This article was originally published in The Northern Daily Leader on 21 July 2012.

The Baiocchi household had a momentous day recently – it was the occasion of Jack’s eighteen month check-up, where the nurse would measure, prod, poke and generally assess whether or not he was developing at the rate he should be. It seemed a bit unnecessary to me. As far as I was concerned, all the important developmental milestones had already been achieved: he knew not to stand in front of the TV when the rugby was on; he understood that the Wiggles could be watched for no more than 18 hours out of a full day; and he knew what the TV remote was and when to bring it to me when I needed it. He hadn’t quite grasped the concept of fetching a beer from the fridge on command, but recent progress had been encouraging.

So you can imagine my surprise that day when the nurse said that Jack’s vocabulary was poor; that by the age of eighteen months he should know between 50 to 100 words. Liz and I looked at each other with raised eyebrows, as deep down we knew that we could only reliably identify about 5 words, and even then we were being generous. It occurred to me that learning to fetch the TV remote and throw the rugby ball perhaps wasn’t the best use of the time Jack and I spent together.

When we got home that day, Liz and I decided that the Wiggles were banished, that Lego, balls, sticks and all the other fun toys were to be locked away – from now on Jack’s only source of fun would come from books. Before the new regime took over however, I turned as usual to Google for advice on Jack’s apparent slow progress. Some quick research produced startling results – it turned out that the nurse’s benchmark was just one of many. Other experts referred to a vocabulary of up to 20 words, with some as low as 10 words. Jack was saved – the toys could stay and we weren’t going to be enrolling him in vocab-bootcamp.

The fact that Jack’s progress didn’t necessarily match up with another toddler the same age reminded me of how we all progress financially at different speeds. Some people are just starting down the path to wealth accumulation; others are already enjoying the fruits of years of planning and investing. The message is that there is no right or wrong strategy we should be following: we’re all unique and how you structure your finances should reflect that uniqueness. The key is to make a start – whether it’s investing, saving or learning to fetch a beer for dad, the sooner you start, the sooner you’ll achieve your goals.

This article originally published in The Northern Daily Leader on 7 July 2012.

Most people are familiar with the famous poem by Robert Frost, ‘The Road Not Taken’, which contains the well-known line “Two roads diverged in a wood, and I — I took the one less traveled by”. There are a number of different interpretations of that line, and indeed the poem itself, but a common view is that the poem encourages us to be non-conformists. Not to be like everybody else and follow the well-worn road, but to be different, to take a less-travelled path.

Of course, being different to everyone else is easier said than done. There’s a certain sense of safety in numbers, and people who stand out from the crowd can often find themselves occupying a lonely spot, sometimes even a target for the crowd. How we look and dress for example, lets us either blend into or stand out from the crowd. As a teenager I had a standard uniform to wear to parties and other social events: brown patterned-leather shoes, acid-wash jeans, a paisley buttoned shirt and a bandanna around my neck. Did I look ridiculous? I sure did, but so did 98% of the rest of the kids at the party who were all dressed exactly like I was. Conformity may be boring, but it sure does a good job of hiding a terrible dress sense.

The pressure on investors to conform is no less intense than that faced by a shy teenager at a dance party. It’s nicely illustrated by the term ‘investor herding’, which describes how many investors behave in the same manner without any prior planning. You see on the news that the stock market is falling; a friend tells you that he’s sold up and put everything in cash; your cab driver tells you he heard someone on the radio predict a financial meltdown; and you receive an email from someone you’ve never met telling you that the only asset you should hold is gold or farmland. So you call up your stockbroker or advisor and tell him to sell all your investments, invariably just before the market recovers.

If you’ve ever done this, or contemplated doing it, then you have joined the herd, where behaviour becomes irrational and driven by emotion. Analysis and rationality get trampled underfoot as the herd rushes for the exit. Of course, it can happen in reverse as investors jump on the latest bandwagon, be it uranium, gold or poppies, only for the wheels to spectacularly fall off later on. Standing apart from the crowd when it comes to investing can be difficult, but remember that rewards seldom come without effort.

