What’s a Financially Literate Aunt/Sister/Mom/Daughter/Friend to Do?

Occasionally, a family member or friend asks me about money.

Thinking back on these conversations, I’m struck by a common trend.  After just a few minutes into me chattering on about investing, taxes, or debt, I realize they’re not hearing me.  Exasperated, and in all earnestness, they ask this simple question:

“Why, for God’s sake, was I not taught this in school?!?!”

Why, indeed.

They continue, still incredulous. “I took trigonometry but have no idea how much to save for retirement.” Or “I got an A in algebra but don’t know what to invest in.”  Or, “I have no idea where my money goes; no one ever taught me how to manage it!”


Aggh! Every adult citizen of the modern world should posses at least a rudimentary understanding of how money works. Our economy is chaotic, frenetic, dog-eat-dog. We’re all players in this game, whether we like it or not. We should at least know the ‘getting started’ rules.

Have you ever played poker with someone who didn’t know the rules?  I hope you took their money, because they had no business ante-ing up.  Yet I know people in their forties who don’t understand the basics of playing our modern economy: how insurance works, how to minimize tax liabilities, how to manage spending, how to invest, etc. They’re playing the game and they don’t know the rules! You know where their money is? That’s right, neither do they.

The core principles of money handling should be taught – for goodness sakes – to EVERYONE!  Alas, they’re not, and so, there I often find myself, three minutes into a conversation about financial management, when I too wonder, why aren’t we taught this stuff in school?

I’m not sure what combination of wicked forces converged to convince education policy makers to strike personal economics from the curriculum. Maybe they got distracted by the ‘we need STEM‘ mania.  Or perhaps they figured, ‘this is the information age, kids can find this information on their own!’

Unfortunately, it’s really the TMI (Too Much Information) age, and it can be difficult to tease useful information out from the wrong-headed, misleading bunk.  I’m talking about those online articles authored by

  • people with vested interests selling financial products
  • callow financial journalists at Yahoo! Finance weaving narratives that leave one feeling like a victim who may as well give up now because the economy is working against us all
  • IRA & 401k companies that estimate $8M is needed to retire
  • hacks who write ‘top 5 financial mistakes’ click-bait on revenue sharing sites
  • well-intentioned journalists who muddle the message by leading with oodles of disclaimers – you know, about not being able to predict the future and that everyone’s situation differs – that the reader grows beleaguered and ceases reading before getting to the advice!

It’s all so overwhelming, it’s easy for my friends and relatives to give up and go right back to where they were: rudderless, discouraged and frightened in their financial journey. Or, they hire investment advisors who overwhelm them with information, or worse, sell them products they don’t need.

So what’s a financially literate aunt/mom/sister/daughter/friend to do?

I’ve tried giving unsolicited advice. That’s more annoying than effective. I’m done with that.

So, I’m gonna sum up – in just 15 short bullet points – the financial ‘getting started’ rules-of-the-game that we all should have been taught in school.

What you’re about to read is one-size-fits all.  These rules apply to everyone. K?

Ready? Lets begin:

1. The object of the game is Financial Independence, ‘FI’ for short. No, you don’t get to choose a different goal. FI is your friggin’ goal. Accept it. Your objective is to accumulate a nest egg large enough to fund your life. That’s FI.

If you prefer, you can call it ‘FU’ Money.  Here’s Lucy Liu’s take on FU money, …and John Goodman’s thoughts on FU money.

How do you know when you’ve won?  There are two simple ways.

When your investments >= 25x your annual expenses. In other words, if you need $40,000 a year to live (shelter, food, insurance, hockey tickets, etc.), then having $1,000,000 in investments should grow/make enough money to fund that life. ($1M = 25x$40k).

Alternative check: cFIREsim reports that you have a greater than 95% chance of successfully living off your assets for the rest of your life. Simple right?  That’s when you’re FI.  That’s when you’ve won.

