The people that you stick with, or are stuck with, have a massive influence over whether your build wealth extraordinary well, or cause great wealth destruction.
In my opinion, there are 4 key ingredients to building wealth. These has less to do with money itself.
- Your motivation, determination and the amount of grit you have
- Your ability to acquire knowledge and wisdom in your pursuit of the goal
- Creating effective Systems, Processes and Habits that lets you execute the actions that builds wealth
- Curating your Environment and Influences
Today, we are going to talk to the #4 factor.
We belong in different environments
Unless you are extremely anti social and reclusive, you cannot avoid being in groups.
You have your family nucleus and extended family. When you get married, you have another sub group.
You work or have your own business, so you will have colleagues and employees, this is another group.
You have hobbies, areas where you are interested in, so you have enthusiast groups.
These groups can be physical, but with the improvement in social media, groups are becoming more virtual.
It used to be that we have virtual bulletin board service (BBS), then we have forums and internet relay chat (IRC).
In recent times, the virtual groups have become more interactive in the form of messaging chat groups such as Whatsapp, Facebook Messenger, Telegram, Line and WeChat.
These environments can have profound impact on
- your competency
- how you go about executing in the area of interest
- the level of quality and grade of your commitment to the area of interest
This is where the opportunity and the threat lies.
My Relationship with my Environment and Influences
The First 5 years
When I observe the path that newbies to investing take today, it reminds me of the first 5 years where I was starting out.
I gain much of my investing competency through knowledge build up by myself. But I also sought opinions through interaction in online forum groups such as SGFunds and eventually Valuebuddies.
SGFunds was immensely helpful for a person starting out when it comes to making sense of portfolio allocation, various geographical markets, general asset classes, personal finance and insurance.
At that stage what I was trying to do was to find out if what was said in theory is the same in practice. I believe many young investors or people new to investing is also trying to do that.
When I choose to interact in the forum, I have consciously chosen an environment where the people are like minded in their pursuit of building wealth rather than not to build wealth.
SGFunds was more for unit trust investing, index investing (back when it is seriously unpopular) and ETF investing. When I decide to pick up active stock investing in individual stocks, that might not be the most appropriate environment.
Eventually I chance upon Valuebuddies, a value oriented investing forum. The wealth of experience of the investing veterans there have been invaluable in making me see certain nuance aspect of business prospecting that nobody told me previously.
However, I did not do myself any favors by creating a good environment for wealth building:
- I was a blogger, so I have to tune in to what was happening in the markets constantly
- I couldn’t weed my eyes away from real time ticker symbols and checking on data constantly
- I was dabbling in various forms of “investing”, trying out many different things. I paid attention to the macro based instruments such as unit trust, individual stocks, mixing technical analysis with fundamental analysis
- I was in a few forums that have people with many differing opinions on how to build wealth
I stopped listening to everything
When I turned 30 to 31 years old, I asked myself: Does doing this make any sense at all? You are not at a very young age. Have you figured out what is the right way to build wealth?
I was in a very bad place because after 5 years I didn’t know what is the right way to build wealth. And I was very anxious how did I end up in a particular position with nothing to show, despite starting 5 years ago.
So I did something I haven’t did for a long time.
I asked myself which way of wealth building is more tuned to my character, have a positive expected return, and I know there are good resources out there.
I decide to go deep in one area of competency and to know more of the nuances of that form of investing.
What happen was, knowing the nuances and the deeper workings of value investing allows me to see things in a different perspective.
This eventually translate to better results, which results in greater conviction in my selection (it also results in more anxiety since value based investing you tend to be rather wary of things!)
What I basically did was that I curated my influences and environment. Those people that I know physically or virtually through books, articles and videos, I pay attention to practitioners that are experienced in this area when they speak. I actively listen.
The more I actively listen, I understand things that in the past I gloss over. I used to gloss over some things that my friend Musicwhiz said. When I went deeper, I realize what he said was correct, important and I didn’t really understand in the past because firstly, I was not competent enough to understand what he means, but also secondly, I was not actively listening because I was distracted by so much information.
Another big influence was this guy Geoff Gannon who used to post in Gurufocus forum. Some of the best teachers comes from areas you least expect. Geoff was able to explain to me how to look at cash flow, the nuances of cash flow, what is the right and conservative way to value cash flow that folks like Warren Buffett, Howard Marks, Mark Mobius, Mark Faber couldn’t.
I found my own Wealth Dojo
Somehow, I decide to discuss investment picks more with only a few people. I use Telegram chat as the virtual dojo.
Dojo is the appropriate word since it is a place for you to spar, get wacked again and again, until it forces you to look at things in the right manner.
Here are the characteristics:
- There is only 3 person, including myself
- They all understand the nuances of value based approach, even if they do speculative trading
- Everyone is harsh enough to speak the truth, discuss the nuances and what we are uncomfortable with about the investments
- Everyone have a good wealth foundation, why they want to build wealth and the goal
- Everyone, by themselves bring something to the table. This could mean sourcing for information on company, compiling data from annual reports, sourcing for broker reports, reaching out to people that knows certain domains better
We could have many chat groups, but we selectively listened to those that make more sense and tune out those that are noises.
Curating my influences and environment is one of the areas that lead to great success for me.
The Toxic Home Environment
We gain a lot of our identity from the places where we were brought up. That is the basis of our first environment.
This gives you the first outlook on how to spend money, how to earn and how to build wealth.
For some people it is very toxic.