This article originally appeared in The Northern Daily Leader on 23 June 2012.

Recent events brought to mind a quote I was sure I had read somewhere, which went along the lines of ‘May You Have Many Beautiful And Obedient Daughters’. It’s apparently meant more as an insult than a blessing; left unstated is the fact that the father of these many beautiful daughters will one day have to fund a considerable number of dowries as each daughter marries. Fortunately paying a dowry is not common practice in Australia, though it’s fair to say that we do have our own modern equivalent of a dowry payment – paying for your daughter’s wedding.

I’ve started thinking about weddings following the revelation that baby number 2 is going to be a girl. At least, I think so. Figuring out whether a baby in the womb is a girl involves looking for an absence of proof, rather than absolute proof that the baby is definitely a boy. Nevertheless, it seems as though the battle of the sexes in our household will be evenly poised once Kate pops out in late October (yes the name has already been chosen, and I guess ‘Rocky’ is sadly no longer an option). Getting back to weddings, did you know the cost of the average wedding in Australia is now $36,000? That’s roughly what you might expect to pay for a brand new Jeep Cherokee. Rather than outlay that amount of money on a single night, the bride and groom might be better off throwing a tent in the back of their new Jeep and heading off for a six-month trip around Australia, all for around the same cost.

It’s also important to remember that a wedding in 20 years is going to be a lot more than today’s average cost of $36,000. Ignoring the possibility that wedding cakes and dresses probably increase in price faster than the inflation rate, applying an annual inflation rate of 4% means that in 20 years the average wedding will cost around $79,000. I’ve known people to buy small houses for less money. The best approach to dealing with a significant future expense is to start early, start small. Assuming a 5% return on your savings, which can be achieved even with just a high-interest bank account, you would need to save only $192 per month. So it’s quite straightforward; less than $50 per week and you’ll have enough money in the bank to meet the cost of a wedding in 2032. Unfortunately making sure your daughter chooses the right man to marry is not as simple, but I’d encourage you to consider favourably any bloke called Rocky Baiocchi, in the very small possibility that he should one day appear at your front door.

This article originally published in The Northern Daily Leader on 8 June 2012.

Being single can be fun. The anticipation of what the next night out will bring, who you might meet, what might happen…the dramas over love lost and love won. Despite being happily married for some time, I’m not that old that I can’t remember the excitement and adventure of a night on the town as a single guy with a few of your buddies in tow (my wife is out of town this weekend, so I’m free to indulge in a little reminiscing without any severe consequences, such as a night or two camping on the lounge sofa).

For any single guy, the most important accessory on a night out is a wingman. Your wingman is a designated buddy who’s there to assist you in your mission, take the shots if he needs to, and generally play a supporting role in helping you to achieve your goal (whatever that may be). Your wingman has got your back and won’t abandon you even when the chips are down and things are looking grim (for example, when the girl you’re talking to happens to have an insecure and angry body building/kick-boxing boyfriend, who has just spotted you from across the pub). Over the years an unwritten code has developed regarding the role of a wingman; it’s a job with significant responsibility, so proper guidelines are sometimes necessary. An important wingman rule is to be likeable…but not too likeable. Girls judge guys by their friends, so a good wingman is polite, friendly and interesting. Don’t overdo it though; the wingman is there only to assist, not to take out the target himself. The most important rule however, is that the wingman puts the interest of his buddy first. If that means taking punches, buying drinks, being laughed at or doused in beer, a good wingman accepts it all amicably. Being a wingman is a position of trust, it’s not to be betrayed through self-interest.

Although investing and financial planning are not as exciting as a big night at the pub, your financial adviser should be your wingman too. Ducking punches and buying drinks is probably beyond the job description, but your financial adviser must obey the cardinal rule of being a wingman – putting your interests first. Always. Did you know it’s not even a legal requirement that your adviser puts your interests first? Legally there is nothing wrong with investment advice which puts the interests of the business first, not yours. So ask yourself, is your financial adviser a good wingman, or is he only interested in the prize for himself? Distancing yourself from an untrustworthy wingman can be difficult, but at the pub a knee to the groin usually works a trick.

