Wealth Psychology Archives | Investment Moats

Focus on What You would Gain Instead of What You Would Lose

February 9, 2020 by Kyith 2 Comments

It has been some time since I shared some personal finance thoughts but I was triggered by two events so I would like to share something and see if they manage to help you or your loved ones.

How do you really convince yourself or get someone to try getting your financial situation in order?

This is a problem that plagued many people but more so, it plagues those that are in a relatively good financial situation, but their loved ones are not.

Convincing people is hard.

Whether you are convincing yourself or someone else, I believe that 9 times out of 10, deep down, they know what are some of the things that they need to do to maybe get to a better position.

The problem is that when we look at the solution, we will immediately recognize what we will lose if we try to fix the situation.

The solution to not having any savings is to go and earn more, reduce your expenses (You can read my wealthy formula here). The probable solution to getting out of the debt cycle is to not accumulate more debt, reduce the expenses and prioritize debt clearance.

Not rocket science solutions. And if you ask some of your friends who are more sensible, less judging and willing to help, they would tell you the same thing.

The issue is not being oblivious to the solution but that we know, but we fear what we will lose if we do it.

If we cut our expenses and prioritize debt clearance, our debt will get less and when they cross over to zero, they will eventually go up.

But we will lose our quality of life. How would life be if we cannot Grab to work and back? You cannot go out with your friends anymore. We have to replace our food with Maggie Mee.

What compounds this fear is that automatically, we think that we have to do this FOREVER for the rest of our lives.

So the easy way is to not do go ahead and change.

What would You gain if you Re-order your Finances?

The solution is not to look at what you would lose but also explore what you would gain.

A lot of times, no one told you what you would gain. You have to figure that out yourself. The conclusion that you would come across is that you will “get into a better financial situation.”

That is very vague, not useful, not a good representation of where you wish to get to.

Here are some examples of what you would gain if you try and implement the changes:

You will not have the anxiety at the back of your mind about who to avoid or dreading to see those bills
You wish to be known as someone who got their shit together. By going down this route, at least you would be known as someone like that
If some of your peers can have $XXX,XXX by this age, you should be able to do that as well. At least you show that you have the ability to do that and able to do it. This is an ego boost
The more you accumulate, you move further away from the times when your family does not know whether you will have money for food the next month
People don’t believe you can do it. You are someone with some fight in you and you want to show them (and yourself) that you can do hard things. You wanna be known that you can do hard things.

In a lot of the examples list above, you may realize it is a transition to a certain better state, or that it is an identity that you wish to be at.

To convince yourself to get started, the upside must be more than the downside.

Most of the time, the upside is more than the downside.

If you cannot articulate the upside, you may not stick to it long enough. Hopefully, you will start seeing some results, and be able to understand what you gain from improving your finances.

But the strong motivator is the ability to identify upsides. If you cannot articulate what you are gaining, then why make the change at all?

The Last Honors Year

17 years ago, I was torn whether I should do the last Honors year during my university days. I really got tired of my career in academics after studying since I was 6 years old.

I was afraid that I am making the stupidest decision of my life by not having Honors credentials. But what I will gain is work income, not having to write an Honors thesis paper.

So I went around to ask some of the teaching assistants and lecturers whom I respected more to see if I am going to do something dumb. Their answers did not make things very clear.

But in the end, I felt that what I gain outweigh what I would lose. Hindsight, things turned out alright. The credentials might matter more if I was in civil service but in my last company, that was less important then my experience.

Try and assure yourself that fixing your financial shit is worth it by also looking at what you would gain.

This article is part of my Lifestyle Re-design Series where I provide some philosophical and helpful tidbits to get through life.

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When you become Wealthier, You will still be Anxious about Money

November 20, 2017 by Kyith 3 Comments

You have to live with whether you have enough money or not.

Whether you are poor or rich.

If you are poor you have a set of anxiety. You will be worry about whether you have enough to put food on the table for the next month, and whether your kids will have money to continue with their education.

However, that anxiousness goes away, when you suddenly come into possession of a large sum of money right?

