This month I thought I would ask my smart friend what we should do when it comes to money. When I say smart, I mean very smart. John Bogle? Warren Buffett? Yes, and more. My smart friend is called Artificial Intelligence, AI for short. My friend has taken in huge amounts of data, analyzed it, learned from it, and then shoots it out whenever I ask. Below are my questions and the answers from AI.
Is capitalism or socialism best for Financial Freedom? My friend says capitalism wins if you want more freedom to create a better future. It does reduce taxes, but it also involves more risk as the individual has more responsibility. My friend says socialism involves much higher taxes and limited opportunities with heavy central planning (politicians). Capitalism gives me the chance to live out my dreams. Check.
How do I create a better life? Creating a better life is built on micro-habits and consistent, daily actions rather than massive, overnight transformations. Start by defining a personal vision, building positive habits slowly (like prioritizing sleep, nutrition, and relationships), and taking control of your immediate environment to support your goals. Take full responsibility for my life. Check.
How do I avoid spending all of my money? My friend says to automate my savings so my money goes to my investment accounts before I see it. Paying myself first is required as I add friction to my spending, basically making it harder to spend money. I need to start tracking where my money is going so I can set up a budget for where I want it to go. Prioritize saving over spending. Check.
Why is it so hard to save money? According to my friend, saving money is challenging because of a combination of economic, psychological, and modern lifestyle factors. Psychological hurdles include instant gratification and lifestyle creep as income goes up. We apparently put more emphasis on the present instead of the future causing us to spend more and save less. Financial therapy is needed. Check.
How much should I save to reach Financial Freedom? My friend says I need to first identify how much I will need for my lifestyle beyond the job. If I need $40,000, then I need $1 Million with no other income. If I need $80,000, then I need $2 Million with no other income. If I find other income sources, I will need far less. It looks to me like a simple math equation. When the math works, it's time to launch. Check.
Which is better, managed funds or index funds? My friend is clear on this one. Index funds are considered better because of lower fees and more tax efficiency. The results are better over the short run and much better over the long run as compounding takes place in the investors account instead of Wall Street and the advisors. Index funds make me the casino, not the gambler. Check.
Which is better, high income or high net worth? My friend says high net worth is generally better because it represents an accumulation of wealth and financial security. High income doesn't represent anything beyond a big paycheck. One demonstrates long term financial security and the other is quite vulnerable to the high paying job. Passive income gets me to Financial Freedom. Check.
Can materialism hurt me? My friend says it can anchor my self-worth to possessions, which often triggers a cycle of debt and constant comparison to others. Psychological research consistently links this mindset to higher rates of depression, anxiety, and a diminished capacity to appreciate non-material aspects of life like deep relationships and experiences. A materialistic life makes life much harder. Check.
Which can hurt me more, market risk or inflation risk? My friend says, while market risk is loud and scary in the short term, inflation risk is often more damaging over the long term. Market crashes cause immediate, visible drops in my portfolio, but inflation operates silently, permanently eroding my purchasing power and reducing the real value of my money over time. Inflation is my true enemy. Check.
Do the people I hang out with matter? My friend says, yes, absolutely. The people I surround myself with shape my habits, mindset, and overall well-being. Research shows that I tend to absorb the emotions, behaviors, and even lifestyles of those I spend the most time with—often referred to as being the "average of the five people closest to me." Get the right people around me. Check.
How do I avoid being a loser? My friend says, shift my focus from seeking external validation to taking responsibility. He says I should build a daily routine focused on continuous self-development, execute my goals rather than just talking about them, and replace passive media consumption with the active pursuit of skills and interests. Prioritize execution over talk. Check.
What does unconditional giving do to my brain? My friend says unconditional giving triggers a rush of "feel-good" neurochemicals like dopamine and endorphins, activating the brain's reward center. It also releases oxytocin to foster social connection and lowers cortisol to reduce stress. This response quiets the brain's fear centers, promoting longevity, and lower blood pressure. Do more unconditional giving. Check!
What does The Crazy Man in the Pink Wig say? My friend has plenty to say on this matter. You can read about it here. Here is what my smart friend has taught me. The truth is out there and it can improve our lives when we are ready to receive it. I portrayed a poor version of AI for folks until the real thing came along that was able to bring a lot more data to the conversation. Embrace it. It can change your life!
