How not to think about Money
As someone who has seen money just as a means to live life, I have never understood the basics of how it works. Failed so miserably to make a money based decision when picking a job this summer that ended up not selecting any of the 5–6 job offers, eventually, was jobless and maybe lifeless. But as luck would have it, my previous employers bailed me out and I started life back again trying to learn the hidden gems of life through books like these. With this blog I would share some of my personal as well as Morgan(author’s) take on the biggest mystery which fascinates the human generations over the years. During the 30 years of my existence, I have always found money-enough to do the daily chores. There were days where I could gift my first girlfriend cards out of a monthly pocket-money of Rs 100 and there were days where I lost $600(Rs 42,000) sitting on a Poker-Table at The Venetian, Las Vegas. The psychology of money is you never run after the maths behind it and always chase things which may bring money to your accounts- people, work and learning in my case( in no particular order). When I realised that I accidentally ended up with some money in my savings account through compounding all these years, I hired one of the country’s reputed investment guides, Zvest, so I would never have to fuss about it again.
- No one understands money- More than historical data, money is all about luck and risks. Average People like Ronald Read become rich by investing over years and millionaires like Rajat Gupta end up losing life’s worth in one single deal. Most of the theories are circumvented to explain an aberration and we fall for it. A poor household in US spends most on lottery tickets than the average household- “Everyone wants to get Rich in a day”
- Luck and Risk: Two factors which influence most of our financial decisions in life are — when and where we are born. Our parents’ habits are imbibed with most of our decisions when we become financially independent. Not discounting Bill Gates’ hard work and passion for building Microsoft , he was one in 300 out of the 303 million high school population studying at Lakeside School with access to a computer ( You can do the maths/percentages). In my case, my dad borrowed money for most of my education and other needs while growing up from an affluent relative and I had access to computers when in Standard V in a remote town of Bhagalpur in India. Four years later that lucky break helped me get an AIR 2 in the National Cyber Olympiad and paved an early interest for computers and software. The source of most of the money is the risk my dad took in my education even in the years when he wasn’t financially well off . Everyone is special in their own way, not all get these lucky breaks in life.
- Compounding works: We studied Simple and Compound Interest formulas early in school, the only difference between them was the static principal multiplying over years in the latter. Everyone forgets this as they grow up, we keep changing principals everytime there is a meteoric rise/fall due to a bull/bear run. For the 8 years of my IT career, 90% of my money has been in the savings account and they have grown well compared to my in-hand salary. The maths was simple for me, to invest in stocks/Mutual-Funds/Crypto, I have to invest an equal amount of time/stress in understanding and keeping a track on them, time/stress which when invested in work/learning/people always earned an annual pay hike which was always greater than what the market had to offer.
- Pessimism Sells Over Optimism: Humans’ minds get attracted to negative news more than positive ones. The likelihood of you attending a close friend’s funeral is more than his/her wedding. So when there is a crash or when we read from the media about stocks ( most of them being clickbaits), our first reaction is to exit and cut our losses. Markets, just like human civilizations, are difficult to understand and are full of surprises, the more you read about them, the more you think you understand . Certain events like World War, Twin Towers attack, Vietnam War couldn’t have been predicted using any theory on this planet. So rather than chasing overnight money and success, do your daily maths/learnings and save for the unpredicted needs, you never know an impending one is front while you read this.
PS- I am no financial expert and most of the above is an accumulation of learnings from the book, my dad, following Shereen Bhan since I was in Class VII. Money, like life in general, is very complex, you will never get it from any book/doctrine/article , so enjoy till it lasts.