K, now it’s settled. Your goal is to become FI / acquire FU Money. Moving on…

2. Memorize these numbers:

  • 75% = 7 years
  • 50% = 17 years
  • 25% = 32 years
  • 10% = 51 years

Here’s what these numbers mean: if you save 75% of your after-tax income, you will be FI in 7 years. If you save 10% of your after-tax income, you’ll be FI in 51 years.

How long do you want to give yourself to get to FI? 17 years? 25 years?

If you answered ’51 years’, ask yourself the question again.  Loop on this question until your answer is less than that. Want to read more about how and why this works? See The Shockingly Simple Math Post on the Mr. Money Mustache Blog. 

3. Track what you earn and track what you spend. There are oodles of powerful tools that can make this easy: mint.com, YNAB (You Need a Budget), Personal Capital. Loop on this step until you’ve fully set that shit up. Download the tracker app on your smartphone (yes – I KNOW you have one), and enter every expense – every latte, fuel fill-up, Ginormo Big Gulp, restaurant bill.

4. Calculate your savings rate.    Your savings rate = (Income – expenses)/(income).

Include in ‘income’ any money your employer directly deposits into your retirement fund – matches and withholdings alike. Omit from income all taxes.*

Include in ‘expenses’ all those stupid Coach bags, costly greens fees, and Lexus lease payments.

What’s your savings %?  At your current savings rate, how long to FI? See The Shockingly Simple Math Post on MMM for a more granular chart. Are you happy with that projection?  If so, skip to #6. Else, keep tracking expenses and continue to #5;

5. Stop buying shit you don’t need. Here are my top five biggest bang-for-your-buck spending cuts: kill cable, get cheaper cell plan (move to Ting or Republic Wireless), stop eating out (pack your damned lunch), sell all cars until you own <= 1, stop buying that daily bottled water / sugar-drink / prepared coffee nonsense.

6. Get free expert advice! While you’re cutting expenses, go get yourself some customized advice; register on forum.mrmoneymustache.com, lurk for a bit, then post a user case and get feedback. Some of us forum posters can be brutal, but that’s what you need if you’re having trouble getting to the savings rate you desire.

Some people on the MMM forum are saving more than 80% of their income.  Crazy, right? Hardly.  Those people are winning the game.

7. Never borrow money to buy a depreciating asset. No you don’t need a $20,000 car. Unless you’re FI, you have no business buying one. Similarly, unless you can put 20% down on a house, keep renting.

8. Educate yourself on investing. Read the Bogleheads.org wiki. Long story short: buy index funds. If you’re young, 100% stock or 90% stock/10% bond.  If you’re older, 80/20. If you’re old / super conservative, do 50/50. Every 6 months, ‘rebalance’ (sell & buy) to get back to your 90/10 or 80/20 or 50/50 ratios. Do it bitch.

Also, never pay more than .3% management fee on a fund. Buy funds like VTI (Total US Stock Market), VXUS (Total World Market – US), VT (Total World Stock Market, and BND (US Bond Market).  If you’ve got >$10k to invest in any one fund, get Vanguard ‘Admiral Shares’.  The management fee is as low as .05%. That’s crazy low!

9. That retirement account at work? Max that shit out.

10. Maxed the work retirement account out? Open an IRA** and max that shit out.

11. Maxed the IRAs out? Open an after tax investment account and buy more index funds like VTI, VXUS.  Try to make the after-tax account all stock – shift any bond funds to tax-advantaged retirement accounts for tax reasons.  (Bond funds pay interest which is taxed at ordinary income rates.  If you are in the 33% bracket – you’re paying more than twice the tax on bond fund dividend vs qualified dividends from equity funds.)

Oh, and mentally prepare yourself to lose half of your investment every 8-12 years.  It happens.  Can’t stomach it? Then increase your bond allocation and dollar cost average (that’s what I do – cuz I’m a total wimp).

