Talking with Tess Vigeland about the psychology of money

As part of the Get Rich Slowly course, I interviewed 18 of my favorite financial experts. Combined, these interviews comprise over eight hours of audio and more than 200 pages of written transcripts, all of which are available as part of the package.

Some of this stuff is too good not to share with a broader audience. Today, by request, I'm posting a piece of my conversation with Tess Vigeland, the former host of Marketplace Money. Tess and I have become friends over the past few years, in part because we both grew up in Portland during the same time. This interview is a little different than others in the series because it wasn't recorded over Skype; Tess and I chatted at my kitchen table.

Some of you will be pleased to hear that I actually edited this to make it more readable. Enjoy!

J.D.
I think it's interesting what you said about there being all these different books that try to prescribe a formula or to approach personal finance or financial literacy from a mathematical perspective. There's some formula to take care of it.

After I wrote [Your Money: The Missing Manual], I started talking with publishers about what a second book might be. My idea was to focus on something that explored the psychological side of money. In particular, I wanted to go around and interview different people. I would've called it something like The Millionaire Project. I would go around and interview people who became millionaires and ask them how they did it.

Tess
Just like The Millionaire Next Door.

J.D.
Well, except for that's more of collective data. This would be letting them actually tell their stories and editing them down and then having anecdotes. They're not interested in it. The publishers aren't interested in it because —

Well, now I'm going to get into a rant on publishing. Sorry for this little tangent. But the publishers, when it comes to publishing a book, they're interested in what has sold already.

They're inherently conservative organizations, and they don't want to take risks. So when you come out with a new idea or an idea for a new type of personal finance book, they're not really interested in doing that. They want to do what's been done before, which are these books that prescribe formulas. And while they'll sell 8,000 to 10,000, maybe even 30 or 40,000 copies, they're not really helping solve the problem. I think if you look at the actual personal finance books that are now considered classics — something like The Richest Man in Babylon or The Millionaire Next Door or Dave Ramsey's Total Money Makeover or Your Money or Your Life from Joe Dominguez and Vicky Robin — there's definitely some prescriptive elements there, but most of these books take a look at the psychological side of personal finance to some degree.

Dave Ramsey's a perfect example. While he definitely says, “Here's how you should do a budget, here's how you get out of debt, here's how you save for the future,” his whole focus is actually on changing the way people behave. I think that's so smart.

Tess
True, true but then when he gets into investing —

J.D.
Oh yes, he makes some assumptions that are incorrect. All of us in the personal finance world get tense with Dave Ramsey's assumptions about investing.

Tess
But the fact is you know on the plus side he has helped an enormous uncountable number of people.

J.D.
And I'm one of them.

Tess
But you know I would say that when it comes to all those books and prescriptive…You know, the show that I hosted was, at least for several years ,it was a call-in show. So we would have people calling in from around the country with their finance questions. And the last couple of years I was there we started moving into some of the more behavioral stuff, some of the psychology of money which is — it's a little kind of — what's the word I'm looking for? It's kind of wishy-washy right?

J.D.
Kind of fuzzy or undefined.

Tess
Fuzzy, yeah. That's the complex word that I was looking for. Thank you, J.D. [Laughter]

And so we would have people write in and say you know, “This is not what I'm looking for. I need you to tell me how to figure out which 529 plan is going to be best for my kids. I need you to tell me how to find a checking account that will actually give me interest. I need you to explain to me a CD ladder.”

Which A, made for crappy radio. But B, what I really discovered over those years is that you can tell people that until you're blue in the face but they don't follow through on it and they come back with the same questions over and over and over again when all they have to do is Google it. All they have to do is you know, read economics 101 or not even economics 101. How about Personal Finance for Dummies?

What they didn't want to hear was that their emotions were playing a part in this, and that that's something that they had to learn how to control. It's too much work and it requires you to actually think about what you're doing with your money. Most people don't want to do that. They don't want that to be one more thing that they have to think about in their lives.

You know, they have to get their kids to school. They have to get their job done at work. They have to do X and X and X. People seem to think that they shouldn't have to do that kind of work on their finances. And they don't want to. I don't know why people think of that because it's such a huge part of your life. Money is part of pretty much every aspect of what you do.