I remember I have a good friend in primary school. Almost all of the things in their home is bought via hire purchase or some form of interest based installment.
This gives us the impression (including myself) that if we want to buy things, this is the way to go.
There were many arguments at home, and often money was a bit part of the conversation.
My friend have a nasty relationship with money later in life. He was less motivated to study, and eventually couldn’t do well academically, which limits the kind of higher earning employment we have.
When you are brought up in an environment where relationships are more important, when you earn you spend them all, you developed that same norms.
A Good Home Environment can turn Things around
One of my good reservist mate shared with me how his family turned his financial life around.
He was having a nasty time controlling his spending. It got to the point that, if he doesn’t do something about it, its gonna severely affect the other aspect of his life.
So what his mother and sister did was scold the shit out of him (it helps a lot in that he realize this is a problem as well).
Every day, they make him tell them what he spend his money on. If you think about it, its rather embarrassing to have to be treated like a little kid (which essentially we all are, if we cannot take care of this very “simple” aspect of our life)
Today, he is happily married. Not just that, he is an active participant in investing, setting money aside for his family’s longer term goals, being more careful how much he spends on his wedding, renovation and different aspects of their family life.
The Very Confusing Environment
When we do not curate our environment, we take in data, information and knowledge from all over the place, on various subjects.
Some of these subjects have got absolutely nothing to do with the way you build wealth:
- If you invest in a portfolio of stocks and bonds exchange traded funds, does it matter so much if the small cap stocks in China collapses? Less so
- If you invest in 6 specific listed businesses, do you worry when some stocks that have absolutely no impact on their business faced some dramatic uncertainty?
- If you hold bonds till maturity, does it worry you of the impact of interest rate rising?
The short answer is that some events affect some of your investments, others do not or not directly linked.
Not curating your environment well, will create more confusion with the way you build wealth rather than aid it.
You become more anxious.
This is what I observed more when folks think it is helpful to participate in communities such as Hardwarezone forums, Facebook groups, Investing Note.
We have a fancy term nowadays: Mastermind Groups
You become so influenced by what others do and ask yourself less what is suppose to be the fundamentally right thing to do. People buy you buy. When you don’t buy and things go up, you regret. When things plunges people go to cash, you also go to cash. You gyrate with the community.
The environment becomes a way for you to validate whether an investment is good or not. However, what I observe is that the person asking is looking for an authority to assure them this is a good or bad pick. They do not bring enough to the table.
Overtime, they gain nothing. Well they would gain money. And essentially that to many seems to be the important one.
The community becomes a place to look for fish, rather than a place to help you become a better fisherman.
My advice: The environment can be helpful, but you got to stay away from the environment sometimes and do more independent work. To form your own ideas, or go deeper into a particular competency. You will do more reflection, more soul searching, increase or decrease your conviction in your selections.
Your work Environment can be Toxic
I have friends who work in highly lucrative environment. However, high pay also comes with some high cost.
You cannot look shabby, or that your clothes look dated. Your colleagues have a way of making it known to you that this is not the way of their tribe.
You will have to go for holidays. It is the norm. If you do not go for holidays, people will think you are weird, that there is something wrong with the nature of your character.
In high stress, high remuneration environment, there can be very “decadent maintenance expense”. This involves drinking and dining out frequently. One or two meal is manageable. But when it takes place every alternate days, it adds up.
And likely, if these things matters to your coworkers and bosses so much, branded goods are not far behind.
One peer built up her addictive shopping behavior while working in CBD and got herself into credit card debt. It is only when she left to work in a work environment further from town that things change.
The quality of coworkers, what they look for changed, and it makes it easier for her to go into corrective mode.
Your solution to this is to:
- change your work environment if it gets too toxic
- have a higher self esteemed and have a stronger control of what you pay attention and what to filter out
- let your budget be your boss
- a mixture of 1 to 3
Helping Your Friends and Family by Introducing the Right Environment
You may have friends and family are facing difficulties with wealth (or the lack of). You could try my other ingredients such as telling the person to be more “motivated” (#1 ingredient) or this is the fundamentally sound thing to do (#2 ingredient).
However, by helping them create the right environment could be much better than you realize.
Self helped group such as Alcoholics Anonymous have achieve good success because they solved this problem of people having a void in their lives.
One of the reasons people turn to these vices, shopping, drinking and partying is that on the surface these seems to be enjoyable and fun, for some they have something missing in their lives, or depressed about something, insecure about something.
They turned to these stuff to fill that void.
So these meet up serve as a way to fill that void, which for many, are loneliness, or having too much time on their hands.
If you wish to help, perhaps form a better environment for them. Perhaps you need to first get better, before telling them to improve themselves.
I seen some success of delinquents or friends with character problems change immensely for the better when they embraced their faith and participate in church activities.
Despite what you can say about City Harvest Church, in the early days many of the kids they took in have a better outlet to channel their energy.
A Shameless Plug for BIGS World
When we created our Facebook Group BIGS World, we want to keep it as a place where we bring like minded people who want to learn about ways to improve their lives, sought solutions to wealth problems and the problems that are connected with wealth.
Initial signs points to a group where there are active participation and a diverse set of views.
It would be helpful if you:
- Have a friend or family member that you want to ease in to a community that tends to be more deliberate with their lives
- Are looking to see how other people handle situations that yourself are struggling to get a handle of
If you wish to join, do follow the link and we will add you in. Note: not for deeper stock or business prospecting, technical analysis, trading discussions. Definitely not if you want to sell some second hand things, or money scams (which we have encountered a lot!)