12. Life Insurance – a simple term policy is all you need.  If you have no dependents, skip life insurance.  If you have dependents, buy only enough term insurance to pay off the house + a few years living expenses for the surviving family. If you have children, add $80k per kid to fund 4 years at a state college. After you get all of your other shit in order, then MAYBE consider LTC (Long Term Care) insurance. But that’s for later. Whatever you do, don’t let anyone talk you into Whole Life or Universal Life Policies. Unless you’re already FI and looking for tax loopholes, they’re BULLSHIT.

13. Insurance in general (e.g. car & health) – get plans with high deductibles! Self-insure the small ticket items.  Insurance is to protect you in the event of catastrophic events.  Insurance is not for financing a $40 course of antibiotics.
(note: if you have some ongoing medical conditions that require special insurance, obviously you may have reasons for doing something different).

14. Change your thinking – it’s all a game. Yes it’s that easy – think of your financial life as just a game. You know the objective, now its time to come up with strategies and tactics to reach it.  Be creative.  How can you have fun today without spending a dime?  Or, adopt this mantra: ‘if I throw money at a problem, I’ve lost.’  Or, put a post-it on your credit card that reads, ‘do you really need to buy stupid shit right now numb-nuts?’

15. Brag. How badass can you get? Brag about your improvements on a frugality or investing forum like Mr. Money Mustache or Bogleheads. Get advice from others who have walked the path. Still stuck in old thinking?  Educate yourself about hedonic adaptation and then decide if you still want to buy that $2,000 Apple Watch because ‘you deserve it’.  (Hint -until you are FI, you don’t).

That’s it.  Do these 15 things and get on with your life.  Soon, you may discover the word ‘money’ magically disappears from your ‘big problem’ mental ledger.  Isn’t that what you want after all? To not have to worry about money? I’ll bet it is – no matter who is to blame – the DoE or you.  Not thinking about money is exactly what got you right here today.  You are in the game no matter what, so maybe it’s time to put your head into it.

Further reading:
Bogleheads.org wiki
http://www.irs.gov (Honestly, this site is THE place to get tax info.  Don’t trust random online articles for tax advice).
Your Money or Your Life (audible audiobook) The audio book beats the print edition IMO, but if you prefer…  YMOYL (paperback)  
The Shockingly Simple Math Behind Early Retirement
Find out if you’ve won the FI game on cFIREsim.

*Incidentally, try to set your W-2 withholding to a level that’s very close to what you’ll actually owe.  Don’t ‘save’ by manufacturing a giant tax refund. Rather, save, by fricking just saving.

**Check the Retirement Account Page on irs.gov to find IRAs you are eligible for. In general, contributions to a traditional IRA are deductible if your AGI is south of $100k, and Roth is open to everyone, unless you already have 401ks in which case eligibility ceases with AGI north of 180K (assuming married filing joint). PM me in the forum.mrmoneymustache.com and we’ll dial this in for you.

Thanks a lot, Amazon Prime Pantry!

In order to confidently live off of savings, we’ve committed ourselves to frugality. It’s kind of like a spending diet; quick fixes or fasts don’t work. What’s effective is making lifestyle changes and sticking to them. Of course, after months of ‘being good,’ we sometimes digress slightly. Splurges may happen for the most admirable of reasons, for example, a birthday. None-the-less, as with a diet, a little fissure in discipline is when all hell can break loose.

Recently, the in-laws visited. We indulged in some expensive meals out*. I treated to a cooking class at the local tropical spice garden. We ran air conditioning in the main house. While we normally don’t engage in these activities, they were all perfectly reasonable while we had guests.  After all, a commitment to frugality should not make one cheap.

But as it is with a diet, deviations from discipline can feel like small cheats and trigger the ‘oh what the hell’ effect. Soon, both feet are off the wagon as one gorges on a foolish spending spree. For me personally, even as I realize I’m being manipulated by master marketers, I spend my money anyway! My frugality muscles go flaccid and the old ‘consumer-suckah‘ me is back, right where I left off. It’s like people I know with drug addictions. Once they slip up, it’s a quick descent to whatever rock-bottom they previously climbed out of.

