Why Smart Financial Decisions Start With a Default Option | Ep. 47

Most bad financial decisions do not come from a lack of information. They come from inaction.

In this episode, Tré Bynoe explains why “it depends” is technically true but often useless when people need to act. He lays out a better way to make financial decisions: start with a strong default, then look for reasons not to use it. Tré walks through three areas where people get stuck most often—investing, budgeting, and choosing between debt repayment and investing—and shows how to make progress without overcomplicating things.

This episode is especially useful for Canadian professionals, business owners, and anyone who tends to delay money decisions because they want the perfect answer first.

What listeners will learn

• Why inaction is still a financial decision
• How to use a smart default instead of freezing up
• Why a low-cost globally diversified equity fund is the investing default
• How to think about budgeting as cashflow management
• When investing should beat paying down low-interest debt
• Why numbers should lead before emotion steps in

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Transcript

Tre 0:00

Have you ever wondered why people always say it depends when it comes to financial decisions. we'll take a look at why people say that, but more importantly, I'll give you a different way to think about decisions I'll talk about why it's important to change what your default option is. Hello and welcome to the Plain English Finance Podcast, the podcast dedicated to helping you make smart financial decisions. I'm your host, Tré Bynoe and I'm joined with my wife.

Sierra 0:26

Hello? Hi, You, you changed it?

Tre 0:30

Yeah,

Sierra 0:30

you threw me off.

Tre 0:31

Oh, I, yeah, I changed it up. Right on. so this episode is on. See, hopefully it'll be a short one. I say that a lot. Yeah. Uh, this episode is talking about different decisions that people make and I think a, a lot of, a lot of the reason that people make poor decisions is due to inaction.

Sierra 0:51

Mm-hmm.

Tre 0:51

And what is my favorite saying about inaction?

Sierra 0:54

No decision is still a decision.

Tre 0:55

Absolutely.

Sierra 0:57

You really put me on the spotlight there. I was like, I hope it's this one, this time. Yeah.

Tre 1:02

And it's, you have to live with the consequences either way.

Sierra 1:06

Mm-hmm.

Tre 1:06

So we'll go through three things that are really important decisions that people like to put off.

Sierra 1:14

Mm-hmm.

Tre 1:15

And what the default option should be. Okay. And maybe you even might know what they are, so maybe you can tell us what their default, I'm hoping is for these, hoping for these three things. So first thing is gonna be investing.

Sierra 1:28

Okay.

Tre 1:28

How to invest. Second thing is. What we should be doing with our budgeting. Okay. And things like that, like what the goal is. And the third thing is debt versus investing.

Sierra 1:40

Okay.

Tre 1:41

Okay. So which one do you wanna start with? Which one are you most confident with?

Sierra 1:45

All of them. None.

Tre 1:47

You can give all of them that.

Sierra 1:49

Let's try investing, but I need a hint.

Tre 1:52

Okay. So, or something. When people say how, if somebody came up to you and they said, Hey, Sierra How you're married to an advisor, how should I invest? What is the, without saying it depends. What is the default option? Is the, what should the default be? I don't know what to do, so I do this.

Sierra 2:11

I would say can I ask them questions?

Tre 2:17

Okay, sure. Ask me a few questions

Sierra 2:18

I would. It depends how old they are. Oh, it depends.

Tre 2:22

Ah, not say it depends,

Sierra 2:23

but it does. So I,

Tre 2:24

okay, so ask the question.

Sierra 2:25

How old are you?

Tre 2:26

I am 45 years old.

Sierra 2:29

What's your timeframe for investing?

Tre 2:34

I just have money to invest.

Sierra 2:36

Okay. And you just wanna invest you, what's your goal?

Tre 2:40

I dunno. I just dunno what to do with the money.

Sierra 2:41

What's your risk tolerance?

Tre 2:43

Dunno. Dunno what to do. The money.

Sierra 2:45

You should go talk to my husband because it depends. That's the default.

Tre 2:51

No.

Sierra 2:51

Okay. I would probably say a broad index fund.

Tre 2:56

A hundred percent globally diversified index fund.

Sierra 2:58

Is that what I just said?