This article originally published in The Northern Daily Leader on 26 May 2012.

One of the most important tasks facing expectant parents is that of choosing the name of their daughter or son. It’s a great conversation for long car journeys or overseas plane travel as there are literally millions of alternatives to choose from. Do you go for traditional and common, quirky and different, or just the plain ridiculous (hello Pilot Inspektor, the unfortunate son of actor Jason Lee)?

My wife and I are back in the name-picking business, following the revelation that baby number two will be making an appearance in late October. However, there’s some disagreement about the baby’s name if it turns out to be a boy. She likes Thomas, Sam and a few other relatively innocuous names. On the other hand I’m pushing for Rocky – that way he’ll have no choice but to become either a boxer or a rugby player when he is older. And as the father of an elite athlete, I’ll be able to bask in the reflected glory. (Actually, I keep insisting it has to be Rocky just to wind her up – it’s surprisingly easy to do when she’s pregnant, dangerous too).

Choosing the right name for your baby can be important. Research has shown that schoolkids with names viewed as being ‘low status’ performed more poorly in maths and reading. It was found that teachers were teaching children differently based on the connotations of their names. It may not surprise you to know that companies listed on the stock market also show similar patterns. Around the time of the dot-com boom, companies which changed their names to something internet-related saw an average increase in their share price of 53% around the time of the change. Six months later their share prices had increased by an average of over 80%.

When the dot-com boom subsequently collapsed, many companies changed their names to remove any reference to the internet or dot-com, hoping for the same benefits as before, but in reverse this time. As an example of investor stupidity, the strategy worked amazingly well. Companies who removed internet or dot-com references from their name saw an average 70% increase in share prices. The moral of the story is that investors, on the whole, can be dumber than you think. Investing based on the name of the company is not a strategy – in the long run the financial viability of the company is more important than its name. Just like with people, it pays to look through the name before forming an opinion or making a commitment.

This article originally published in The Northern Daily Leader on 12 May 2012.

By the third day of their honeymoon in Las Vegas, the newlyweds had lost their $1,000 gambling allowance. That night in bed, the groom noticed a glowing object on the dresser. Looking closer, he realised it was a $5 chip they had saved as a souvenir. Strangely, the number 17 was flashing on the chip’s face. Taking this as an omen, he donned his green bathrobe and rushed down to the roulette tables, where he placed the $5 chip on the square marked 17. Sure enough, the ball hit 17 and the 35-1 bet paid $175. He let his winnings ride, and once again the little ball landed on 17, paying $6,125. And so it went, until the lucky groom was about to wager $7.5 million on the next spin. Unfortunately at that point the floor manager intervened, claiming that the casino didn’t have the money to pay should 17 hit again. Undaunted, the groom taxied to a better-financed casino downtown. Once again he bet it all on 17 — and once again it hit, paying more than $262 million. Ecstatic, he let his millions ride — only to lose it all when the ball fell on 18. Broke and dejected, the groom walked the several miles back to his hotel. “Where were you?” asked his bride as he entered their room. “Playing roulette”, he answered. “How did you do?” she asked. “Not too bad”, replied the groom, “I only lost five dollars”.

This story, known as the Legend of the Man in the Green Bathrobe, is most likely not true, but it certainly contains an element of truth. That’s because it very clearly illustrates a well-known principle of behavioural economics – the ‘house money’ effect. Research has shown that people take far more risks with money that they have won in a windfall or from gambling. It’s in the wiring of our brains that when gambling with earlier winnings from the casino, we make much riskier bets than usual, somehow rationalising that ‘it’s not really my money’. If the Man in the Green Bathrobe had worked hard over many years to save up $262 million, would he have been willing to gamble it all on one spin of the roulette table?

Unfortunately the ‘house money’ effect is not restricted to just when we’re at the track or the casino – it also affects how we approach our finances. Beware of treating windfalls or sudden gains differently from money which you earn through hard work. Treat every dollar the same, no matter how it comes to be yours. Except if you win money playing roulette in your bathrobe – spend a few dollars and buy yourself something nicer to wear.

