Financial Wisdom from Professor Chester Chambers
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
Professor Chester Chambers teaches information technology and operations management at the Cox School of Business at Southern Methodist University. With a focus on personal finance and wealth-building strategies, he equips his students with the tools they need to understand the complex world of finance.
In this insightful interview, Professor Chambers shares his expert advice on cultivating financial habits, understanding debt, and adapting to the changing landscape of banking and investing. Join us as we explore his perspectives on effective financial management and discover what brings him joy beyond the numbers.
In this article
Building wealth
Joy Wallet: What are the key financial habits you would recommend for someone aiming to build wealth over the long term?
Prof. Chester: I am going to keep this very simple:
- If you don’t need it – don’t buy it. Take the money you wanted to spend on it and invest it.
- When you look at those investments, keep track of costs. Any costs have to reduce the realized net returns because there is no other place for the fees to come from.
- Time in the market beats timing the market. Don’t interrupt the magic of compounding if there is any way to avoid it.
- The market is smarter than you are, and aggregate returns are driven by outliers. That’s why buying the whole market is the way to go.
- Complexity is costly — complex products that promise to give you upside potential without downside risks are bad products. They are a combination of market timing (which cannot be consistently done) and complex contract terms that are added for the benefit of the seller, not the buyer.
Understanding debt
Joy Wallet: In your experience, how do successful individuals differentiate between “good debt” and “bad debt?”
Prof. Chester: Most successful individuals who come to mind do not fixate on debt at all — but on earning enough money to make the debt irrelevant as quickly as possible. The larger problem with really smart, high-energy people, including a lot of professors, is that they are great at generating a narrative that makes a complex plan that involves debt sound like a good idea. So, when you ask a smart person about his “bad” debt, they will say, “I don’t have any.”
That’s why the best approach is probably to hold to a few simple ideas and use your strong will and intellect to constantly reinforce the realization that your solid plan will inevitably work if given enough time. But if you are not there yet, start from where you are, make a little more, spend part of the increase, and invest the rest. If you can stick with that, the rest will take care of itself.
Millions struggle with debt. We help them move on with their lives.
- End your debt stress with a proven, affordable debt relief program. Our consultants will guide you through every step.
- Everyone’s financial situation is different. That’s why we start by giving you a free debt analysis and create a custom solution based on your unique needs and goals.
- Let us help you solve your debt problems and move forward with improving your overall financial health.
Not available in CO, HI, ND, OR, RI, VT, WA, WV, WY, MN, DE, IA.
The future of banking
Joy Wallet: How do you see the role of digital banking evolving, and what should consumers prioritize when selecting online banking services?
Prof. Chester: Most banking has actually been digital for decades for those who want it. The bank will keep a physical presence as long as we demand it. Surprisingly, we have demanded it pretty strongly over the last 40 years, even though it provides little financial value.
The most interesting recent development in this space is probably the emergence of the FedNow system, which facilitates instant payment clearing at the Fed level. The adoption by big and mid-sized banks has been much more aggressive than first expected. The system was forced by law to charge fees similar to private systems, but as private firms cut their fees to compete, the costs of using the FedNow system will fall as well. This will dramatically eat into the range of services that other digital banks claim to offer beyond what the bigger banks deliver.
I suspect that the role of digital banking in the creation of many new, smaller providers will be temporary, and the larger banks will end up with the lion’s share of the new business that is created.
Saving for major life events
Joy Wallet: How should individuals approach saving for major life events, such as buying a home or funding their children’s education?
Prof. Chester: Intentionality is always key. If X dollars are needed to do something by time Y, set out a plan to have X by that point in time. But remember, that plan is a forecast, and it may be wrong. The plan will not work exactly as expected, but it is much more likely to produce a good outcome than not having a plan at all. Perhaps, more importantly, most of the big flaws in decision-making can be traced back to the yearning to pretend that something is deterministic when it is not. In other words, the intense desire to pretend that future costs and revenues are known when they are not creates disappointment.
The process and strategy of building wealth are the key. Your ideas about how much you will spend on a house or for tuition 10 years from now are really shots in the dark. Adopt the approach that looks to maximize your long-term position and work with what you have when you get there.
Investing on a budget
Joy Wallet: In your opinion, what’s the most impactful way for people to start investing with limited funds?
Prof. Chester: Regular contributions in tax-advantaged accounts with some sort of company match are still the king of this hill. No cost, indexing, with tax deferral, and compounding that is never interrupted is the basic formula that has produced the overwhelming majority of millionaires in America today. Get to a point where you can live off of what you make. Any raises or increases in earnings that follow can be split between lifestyle and investing. Keep it simple. Complexity is almost always more costly than the benefits added.
- Commission free stock trading.
- No account minimum.
- Trade stocks, options, ETFs, and more.
- First stock free.
Cryptocurrency considerations
Joy Wallet: What are your thoughts on the increasing popularity of cryptocurrency, and how should individuals approach it as part of their financial plan?
Prof. Chester: An investment is something that generates a cash flow and allows you to make some sort of claim on those flows. This may be debt repayments, dividend payments, rent payments, insurance payouts, or earnings growth. If you want me to invest in farmland, I can consider it because the land produces crops. If you want me to invest in real estate, I can consider it because the property produces rent. If you want me to invest in cryptocurrency, you are going to have to show me what it produces. No matter how long a fad lasts, eventually, everything will be priced as some multiple of the income that it produces. Since crypto produces nothing, its intrinsic value is $0. Since my planning horizon is always measured in decades, I believe that crypto will reach its fundamental value (which is very cost to 0) before my horizon is reached.
