Comparing Personal Finance & Netflix

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Personal Finance is about making choices, actually personal choices. The choices you make will determine how satisfied you are once you move on to different stages of your life.

Similarly Netflix is about making choices. The choices here are in terms of movies and shows available for you to watch. Your choices will determine how satisfied you are once the movie or episode(s) come to an end.

Netflix is relatable to many of us. According to GBH Insights, the average Netflix user spends 10 hours per week on Netflix. And there are over 148 million Netflix subscribers in the world. So there’s a pretty good chance you or someone you know is a user of Netflix or maybe some other streaming TV service. We’ll stick with Netflix here since I have an account and am familiar with its platform.

And because of the volume of subscribers, Netflix is able to continuously put out content and gain more power. This is what you want out of your Personal Finances: more users (i.e., investment diversification), resulting in more power (i.e., higher returns).

“Binge Invest”

You know when you finish an episode and there’s a message at the bottom saying the next episode is starting in 4…3…2…1. Here you may think to yourself, it’s too late to grab the remote now, let me just watch another one.

How about having this binge investing mentality too? It can be achieved through automating your investing actions.

One example of automating investing is through reinvestment of dividends. Dividend reinvesting takes the cash you earn from dividends paid and reinvest them into more of those shares.

The result is after a while, those dividend payments can really add up.

You can also automate investing through dollar-cost averaging (DCA). DCA is a process where investments are purchased at set intervals (weekly or twice a month or some other frequency). This is typically done through investing in your employer’s retirement program. You initially set up how much of your paycheck you’d like to contribute to your investments and each pay period, the funds are automatically invested within the investments you’ve specified.

With dividend reinvestment and DCA, it’s just a one-time set up and you’re binge investing.

In terms of an after-tax brokerage, account, I don’t believe you can set up automatic trades and I’m not sure if you would want to either. Unless you are buying into a stable fund, you’d want oversight over each trader order.

What you could do is deposit funds into your brokerage account at set intervals. For example, Ameritrade allows you to deposit funds into your account one time, weekly, every other week, monthly, quarterly, annually and other frequencies. At least this way, you’ve automated step 1; having the funds available to invest.

Get Recommendations

One of the hardest things in life is deciding what to watch next on Netflix, am I right? It’s a real problem. 🙂

Luckily, Netflix offers recommendations. Let’s say you finished watching Arrow. If you’ve watched all of the episodes, Netflix assumes you liked the show and will recommend a similar show, like The Flash.

Netflix narrows down the decision-making process for us. It uses this based on the genre or cast, or some other complex algorithm to figure out what we may like if we liked what we previously watched. 

And pretty soon, or depending on how much you watch, Netflix will remind you of content you’re in the middle of watching, content you’ve already watched – and may want to watch again, and new content you should watch. It’s like a visual representation of your TV watching experience to keep you on the platform longer.

Receiving recommendations can apply to investing as well.

A while back within my retirement account, I entered some basic information like my age, current assets, expected retirement age, desired rate of return and voila! I received a recommendation of my investment mix.  My investment is heavy on large-cap, with some mid-cap, small-cap, international, and little bonds. I have a couple decades to go before seriously thinking about drawdowns, and therefore, this mix represents a “moderately aggressive” investment style. So take advantage of the free online tools available to you.

This recommendation tool was utilized during the time I was switching to low-cost index funds. The recommendation served as a valuable guide. Without it, I’d be lost or would have spent quite some time deciding which investments to select. And this is pretty similar to how we often are on Netflix wandering from title to title, but finally shutting the TV off and going to bed.

Use Previews or Trailers

And when you’re logged onto Netflix and are on a particular title, it will automatically show you its trailer. The trailer may help you decide if you want to proceed to watching that title. I’ve wasted so much time staring off shows and movies only to find out they weren’t what I was looking for and had to start over.

A similar concept exists with your personal finances. Personal finance tools such as retirement calculators, budgets, and other simulators can be viewed as a preview to how your finances can look and may help you make certain financial decisions.

I have created a few simple templates that you may be interested in. These include a Simple Money Tracker, Simple Retirement Projection & Budget, Simple Retirement Tracker, and Simple Savings Rate Calculator.  These are all templates I, myself, use from time to time to assist in decision making. For example, the Simple Money Tracker helps to decide at what point during the year I can afford to go on a trip, or deploy some excess funds into an after-tax investment account.

For investing specifically though, there isn’t a preview. If there truly were, we would all be reaping investment gains. Instead, there are metrics which look at past performance, future outlooks and projections and comparisons of other investments. All of these can help to paint a preview of how an investment may perform, but one can’t say for certain. 

Takes Time To Develop

It can be frustrating wasting time starting a movie or show on Netflix and realizing it was not what you were looking for. And it would be equally, if not be more frustrating, to waste both your time and your hard earned cash on items and investments to find out that the money spent or invested could have been used for something better suited for your life’s goals.

Some movies and many series take time to develop in terms of the story, characters, action, etc. Sometimes, when there are plot twists, they take time to come to fruition but make the movie or show so much more interesting and exciting.

Well it’s very similar with your Personal Finances. It may take time to get rid of your credit card debt, it may take time to fully fund your emergency account, and it may take time to max out your retirement contributions and to see them growing. It’s important to stay the course; see what you’ve started all the way through because it shows commitment.

A Fund Is Like Netflix

And even index fund or ETF is like Netflix. You get instant diversification into possibly hundreds of companies and at a low cost! You have the same with Netflix. You can watch comedy, drama, action, horror, educational, and other categories and pay far less than cable or even a trip to the movies!

Join The Discussion:

  1. Can your Netflix habit improve your personal finances?
  2. Do you use and follow the advice of free tools and services provided by personal finance platforms?
  3. How do you practice patience and consistency with your personal finances?

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I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!

Check out my simple, yet detailed Personal Capital Review here.