This article originally published in The Northern Daily Leader on 28 April 2012.

Every new parent appreciates those moments when your little treasure grants you a few minutes of peace and quiet. A temporary chance to be an adult again and not be focused on the next nappy change, the next baby meal, whether the oven is hot, whether the kitchen scissors are too close to the edge of the kitchen bench-top or any of the other hundreds of concerns you were blissfully unaware of before you started a family.

And most parents also know that one way to have a moment of peace and quiet is to chuck the baby in the car, put on a DVD for him or her to watch (if you have one) and go for a long drive. And so, last Sunday, we put Jack in the car seat, popped in a brand new Wiggles DVD, and went for a drive around the Tamworth region. An opportunity for my wife and I to pick up a take-away coffee, go for a drive and have a good uninterrupted chat, if you could ignore the rowdy sounds of ‘hot potato, hot potato’ coming from the back seat.

Being only relatively recent arrivals to Tamworth, we thought it was a good time to have a look at the trees along King George V Avenue – we had seen the newspaper articles about the threat to the trees and wondered what the fuss was all about. To say we were impressed is to put it mildly, frankly we were astonished at the splendour of the avenue of oak trees. A true hidden gem in Tamworth, and a great example of what can be achieved with a little bit of foresight and selfless thinking. And how depressing to think that seventy-six years of history might be felled in the name of ‘progress’.

Thinking of those beautiful oak trees, and the fact that those citizens who planted the trees back in 1936 knew it would take many years before they could enjoy the full benefit of their endeavours, reminded me of how we should approach our finances. Like oak trees, which grow relatively slowly and can take many years to reach maturity, your finances can’t be fixed overnight. Making the most of your financial situation is a slow and on-going process, there are no quick fixes. Don’t start thinking about retirement the day you resign and buy the caravan, by then it’s too late. Just like planting trees, the sooner you start paying attention to your finances, the sooner you will start to reap the benefits of your work. But unlike the oak trees, there is no nasty council to come and chop down all your hard work.

This article originally published in The Northern Daily Leader on 14 April 2012.

There are many ways that you might try and rob a bank. Perhaps you would think to hide in one of the offices until the bank closed, giving you an opportunity to try and crack the safe. Maybe you would just lunge across the counter and make off with whatever you managed to grab out of the cash drawer. If you had the time perhaps you would try tunnelling into the bank from underground, an event which seems to happen quite frequently in movie-land. You might think to do it simply with some forged cheques, hoping to make it to exile in Brazil before the AFP caught up with you at the airport.

McArthur Wheeler is one person who should have thought a bit harder about the various ways to rob a bank. In 1995 he walked into two Pittsburgh banks in broad daylight and robbed them at gunpoint, making no visible attempt to disguise himself. He was arrested a few hours later after CCTV footage of him was released to the local news. When police showed him the footage, he was surprised and mumbled “But I wore the juice”. Apparently Wheeler was under the impression that rubbing lemon juice on your face rendered it invisible to CCTV cameras. Clearly, he was wrong (too much reliance on Google perhaps?).

The story of Wheeler comes at the start of an excellent research paper from two researchers at Cornell University. In the paper, the authors considered the issue of incompetence, hence the short story of McArthur Wheeler and his not-so-clever crime spree. In what has become called the ‘Dunning-Kruger effect’, in honour of the two authors, they found that incompetent people can be so incompetent that they don’t even realise they are incompetent. To put it more simply, sometimes we’re not only stupid, but we’re so stupid we don’t even realise how stupid we really are. Even Charles Darwin knew this, writing in 1871 that “ignorance more frequently begets confidence than does knowledge”.

So what does the Dunning-Kruger effect have to do with finance or investing? The problem is that our confidence in our ability to make rational and appropriate investment decisions is often misplaced. We may think we know what we are doing, but in reality we are deluding ourselves and should let somebody who really knows what they’re doing make the decisions for us. But according to the Dunning-Kruger effect, we’re too dumb to even realise this and so we carry on making the wrong decisions. So be honest and ask yourself if you need expert help. And if you think lemon juice really does make you invisible, you definitely need some help.