After our visitors departed, I thought about our daughters in the US. I decided to send them an early Easter basket (to the devout Christian) or Zombie Day baskets (to the atheists). Instead of chocolates, though, it’d be basics – dental floss, pasta, olive oil.

These things might not sound exciting, but all three girls are at various stages of starting their adult lives. I suspect they might be scrimping on personal care items and pantry necessities. I worry they may not be flossing their teeth or replacing their toothbrushes! It’s important to take care of your teeth. I wish I’d taken better care of mine when I was their ages.

In the end I placed three $100 orders with Amazon Prime Pantry. One order to each daughter. $300 total, even though I intended to send maybe $30 worth of floss and pasta to each daughter.

Amazon Prime Pantry is based upon a brilliant business model**. Items are shipped for a flat rate of $5.99 in a big box. While selecting items, Amazon reports *in real time* the % volume of the package that has been filled. They don’t offer various box sizes. Just one size. So, when you go to place your order and see the box is only 28.7% filled, it’s pretty hard to press the order button. The urge to fill the box to capacity is strong. So, you go back in and add more rotini, some shampoo and bulky items such as clorox wipes, paper towels and toilet paper.

Take that Amazon biz-natches; Oh yeah, I got to 99.2%! ‘Order’.

Back up. I spent 3x what I’d intended. Even as I chose between Charmin and Angel Soft, I understood that filling the box was exactly what Amazon wanted me to do. I knew I wasn’t gaming the system. The Amazon marketers astutely studied their behavioral economics. They designed a cattle shoot that nudged me right into the killing chamber. And I happily mosied in, fully aware, even as I pulled the trigger on my Chase credit card that discharges with a 1% cash kickback. Three times over, I watched as $100 bullets exploded into an arc eastward, toward Amazon.com HQ in Seattle Washington, USA.

Thanks a lot Amazon Prime Pantry! Actually, yes, thanks. I’m glad I did this one last splurge while off the frugality wagon. Our daughters are definitely worth the extra money. That said, we are now climbing … back … on.

*Full disclosure – the in laws treated to most of these expensive meals out, but it still had an ‘off the wagon’ feel to it.

**Amazon Prime Pantry is based on a brilliant, but not perfect business model. It lacks one fundamental feature: the ability to include a note with the package. To each daughter, I wanted to explain,

“Happy Early Zombie Day / Easter _daughter’s name_,

This package is to help you take care of yourself!  The intended message is ‘floss your teeth!’ Although, it’s understandable, that if you miss this note, you’ll read, ‘wipe your butt.’ While both activities are worthwhile, what we really want to say is this: Since we no longer take care of you directly, we hope you take care of yourself with all of the love that we have for you! Happy Easter/Zombie Day.”

I keep it all in my head!

“Where can I find the notes?”  I asked a colleague who’d attended a customer alignment meeting.

He pointed to his head and said,  “I keep it all in here.”

Sigh.  He believes his brain is a reliable storage device.  He couldn’t be more wrong, and in more ways than he might expect.


The phrase ‘high-fidelity’ has lost steam.  Its absence from every day conversation is a sign that audio recordings are nearly perfect now-a-days.  Go back a few decades, however, and you’d discover ‘hi-fi’ was all the rage.

Fidelity is nothing more than the accuracy of a copy. A musical recording that sounds exactly like the original is ‘hi fi’.  In the modern day, sample rates and precisions exceed a human’s capacity to detect differences from an original to a copy. Everything is hi-fi in the modern world.  Fidelity is a non-issue, for digital copying at least.

Unlike a hi-fi recording, however, the fidelity of my colleague’s memory, no matter if sampled it in 1985 or today, would be really… really… low fidelity. His recall will be sparse, inaccurate and misshapen by confirmation bias.