J.D.
Absolutely.

Tess
That's not saying that it's the most important thing in your life but —

J.D.
No, it just kind of permeates everything in your life.

Tess
Yes, it permeates everything that you do. So, you know, people who say that they can't take two hours a month to go over a budget, or even just to go over your credit card statements or even just to look at your retirement fund. If you can't make the time to do that, you are making the choice not to be invested in your own money.

J.D.
Right. I forget what the exact phrase is but it's something like if you fail to choose you choose to fail. That's what it is.

Tess
That applies to money just as much as anything else.

J.D.
Absolutely. So, the project that I'm working on, for which we're doing this interview, is how to be the chief financial officer of your own life.

Tess
I like that.

J.D.
What I'm really trying to encourage people to do is to take control of their financial situation. I feel like so many people are like I used to be: just passively waiting for something magic to come along and —

Tess
Or blaming other people for their problems.

J.D.
Or blaming other people, absolutely.

Instead if you say, “Okay, screw that, I'm going to be in charge of this, I'm going to be the chief financial officer of my own life, I'm going to make the decisions, I'm going to do the research and I'm going to make the smart choices,” I think that by becoming proactive, people can solve not everything, but they can solve a lot of the problems. They can find answers by themselves without trying to have the solutions fall in their lap.

Tess
Right, right. And I think it's also because there is an industry around the subject. I mean, the personal finance industry, I think, is a huge problem. It's not just the authors who write the books that they shouldn't but it's the Fidelities of the world, it's the banks, it's all these people who you are their last priority. You are not their priority. The financial industry could give two [hoots] about you. You know?

Which is why by the time I left Marketplace, I really was at the point — and I did this with my own finances — where I believe that simple is best.

J.D.
Absolutely.

Tess
The more simple you can make everything, the better. For example, my retirement fund. This is something that people are crazy, crazy confused about: “Like, oh my God! Should I go into emerging markets? Should I buy bitcoin? Should I have large cap or small cap? I don't know anything about this.” Well then, don't bother. I have 50 percent of my retirement fund in a total market index fund, and I have 50 percent of it in a general bond fund.

J.D.
That's essentially what I recommend.

Tess
I never think about it. Yes, it means maybe I'm not getting 8 percent return or 10 percent or whatever somebody else is promising you, but I don't have to worry about it. I don't have to think about it because I'm protected on the upside and the downside.

I don't care if I'm getting 3 percent. At least I'm not worried that I'm going to lose it all because I'm protected on both the upside and the downside. It's one of those things that even though I was involved in it for years on end, I don't want to have to think about it. I don't want to have to think about my retirement fund, so I don't. I don't even rebalance. I don't need to. It's 50/50.

J.D.
I don't rebalance either. Mine's a little bit more complex, but it's still made up of just index funds.

Tess
Then people are like, “Well which index funds should I have?” And they can't figure that out for good reason. Maybe you're in a plan that has 50 different options for you, even just index funds. Which is why I keep it even more simple than that. It could not be more simple unless I had it all in cash — which is not a good idea.

J.D.
I think that, Tess, you're onto something here. I agree that simple is the best. Because I think the simpler you can make things, the more efficient you can make things, the more automated you can make things, the more likely you are to follow through.

Tess
And the less you have to worry.

J.D.
And the less you have to worry. The more you could just focus on enjoying life.

As much as I'd like to share more, I need to stop things there. There's much more in my GRS course. And now it's time for me to take a much-needed vacation. I'm off to California for a couple of weeks, where I'll meet some GRS readers (including Tyler K!). I'll see you all in June!
More about...Psychology

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Nicole
Nicole
6 years ago

The financial world needs more people like Tess. This is the BIG thing that brokers and advisors are missing.

Babs
Babs
6 years ago

I’m a fan of Tess & I am a fan of Marketplace(APM). “I don’t care if I’m getting 3 percent. At least I’m not worried that I’m going to lose it all because I’m protected on both the upside and the downside. It’s one of those things that even though I was involved in it for years on end, I don’t want to have to think about it. I don’t want to have to think about my retirement fund, so I don’t. I don’t even rebalance. I don’t need to. It’s 50/50.” Sometimes I worry that I am too risk… Read more »

Anna
Anna
6 years ago

I’m getting pretty sick of reading JD’s advertising spiels on here. Every time it’s a post by JD, he mentions his “course” or his books or his other blog or some crap that I don’t care about. Is this blog JD’s personal advertising platform now? If so, it might be time for me to unsubscribe.