Tre 3:00

Close enough. Yeah. Broad is

Sierra 3:02

fund

Tre 3:03

that. That should be the default. I don't what to do. That is the default. So wait again, what time frame?

Sierra 3:07

Say it again. Globally diversified

Tre 3:10

equity fund.

Sierra 3:11

Equity fund?

Tre 3:12

Yeah, an index fund. Okay.

Sierra 3:13

Okay.

Tre 3:14

That's the default. Low cost, own everything.

Sierra 3:18

Yeah.

Tre 3:18

That's the default.

Sierra 3:19

Mm-hmm.

Tre 3:20

So then what you do, so now that that's the default. The default isn't sit there in cash and not know what to do with it and leave it around, that's the default. So now we look for things, reasons why we shouldn't do the default.

Sierra 3:34

Okay.

Tre 3:35

What are some of those reasons that we wouldn't want to invest in a hundred percent equity diversified portfolio?

Sierra 3:39

I said, how old they are and what they're using the money for. Because if they're gonna be taking it out in three months,

Tre 3:48

then it's a reason not to do that. Right? If they, uh, if they haven't got an emergency fund yet, it's another reason not to do that. But instead of the default being leave it around doing nothing, that's what you do with the money.

Sierra 4:00

So would you say you could put it in And then fix it after? Is that a wrong statement?

Tre 4:06

I would say ideally you ask these questions first.

Sierra 4:08

Yeah,

Tre 4:08

right.

Sierra 4:09

Yeah.

Tre 4:10

But

Sierra 4:11

not saying it's

Tre 4:11

technically yes if you do it every day, but if that's what you do every day and it's your entire life and that's your investment philosophy, like it is ours. Yeah, you could, because we have money in there right now. What's the difference between adding more or taking it out or whatever, like, you know, just,

Sierra 4:26

yeah,

Tre 4:27

it's the default option.

Sierra 4:28

I saw a post, that's why I'm asking.

Tre 4:31

Okay.

Sierra 4:32

That said. Oh, I can't remember exactly what it said. Sorry. I just like disappointed myself. It was a circle and the circle was messy, drawn, messy, and it said something like, make it first and perfect it later, or something.

Tre 4:52

Okay. Yeah,

Sierra 4:52

because it, it was showing that you need it in order to make.

Tre 4:57

Do as much as you can.

Sierra 4:58

Yeah.

Tre 4:58

Now, as quickly as possible.

Sierra 5:00

I really thought, oh, in my brain, I was like, this is, it was

Tre 5:02

profound.

Sierra 5:03

This is a good connection. And I'm like, I can't remember exactly what it said. There's a circle. Sorry.

Tre 5:10

But you're right. You're absolutely right. That's it doesn't have to be complicated. Don't over complicate it..

Sierra 5:14

Yep.

Tre 5:15

That's the default option.

Sierra 5:16

Yeah.

Tre 5:16

Okay.

Sierra 5:16

It's do something and then you can work on the.

Tre 5:20

Small stuff later. The worst thing to do is to leave it around doing nothing.

Sierra 5:24

Yeah.

Tre 5:24

Okay.

Sierra 5:26

So I got one point?

Tre 5:28

Yeah, one's good.

Sierra 5:29

Okay.

Tre 5:29

One point.

Sierra 5:30

one

Tre 5:30

outta three. Okay. Then it was debt and budgeting. Which one do you wanna tackle next?

Sierra 5:35

Budgeting.

Tre 5:36

Okay. What is the goal? What's the default option with budgeting? Um, So, hey, Sierra. What do I do with my budget?

Sierra 5:45

Do you have one?

Tre 5:47

I dunno. How should I budget? Where should I? Where should

Sierra 5:51

You You should set your expenses, not track them, step one. And you should not tie your expenses to your income.

Tre 6:08

Good. That's two. That's two really good principles. Yeah.

Sierra 6:11

So. Get your piece of paper out and write down your expenses, and then everything else, once you know exactly what your expenses are, everything else goes to investing.

Tre 6:23

Mm-hmm.

Sierra 6:24

Very, very, very simply put, that's

Tre 6:26

yeah, I, I would say the default option is to do something that works for you.