How do I know this? It turns out, the scientific community loves to study memory function, and has for a long time. Relevant studies reach back to the 1930s.  More papers have been written on this topic than I could possibly read without growing bored and despondent.  Yet I persevered and, ignoring my facebook/linkedin/twitter/pinterest/MMM-forum feeds for whole hours at a time,  I learned quite a bit about what we know about memory, and am about to share the juicy bits with you right now. You’re welcome.

What I learned in a nutshell: given the way our brains encode, consolidate and recall memories, none of us should fully trust what is recalled.  The science of memory is fascinating… and horrifying!

“Okay, so what? Memory fades over time. It’s not exactly a news flash,” you say.  Ah yes, but the scary thing is that low memory fidelity isn’t just about forgetting stuff or losing details.  Data erosion is just one of many phenomena that render our memory unreliable.

We have false memories, biased memories and memory fragments. We have a brain that, unbeknownst to us, takes the liberty to ‘smooth the narrative’ or ‘fill in the blanks’ as it recalls episodic memories. Our brain calls up schemas and teases out the storyline that resonates with pre-existing notions. It then lets go of pesky disconfirming bits and stores in memory only the storyline it recognizes.

All of this goes on without our realizing it.

“Okay, maybe I remember the bits I like to some degree, but hey, I don’t fabricate my memories.” you object. Yes, yes you do. For one thing, you have stored false memories. It takes just a few subtle comments from an outsider to cause you to store a false memory. In fact, researchers are able to install false memories in 30 to 50% of their subjects in evil maniacal experiments. Don’t believe me? Just watch Elizabeth Loftus’s TED Talk on the subject. Unleash the horror.

Back from that Ted Talk? Sufficiently disturbed?

Your brain misses no opportunity to mold memory.  And it has a staggering number of opportunities to meddle!  From encoding to storage, consolidation to recall, the frontal lobes and hippocampus work together to prune and distort information at every stage.  By the time you recall a story weeks after the event, the only thing you can be sure of is that your retelling is super-duper lo-fi.

Stage 1 (the first opportunity for data loss or corruption): Encoding*.

During a customer meeting, it’s easy to get distracted. Someone may open a door or the fan might start wah-wahing. The customer might state something in a high pitched yet airy tone that triggers a whole storyline of thought in your head. Three minutes later, you realize you haven’t heard a word as you awake from daydreaming about the Jim Gaffigan Hot Pocket bit. You tune back in.  After some time you notice a blackhead on a colleague’s nose. Two minutes later you’re dismayed when you shake loose yet another daydream in which you relived the oddly distubing-yet-compelling Michelle Lhooq vice.com article on the zit-popping.

Distractions can cause whole chunks of conversation to be missed. The thoughts don’t even have a chance to get stored in memory because they are never heard.

Encoding errors also result from misinterpretation. It’s astounding how often we hear what we want to hear rather than what is said. Our brains are pattern-recognition machines, and they love to jump to conclusions before all of the information is in.  Do you ever find yourself filling in other people’s sentences when they pause? If so, what do you think your success rate is at correctly predicting what they were going to say? Don’t know? Do a little experiment. Over the next few days, look out for times when you’re listening to someone and your brain starts filling in the blanks. Stop yourself from saying anything and patiently wait. Mentally note what you thought they were going to say. After they (finally) complete their thought, assess whether you had guessed correctly.  How often are you wrong?  I’m betting it’s more than you’d predict.

These fill-in-the blank predictions are based upon pre-existing schemas. And as we’ll see, these pre-existing schemas toy with the real story.  These schemas prompt us to cherry pick parts of the story line that resonate with what is already in our heads.  They filter out new, subtly differing information.  And yet, if you are trying to uncover customer goals and challenges, the new and unexpected information is exactly what you want to capture!