None of the other authors have all this advertising that goes along with their posts. It would be best to remove all that crap from JD’s post as well.

El Nerdo
El Nerdo
6 years ago
Reply to  Anna

Best for who? Unlike the other writers, who get paid, JD posts here for “free”– that means of course that he must get rewarded in a different way. Just like most unpaid reader stories that get posted on Sundays, he gets to advertise his product. Otherwise, what’s the incentive? Considering JD’s net worth, I doubt he’d labor for the going rate, so my guess is you would have to either get his articles with the ads, or not at all. I’m not saying that you have to like his articles, I’m just explaining the tradeoff. You can subscribe or unsubscribe,… Read more »

Vanessa
Vanessa
6 years ago
Reply to  Anna

The course is called “Get Rich Slowly,” so naturally it’s going to be mentioned here a lot. Seems appropriate to me.

Mike in NH
Mike in NH
6 years ago

I can ignore the advertising aspect as we are constantly bombarded by advertisements everywhere we look on a daily basis already.

The problem here is content, something for which the scraps of this conversation severely lack.

This could have been summarized in a post of maybe two actual sentences. I think the lack of reader comments speaks for itself.

Looby
Looby
6 years ago

My comment is to JD’s interview skills- I’d hope it’s his editing but having read the unedited dialogue with Gretchen a couple of weeks back- I don’t think that’s the issue.
I get that JD knows these people but interviews tend to go better and elicit more information if the interviewer learns to say as little as possible and stop steering the conversation.

Kiernan
Kiernan
6 years ago

50% bonds is a surprising allocation for someone in their 40s (I think?)

Fredrik von Oberhausen
Fredrik von Oberhausen
6 years ago

The problem arrives with the quantity of choices that are given in terms of financial products. People do not have the education or “gut-feeling” for which products are good. There are so many Funds, so many ETFs, so many Stocks, so many Bonds to choice from that it gets overwhelming and they therefore also listen to the financial “expert” telling them what they should invest in. So for me this is not a matter of a fuzzy psychology of money it concerns even more basic psychology of choice and deciding to chose something. These products you can neither taste or… Read more »

Mick
Mick
6 years ago

I thought the whole point of financial independence was not having to sell your time, skills, etc. for money, i.e. being free to follow your passions regardless of remuneration.

If JD is financially independent, why is he selling his course here? Especially when he used to give this information out freely?

I agree, using GRS as an advertising venue for a PF course seems to contradict the original mission of the blog.

On the other hand, I love Tess V. and miss hearing her beautiful voice on Marketplace.

imelda
imelda
6 years ago
Reply to  Mick

Because he wants to, I think?

Remember, JD ran GRS for at least a couple of years before it started becoming profitable. There’s definitely love behind his work on personal finance. Besides, he’s not a billionaire, I’m sure the extra money doesn’t hurt.

I am a little nervous that this blog will become TOO ad-heavy, but so far they’ve avoided that. Unlike Ramit Sethi’s blog, which I stopped reading because it really became constant shilling for his paid courses.

Scott
Scott
6 years ago

El Nerdo,

Just because something is free does not necessarily make it worthwhile.

Tim
Tim
6 years ago

I am disappointed that JD monopolizes these interviews and steers it towards his desire topics and his projects rather than letting the interviewee talk about their expertise. It almost feels at time that JD is the guest interviewee.

Chris
Chris
6 years ago

I too am getting tired of the advertisements. If anything, they are turning me OFF from his course, not towards it. The main problem I have is not that advertising is taking place (nothing wrong with a site generating income), but that it’s coming from a person who has not been involved with this community for years. Look at JDs posting history for the past 2 years or so… Very little and infrequent posting. He’s here, he’s gone, he’s back again, etc… All very eradic. Then immediately leading up to his course’s release and now right after it we have… Read more »

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