Assessing financial health
Joy Wallet: What are some key indicators people should track to assess their financial health and make adjustments as needed?
Prof. Chester: Let’s start with the most basic. My father taught me one day as a child that there are three types of people. People that make a dollar and spend two — we call those people poor. There are people who make a dollar and spend one — we call those people broke. There are also people who make a dollar and spend less — we call those people rich. How much money you make may depend on what other people think of what you do. Whether you are rich or poor is completely up to you. Once you reach a sustainable income level, meaning you can safely live off of what you make, then look to increase those earnings annually, spend half of the increase, and invest the other half. Maintain a laser focus on this process, and the indicators will take care of themselves.
Refinancing decisions
Joy Wallet: In your view, how can someone determine when it's appropriate to refinance a mortgage, and what factors should they consider?
Prof. Chester: The first principle to hold onto is that your house is not an investment — because you have no intention of renting it out or selling it to live except as a last resort. The long-term return on your residence, after you account for interest, taxes, and maintenance, is almost never above 1% or 2%. Buying as much as you can make payments on and investing as much as you can are opposite objectives. Live as cheaply as you can safely. Most working-age adults today move much more often than we did when I was younger. This puts the planning horizon for minimizing housing costs at your current address at roughly eight years. If the total effect of refinancing produces savings over that planning horizon, then go ahead. Attempting to time the interest rate market works no better than trying to time the stock market, so when the numbers make sense, move on it.
Debt prioritization
Joy Wallet: How should individuals prioritize paying off multiple debts, especially when dealing with different interest rates (e.g., student loans, credit cards, mortgages)?
Prof. Chester: The math is straightforward here, and it almost always says pay off the highest rate debts first and work your way through the rest from there. However, the psychology of money often trumps the math. Many people like to pay off the smallest debt first to get the psychic reward of that achievement, and they may need that to stay motivated. If that’s who you are, go with it, and don’t let any egghead (myself included) talk you out of it.
Financial planning misconceptions
Joy Wallet: What are some common misconceptions people have about financial planning, and how can they correct these misunderstandings?
Prof. Chester: “I can’t do this! It’s too hard! I don’t have time!” Making a plan is hard. Living without a plan is harder. Finding the time is hard. Living a financial life without having time to figure things out is worse. Whether you plan or not — it’s going to be hard. You cannot afford to NOT do this simply because it’s hard, for the simple reason that living without doing it is harder. It is natural to think that a financial plan has dozens of elements, and I can’t figure all of them out today. Fortunately, you don’t have to. Figure out how to track your spending this month. Figure out a budget next month. Figure out your net worth in the month after that. Figure out which bills to prioritize the next month. Figure out how to add to the pile of assets over the next six months. Figure out a tax strategy the next month. Figure out an estate plan the month after that, etc.
It’s your money, and you are the world’s foremost expert on what is most important to you. If things go well, you will be happy. If things don’t go well but you are doing things the way that someone else told you to do, you will never be sure if it failed because the plan was bad or because you didn’t really believe in it. If you live according to your own plan and it doesn’t work, you know exactly why, and it's easier to fix.
Working With Advisors Can Provide More Security than Going at It Alone.
- SmartAsset's free tool matches you with up to 3 financial advisors that serve your area in 5 minutes.
- Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Structuring financial goals
Joy Wallet: How can individuals best structure their financial goals to achieve both short-term and long-term success?
Prof. Chester: We love the sound of the phrase “long-term success,” but we ignore one simple fact. Who you will be 20 years from now is not who you are now, and you don’t really know how that person will define success. I know that I will be roundly criticized for saying this, but I am old now, so I really don’t care. Focus more on the process of growth and understanding and a lot less on the “goal” that supposedly justifies everything else. There is no such thing. As you get older, your sensitivity to risk will change, your utility function will change, your favorite things to spend money on will change, your life expectancy will change, etc. Understand who you are at each stage, build an approach that best matches that person, and roll with it. As that person changes, the approach will change with it, and that’s ok. But start where you are, with who you are, and build from there.
Corporate principles in personal finance
Joy Wallet: What key principles of corporate financial management can be applied to personal financial decision-making?
Prof. Chester: Many corporate decisions are made with an eye on increasing market capitalization. The parallel for the household is net worth. We often focus on singular pieces, such as income or debt, without thinking about the composite picture. Increasing income and expenses together may be a terrible idea, even though the higher income sounds like a great thing. We all know lots of folks rushing to pay down an old mortgage with a 2.5% interest rate because less debt is good while ignoring money market accounts that are paying 4%. It's about a strong balance sheet — not necessarily minimum debt or a great cash flow statement, rather than simply an increased inflow.
Finding joy
Joy Wallet: What brings you the most joy in life?
Prof. Chester: Silence. If we stay fully aware in silence long enough, we eventually realize that everything that we thought we were looking for — we already are. Remember, in this journey called life, there is really only one destination — and that place is YOU! Everything — all of it — is you. A lifetime dedicated to figuring out all of what that really means is a constant joy and a life well spent.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Joy Wallet
We are entrepreneurs, investors, fintech enthusiasts, journalists, and masters of aggregating and deciphering data. We have been working in the financial services industry for over seven years and wanted to build a place where we can bring together the brightest minds and organizations to help you make more money.
With access to the right opportunities, you can take care of the ones you love and create a more prosperous lifestyle. We made Joy Wallet out of a desire to find the best financial partners, strategies and tools to help you achieve your life goals and make the most of money.
Share this article