Pro-tip: Seek Confirmation.  In the Customer Advisory Board program I once ran, long long ago, I didn’t want people to misinterpret what customers were saying. So, I coached participants to confirm their understanding by restating what they’d heard at sensible intervals (a tip I learned from a mentor, Rory Clark). It was astounding how often customers corrected the interviewer, even though the recap came from verbatim notes.  The magic of restatement happens when the customer fills in missing details (but that is for another post).

Did you get that? Even when the interviewer thinks they are accurately recording what the customer said, they often get it wrong. Misinterpretation, selective hearing and distraction are to blame for many encoding errors.*

Stage 2: Pattern Recognition.

We all have in our minds existing ideas of how the world works.  In their excellent book, Switch, the Heath brothers explain what a schema is using the example of a pomelo and a grapefruit.  A person could describe a pomelo from the ground up using all kinds of adjectives.  Or, that person could take a shortcut by employing a schema.  They could say, “a pomelo is a large grapefruit.  ” Bam!  A lot of time and effort has been saved, and the full message has been transmitted in six simple words.

Our brains are wired to think in schemas.  Of course they are!

So, say you work in the Field Programmable Gate Array (FPGA) industry.   You might have an idea of what customers care about. This is your ‘customer needs’ schema.  In the 1990s your ‘customer needs’ schema may have been ‘bigger, faster, cheaper’. ‘Bigger’ meaning more logic capacity for a given physical device size, ‘faster’ in terms of Input/Output and core logic performance, and ‘cheaper’, well, you know what ‘cheaper’ means. ‘Bigger faster cheaper’ was easy to say, and was generally accepted.

As the decade progressed, customers began demanding lower power. But it took a while for everyone’s ‘customer needs’ schema to catch up.

The problem is that every customer has slightly different needs.  So one monolithic ‘customer-needs’ schema is in fact, not 100% correct.  It’s not specific to any single customer and that’s precisely the point. If you ask anyone at the company, “What do customers want?”, they would readily state some schema such as ‘bigger, faster, cheaper.’ Ask them to name specific customers, and it’ll take them some time to answer. They have developed a schema, and it is a composite of multiple customers. They believe this schema because over and over again, they’ve learned that these are the things customers care most about. The brain simply levels up to this snapshot of the big picture.

This is great, right? Yes it is. Schemas, when they represent the real world, are what gut instincts are made of. When you viscerally know that something feels right, that’s your brain ding-ding-dinging with a pattern-match based on your schemas. The stronger a schema, the more we encode, store and recall bits of a particular story that further bolster that schema. Unfortunately (and herein lies the problem), we let go the rest.

Back in 2000, when customers expressed needs within the ‘bigger, faster, cheaper’ schema, those needs were easy to remember. Requests for ‘lower power’, conversely, and dangerously, were easy to ignore.  The new ‘bigger, faster, cheaper, low power‘ schema evolved more slowly than we would have liked.

Does this mean all orthogonal or disconfirming information is lost?  No.  When a story massively contradicts our schemas we sit up and take notice.  If a customer claimed that they only needed a few thousand logic elements (the opposite of ‘bigger’), didn’t care about performance and claimed ‘cost is no object,’ you can be sure someone with a ‘bigger faster cheaper’ schema would take note.

The massive influence of the schema is the crux of what we know to be confirmation bias. Strong schemas lead us to retain information that confirms what we already believe, and discard disconfirming information.  But schemas affect more than the encoding and storage stages. As we’re about to learn, they detrimentally affect recall as well.

pro-tip: Write down exactly what customers say, as they speak.  In the meeting, you may fail to pick up on subtle differences between their message and your pre-existing schema for what they want.  Later, when you re-read the notes, you may find some nuggets of new information that differ from your schemas.  In doing so, you’ll evolve your schema to the current reality.

Stage 3 (the third opportunity for data loss or corruption): Memory Storage.