This article originally published in The Northern Daily Leader on 31 March 2012.

Exclusivity can be a real handbrake on your social life. There’s always a party or an event to which you’re not invited, a restaurant at which you’re never going to be able to make a booking, or shops at which the size of your credit card is never going to pass muster.

Some years ago a friend, lets call him Steve, told me of a night out he had planned at a new and exclusive nightclub. Primped and preened and dressed in his finest, he waited patiently in the queue and paid the cover charge to enter the club. But before he was allowed into the club proper, he was made to walk past a window, behind which sat one of the club employees – she was checking that people coming into the club had the right ‘face’. Unfortunately for Steven, his face didn’t make the grade and he was ushered through a side-door onto the street, given back his money and sent on his not-so merry way. I had heard of dress codes, but a ‘face code’ was new to me. Though I can see where some face control might be useful – no chance of ever having to bump into Sir Les Patterson while dining at Rockpool for example.

Fortunately financial advisers don’t follow a ‘face code’ (I hope!) – exclusivity should not be a barrier to receiving financial advice. Some advisers may charge more than others, but you shouldn’t be discriminated against based on the balance of your bank account. This is related to a question I am often asked: how much money do you need to have before you see a financial adviser? Many people think that there’s no use getting financial advice unless they have a spare couple hundred thousand dollars lying around. The truth is that you don’t need to have money to justify seeking out financial advice; you just need to be interested in making the most of your financial situation.

If you’re just starting out, financial advice can be useful in identifying some priorities – a savings plan, getting on top of the credit card, how to fund that first home or car. If you have a family and a mortgage, should you be focusing on the mortgage, the kid’s education or superannuation? And if you’re retired or close to retirement, how will you cover your living expenses, what should your money be invested in and what can you do to make it last? And if you are finding your social life needs a rev up, we even discuss financing whatever work is needed to get you past ‘face control’.

This article originally published in The Northern Daily Leader on 17 March 2012.

How great is the internet? Want to know how many ping pong balls fit in a jumbo? Just google it (around 28 million). Want to know Tony Abbott’s date of birth? Just google it (4 November 1957). Want to know how much the world’s most expensive watch costs? Just google it ($4.7 million). Want to know where the….ok you probably get it by now. It’s almost hard to imagine life without access to all of this amazing information. Though of course much of what you find on the internet is of dubious quality – have a look for when the world will end and you’ll see what I mean (21st of December apparently, so go easy on the Christmas presents this year).

Setting aside the impending end of the world, it’s in the area of health that the internet really shines. Be honest, who hasn’t googled their medical symptoms? Self-diagnosis through the internet has become so popular it has even led to the creation of a new word – ‘cyberphobia’ – which refers to a tendency for seemingly sane and rational people to focus on the worst ‘diagnosis’ they find on the internet. A headache becomes a possible brain tumour. Stomach pain could be a perforation of the bowel. Sometimes it’s better just to leave the computer switched off.

As someone who uses a computer everyday however, I find it hard not to indulge in a bit of cyberphobia. Some back pain prompted a trip to the doctor some years ago. I had already googled it and was resigned to finding out I had back cancer or even worse. I was surprised however when, after describing my symptoms to my doctor, he turned to his computer and did a search on the internet. Why was I paying $120 an hour for him to search the internet, when I could (and had) done that myself? Well, it turns out it was money well spent as it took him 30 seconds to determine that I likely had a pinched nerve and wasn’t going to die in two weeks, and just needed to relax, literally.

The benefits of having an expert in his field consider my case were obvious. It’s surprising then that so many people are happy to let their financial health be managed by what they find on the internet and elsewhere. Rather than seek professional advice, we let the internet, the newspaper or the guy on TV tell us how to manage our finances. Go and see a financial advisor, it’ll be money well spent. And do it before the 21st of December – after that it’s apparently just too late.