risk of financial implosion if your spending habits are not under control. If you manage to save up a meaningful emergency fund and then spend it all on a JetSki, it will be difficult to argue that you’ve improved your lot in life financially. Developing the discipline not to raid your savings is the core skill that will determine your degree of financial success.

With that said, it is possible to reduce the need for financial discipline in your day-to-day life by setting some things on autopilot. In a 2012 profile of Barack Obama, the president’s unique approach to limiting “decision fatigue” came to light. He observes “You’ll see I wear only gray or blue suits; I’m trying to pare down decisions. I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make.”

In that same vein, why would you put yourself in a place where you need to save money manually every single day? What if you could just set yourself on autopilot?

While there are no “set it and forget it” strategies, here are three little tricks that I use to manage my own money that have made my life easier.

  1. Use multiple bank accounts and automatic payments to stay on budget. One of the easiest places to make a financial mistake is in your monthly remittances. It’s obvious that if you forget to pay your bills you’ll rack up late fees, but what about if you forget to save? I divide my paycheck up between separate accounts dedicated to bill payments, spending money, personal savings, and retirement savings. This makes it very difficult to deviate from the plan.
  2. Have some kind of central dashboard and check it regularly. Make sure you have a place where you can easily figure out if your finances are still under control. All of the automation in the world won’t do much for you if you have no way of telling if it’s getting you anywhere. Some rely on the help of a financial planner to figure this out or periodically evaluate their spending while balancing their checkbook. I prefer to use web-based platforms, like Mint or Personal Capital, because they tend to be quicker to update and are easier to stick with.
  3. Pay off debt strategically. Make sure that you structure your automatic payments so that you are getting the maximum return on your dollar. One of the best ways to do this is by directing extra money towards your high interest debt. Though it may initially seem daunting, it’s actually pretty easy to figure out what to do here. Either use specialized services (like for student loans) or just make a list of your loans and their interest rates. Pay the minimums on most of them, and pay down the highest interest one as fast as you can afford. When it’s gone, move on to the next one.

These three tips are just the beginning. We’ve just published something that’s worth checking out regardless of your level of sophistication: the Essentials of a More Secure Retirement. It is a globally relevant guide to getting your finances in order, starting with tracking your spending and moving on to investment strategy.

Remember: if you want to be an investor, you’ll need money. Managing your own prudently is one of the best ways to get some.

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Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
Sloane Ortel

Sloane Ortel is the founder of Invest Vegan, an ethics-first registered investment adviser that manages distinctive discretionary portfolios of public equities on behalf of aligned individuals and institutions. Before establishing her own firm, she joined CFA Institute’s staff as a sophomore at Fordham University and spent close to a decade helping members adapt to a changing investment landscape as a collaborator, curator, and commentator. She is also a co-host of Free Money, a podcast for sustainability-oriented investors with a sense of humor.

6 thoughts on “Have You Made a Profit on Your Life?”

  1. Ken says:

    Thank you for this. This is actionable!

    1. Ken–

      You’re very welcome! Good luck taking action on it, and thanks for reading!


  2. David R.(Canada) says:

    Originally published in book-form in 1926, the definitive book for those trying to save is still “The Richest Man in Babylon” by George Clason.

    Highly recommended.

    1. David —

      I agree! My uncle got that for me as a present when I was 18, and (i hope) it made a lasting impression.

      All best —


  3. Geoffrey Sadler says:

    Sloan Orlet is 100% right, there is no way to amp up cash flow with investment accounts without having some deep pockets to begin with. The best way to pile up cash in the bank, so to speak, is to earn it, save it, and not spend it. And I would add, maybe invest in CDs or penny stocks, or something modest like that. No one I know has worked at a day job, spent money to keep up an upscale lifestyle, and end up every years with a pile of cash to show for it. Most of us make money, spend money, pay taxes, and wind up without much at the end of the year to show for all that work. The lucky ones, or smart ones, save enough to show something for it, but it isn’t much unless they’re lawyers or some other highly paid professional, and can put away $200,000, $250,000 per year without touching it, and don’t touch it. So it adds up. The only other way I have seen to pile up a significant amount of cash quickly is to sell off some sort of future revenue stream, like a structured law suit, or lottery winning paying off yearly – or, if you’re around 70 and have significant value in a convertible term or universal life insurance policy, and sell life insurance policy. Of course the catch is figuring out how to go about selling a life insurance policy for cash; and selling your life insurance policy for cash isn’t something you can do off the cuff… Seniors really have to know what they’re doing, and study companies that buy your life insurance policy…. Companies that are professional and will sit down and talk to you in-depth about selling a life insurance policy; companies that will let you know right off the bat – can you sell your life insurance. Realistically, are you a real candidate. And if they’re truly good at buying out life insurance policies, they’ll be able to have those conversations with you. Without any salesmanship… just the facts, ma’am. Just the facts. And then there’s researching online, asking Google, “Can I sell my life insurance policy…” and can you sell your life insurance policy to a legit life settlement company for real retirement nest egg money… not $2,000 or $3,000. Real money. Seniors will spend several day Googling, “Can I sell my life insurance policy?” and “How do I sell my life insurance policy for cash?” or “How do you start the process for selling your life insurance policy for cash?” and, “Who purchases life insurance policies!” Listen, as far as I’m concerned selling a life insurance policy for cash, is, for anyone, and especially for seniors, a critical move… so you can’t mess it up by not knowing what it’s all about. Seniors I know, who have been paying into universal life or convertible term life insurance all their adult life, and usually will go to sites like, or The Insurance Journal, or, to research, or will study an established life settlement company, like Serious policy holders I know called a company like that up to ask, “How do I know how much my policy is worth?” and “Who are companies that buy your life insurance policy?” And by the point they are asking those types of questions, they are probably on their way to actually selling a life insurance policy. The deal, getting a strong percentage for selling life insurance policy… selling universal life insurance, or a convertible term policy… is strictly up to the policy holder. But it sure helps to have studied the subject a bit, or to have some friends who know a thing or two about the process! No one wants to go in there knowing nothing – if you want to walk out with 40% or 50%, 60% of a universal life or convertible term life insurance policy in cash value… 5 to 10 times as much as an insurer will give you… challenging, as it were, Sloan Orlet’s wise formula.

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