Sierra 6:32

Mm-hmm.

Tre 6:33

There are lots of ways to budget.

Sierra 6:34

Yeah.

Tre 6:35

If you are feeling it is restrictive, it is because you are doing well, not restrictive.

Sierra 6:40

Impossible

Tre 6:41

in labor intensive. okay. If you're finding that, it's well, it's just taking up so much time and so much energy. Yeah, you're doing it wrong. There are better ways to, to do it. As I've already explained in lots of episodes before.

Sierra 6:52

Mm-hmm.

Tre 6:52

We look at our budget once a year and then it's implementation, which takes. You a little bit of time to etransfer the food budget and me a little time to go through a credit card statement and take the money from the right accounts, right?

Sierra 7:07

yeah,

Tre 7:07

half an hour a month.

Sierra 7:09

If that,

Tre 7:09

if that, so,

Sierra 7:10

I just wanna quickly say we also have been watching that show Til Debt Do Us Part.

Tre 7:14

Oh yeah. Great TV

Sierra 7:18

I was gonna say eventually I want you to do a React video that, that, yeah. But anyway. The last episode though, I said, oh, that's actually a good idea for people who

Tre 7:27

need visual.

Sierra 7:28

Yeah. Are better at visualizing where she gave them fake dollars,

Tre 7:32

that monopoly money.

Sierra 7:33

Yeah. And they had each category on a card and they had to put the dollars into the categories. And I was thinking, wow. that's smart, but it's a lot of work. But I feel for somebody who's really struggling, that could help.

Tre 7:46

Yeah.'cause they were struggling on just making the budget balance. Right?

Sierra 7:50

Yeah.

Tre 7:50

And that's the thing, a lot of people, which is why the default is to do it because a lot of people don't even know where their money is going. And if you're in that boat, it's. Just being in control of it is the key thing.

Sierra 8:01

I think that's why she made them do that. Yeah, because they were chronic credit card users. They had no idea what they were spending.

Tre 8:08

Yeah.

Sierra 8:08

As per the usual

Tre 8:09

And depending on your problem, depends on the type of budget that you would apply. So for example, somebody that is, has too much cash and their account just keeps going up and up.

Sierra 8:20

Mm-hmm.

Tre 8:20

Also has a problem. Budgeting also has a budgeting problem.

Sierra 8:25

Why,

Tre 8:25

why are you looking at me I feel attacked.

Sierra 8:29

I'm why do they have a problem? What a

Tre 8:32

Because a budget budget those other people, not me. Because the point of a budget is to determine where your money is going, not to necessarily be restrictive on your spending.

Sierra 8:41

Mm-hmm.

Tre 8:42

That's all it is. It's, it's, you're allocating, you're not budgeting. Doesn't have to be restrictive, which is why I try to call it cashflow management more than budgeting. Budgeting also,

Sierra 8:49

which sounds like way more fun. Who wants to budget when you can cashflow, manage your cashflow?

Tre 8:59

Okay. It's important. Okay. debt.

Sierra 9:03

Debt, hit me.

Tre 9:05

Invest or what should I do I have$50,000 extra? Do I invest it? Do I pay off my mortgage? What do I do?

Sierra 9:11

Okay. Very specifically though, is it a mortgage? Is that your debt?

Tre 9:16

Good question. Yes.

Sierra 9:19

Okay. Then it doesn't matter. We've talked about this in another episode on Paper Invest.

Tre 9:26

So what should the default option be?

Sierra 9:28

The default option should be invest, I think.'cause on paper,

Tre 9:32

yes, absolutely. The default option. Wait. Look, you go

Sierra 9:35

three for three. Yeah.

Tre 9:38

The, the default option should be what is the correct thing to do based on the data and based on the numbers. Yeah. Ignore human emotion. That should be the default option.

Sierra 9:46

Yeah.

Tre 9:46

And then you determine,

Sierra 9:48

can I do this?

Tre 9:49

Can I do this? What? Why shouldn't I do this? That's a, are, are lots of reasons. That's a good way

Sierra 9:53

to look at it.

Tre 9:54

There are lots of reasons not to do something perfectly according to the numbers, but if you are starting, if the default option is an emotional decision

Sierra 10:03

or why should I do this?