Memory storage is itself multi-staged.  A single memory can be batted around brain regions tens to hundreds of times. With each transfer it is vulnerable to distortion, all while simultaneously being reinforced. First, a memory is put into STM (short term memory).  This is typically an auditory and relatively hi fi copy.  If the memory is recalled, schemas influence which parts of the memory are reinforced, and which bits are discarded. At night, the brain consolidates memory, whereby episodic memory fragments bounce from frontal lobe to hippocampus over and over again, and in doing so, further bias the memory to match existing schemas. By the time you wake up, some portion of a very lo-fi memory might be stored in long term memory (LTM). (I say might because it is a crap-shoot which memories will be deemed worth storing by the hippocampus and frontal lobes).

Pro-tip: Learn how to take notes and then bloody well take notes in every customer meeting.   Writing down bullet-points to ‘trigger your memory later’ is insufficient.  By now you get it; you know your memory is unreliable.  Therefore, every time you meet with a customer, you shall henceforth transform into a stenographer, okay?  Your job is to write down as many verbatim comments as you can possibly record.  Your job is to write down exactly what the customer says using her exact words.  If you write it down, you have a backup copy, in case it’s lost by that doddering old hippocampus.

Stage 4 (the fourth opportunity for data loss and corruption): Retrieval

A fascinating 2007 paper by Elizabeth J. Marsh of Duke University documents how retelling a story alters recollection.  Long story short, if you retell your experience of a customer meeting, you will report the items you think your audience will find interesting. Fair enough.  The scary thing is that this retelling will act as a memory-pattern-filter in your brain.  You will likely remember the story you retold rather than the initial story you heard.  Your memory will be filtered by the schema you imagine to lurk in your audience’s collective brain. That’s crazy!  But that’s human.

Imagine a FPGA engineer named Bob.  Bob heard a customer talk about needing bigger parts running at faster speeds.  The customer added that they needed this even as they were hitting a power wall.  So they need more logic, faster performance and lower power. Imagine that after the meeting Bob runs into a co-worker: the architect responsible for packing more logic into the next generation devices. Bob might mention the customer’s logic capacity needs. They chat a bit about why the customer wants a bigger part and then say their goodbyes.  Bob proceeds to his desk, gets distracted by urgent emails, and doesn’t get around to typing up his customer meeting notes for three days.

How likely is it that Bob will write up the customer comments regarding low power?  Given that he’s recounted a version of the story that omits the low power comments, he very well might not.

Pro-tip: record meeting notes while in the customer meeting.  Clean them up and fill in missing details that same day – especially before recounting the experience.

What to do.  

Create a culture of note-taking.  It sounds easy, but in all honesty I found it to be a monumental task. I don’t think I ever really succeeded. But it’s worth doing if you want to minimize the toxic effects of confirmation bias, retain ‘hi fi’ records of what customers are telling you, and build schemas that reflect the real-world. If you don’t write down what the customer says, you may as well not meet with the customer.  In fact, if you have no intention of taking verbatim, real-time notes, you may be better off NOT meeting with the customer.

Want to do something about it? Learn how to Take Notes.

* Okay, technically, these aren’t encoding errors.  Encoding is the process by which information is converted into storable forms (audible, visual or semantic).  So encoding errors are more about information corruption during the process of say, converting a written word to the audible version of it.  IDC.   I’m sticking with my version of encoding errors based on my experience.  Take the terminology with a grain of salt, or a glass of wine, depending on your capacity to tolerate laymen slinging lingo haphazardly.


It’ll stop you from daydreaming and will prevent you from getting into pattern-recognition prediction mode where you remember only the bits you predict. In the end, writing down customer statements keeps you open to hearing what is truly being said and makes your notes reliable.

Even if you think it’s beneath you, when you’re meeting with a customer,



Marsh, E. J. (2007), Retelling Not the Same as Recalling.  Duke University
McLeod, S. A. (2007). Stages of Memory – Encoding Storage and Retrieval. Retrieved from http://www.simplypsychology.org/memory.html
Payne, J and Nadel, L, Sleep dreams and memory consolidation The University of Arizona, Psychology