Tre 10:04

Should I, yeah.

Sierra 10:05

Versus why shouldn't I do

Tre 10:07

this? Yeah, exactly. And that's how you should approach. approach If everybody approaches the big financial decisions, the ones that really matter in their life that way, where they look at the numbers, they look at the data and say, this is what I should do. Why shouldn't I do this? The vast majority of people would be in a better, better circumstance. Mm-hmm. Because it would stop the, it would stop all of the bad habits that people, people tend to do and

Sierra 10:32

or the I can'ts. Yeah. Well, maybe not, but it would maybe deter'em a little

Tre 10:37

bit. It helps. It helps with the decision making. And also it means once you are in a place where you've actually looked at the data, actually looked at the numbers, actually went outta your way to get help with it.

Sierra 10:47

Mm-hmm.

Tre 10:47

And then made sure that the person you're getting help from is actually doing that. Because that's an important caveat to that.

Sierra 10:52

Go back to an episode.

Tre 10:54

then it, you are automatically in a better place to make these decisions and it is most likely gonna end up in a good place. Yeah. Because you're picking the, picking the decision that's gonna. Most likely you've heard of a good outcome. Yeah. So yeah, they're the only ones I wanted to, the, I wanted to just cover those few things, make sure that everybody was on board with

Sierra 11:17

The default. What the

Tre 11:17

default option should be. Okay. Well, I mean, there's a few other default things that we'll touch on in future episodes, when to take CPP and

Sierra 11:24

Yeah.

Tre 11:26

How much, you should be saving and all that stuff. There's, there's a few other default options that I like to make sure people have, but

Sierra 11:33

mm-hmm.

Tre 11:34

Those are the core ones that come up most often.

Sierra 11:37

Yep. Okay. So what are they again? Default for

Tre 11:40

investing.

Sierra 11:41

Investing is

Tre 11:43

100% global equity.

Sierra 11:44

100% global equity. And then ask yourself, why can't I do this?

Tre 11:48

Yeah. Why shouldn't I do this?

Sierra 11:50

Step two. Category two, budgeting. Do something. Right?

Tre 11:55

Basically. Yeah,

Sierra 11:57

do something. Category three debt. Invest.

Tre 12:03

Invest over paying off low, low interest debt.

Sierra 12:05

Low interest debt. But that's why I specifically asked

Tre 12:08

is different. High interest debt is very different. Yeah. If it's, this isn't a mortgage. Questions, other, other things you have to determine.

Sierra 12:14

Yeah.

Tre 12:15

The difference between somebody starting at 30 and if they're investing for a 30 year timeframe. There was one scenario I looked at where the difference was almost$800,000. they both became millionaires. One of them ended up with a million dollars in a portfolio because they paid off an extra thousand dollars. I think it was every, they paid off that mortgage half and half the time.

Sierra 12:37

Mm-hmm.

Tre 12:37

But. The Time, time in the markets makes such a big, big difference that you just cannot get that time back.

Sierra 12:44

That's why they say time is money. Sorry.

Tre 12:52

It's, true. You're not wrong. You're right. I think it's quite reasonable,

Sierra 12:55

How do you know that's not working?

Tre 12:57

That's you. Not wrong. You're not wrong. Okay, perfect. we'll leave it there.

Sierra 13:01

Awesome. That was a quick one.

Tre 13:03

Yes.

Sierra 13:04

Yay.

Tre 13:04

My chicken is also in the smoker, so I need to go.

Sierra 13:07

Yep. I'm

Tre 13:07

hungry. Grab that. Okay, perfect. We'll see you the next one.

Sierra 13:10

Bye.

Tre 13:11

Bye.

Speaker 13:12

Thanks for listening to this episode of the Plain English Finance Podcast. Trey BYO, certified Financial Planner. Chartered Investment Manager is a financial planner with TC Wealth Management and a Visa wealth. You should always consult with your financial, legal, and tax advisors before making changes. This podcast is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell at any securities. The views expressed are those of the individual and are not necessarily those of a Visa Financial Inc. Mutual funds and other securities offered through a Visa wealth, a division of a Visa Financial, Inc.