What I realize for myself is that this is not true.

I started my journey with money at 18 years old when I stop taking pocket money as I got into compulsory military service. I struggle with part-time job for food and allowances in 3 years of university.

Then I got out of university with a small debt to repay and gradually build up my wealth to this point.

I realize the anxiety never went away.

It just changed from one form to another.

It surfaces during certain moments and dives when those moments were adverted.

The New York Times has an article profiling rich men and women and their anxieties with money.

I thought it is a very good summary for myself to consider. Many of them are rather true.

I will try to summarize some of the important points here.

Money Equals Many Emotional States and Goals we think it will Solve

When we do not have the money, we believe that once we have enough, or reach our goals, it will resolve most of the following:

Love
Power
Security
Control
Self Worth
Self Love
Freedom
Self Esteem

When we are near that goal, reach that target level, or near that goal, we realize that is not the case.

Our assumptions about it was wrong.

The Stress does not End When You Become Wealthier

The anxiety does not go away due to the lack of knowledge about money.

Your path to wealth might be luck, or working in a field where you leverage your human capital.

It doesn’t mean that you level up on the wealth knowledge.

Many of them feel like the do not have enough money. This is even by society standards they are very well above average.

Their worry stems from:

Not knowing if the money will last them
Would they live longer than they anticipated

They are also worried about making the wrong money moves:

Whether they are making smart money decisions
How well they are spending
Whether they have money to passed on to future generations
Suspect about the motivations of the people providing the advice and consultations

They Struggle to resolve the change in Identity

When you become more wealthier, you also realize that your social standing shifts.

The people that you stay around also shifts.

And this could cause some anxiety.

You may have become “those people” that you wish you could become, but detest because they have more than your family.

You grew up hearing money messages like rich people only care about themselves or other negative beliefs about the wealthy and then you become wealthy yourself.

When you become “those people”, you become anxious what should be the right posture. Should you be yourself, or should you do what people with greater status of wealth do?

Would having more money make you corrupted and insensitive to other people’s feelings?

You may be afraid that with so much wealth, your children would be very unmotivated and de-generate into very unproductive individuals by society standards.

You are also anxious and frustrated how your relationship with friends, family, relatives change as you come to terms with more money. People will hit you up for loans and gifts.

The Solution to This

The first thing to conclude is that, if you are not so rich now, don’t think that by being rich, a lot of your life’s problems will go away.

Yes, the tangible survival and security aspect will be resolved.

Most people just want some form of financial security (in my 10 stages of wealth here) but sometimes they do not know it. And to achieve it, they don’t have to push themselves crazily to an extreme end to reach financial independence.

Greater wealth often gives you:

the wrong kind of love
not enough power
less control than you imagine
no self worth
no self love
not enough freedom
less self esteem

Money like my friend Christopher Tan from Providend said, is an enabler of life, and if you associate having money as the ultimate problem solver, you will be disappointed.

The solution is to live and discover life, with money as the support infrastructure.

This may be profound but its not an area I have high competency in. So I will not bullshit so much.

Secondly, a lot of the anxiety that deals with money can be solved by increasing the knowledge and wisdom on building wealth. This is why I list acquiring Knowledge and Wisdom as 1 out of the 4 important determinants of wealth.

You are anxious because you do not have enough convictions and you do not have enough convictions because you don’t really know whats the truth, what is false, how far ahead or behind you are.

Let’s go though some of these examples.

Some rich folks are worried about:

Not knowing if the money will last them
Would they live longer than they anticipated

This is a question about whether you have enough retirement or wealth withdrawal competencies. Whether you have adequate or not can be determine by going through some of the literature of retirement and financial independence. ( I provided a section on retirement here)

A good wealth planner provides you with a few versions of plans, with action steps to bring you closer to your goals. They also provide good knowledge to help you make the decisions better.

When you know what are the assumptions, what are the dangers, how much you have now, your anxiety dissipates and gets replace by either relief that you are actually in a better situation or grief that you would never retire or your money will not last. At least it is some form of moving on.

When you worry about:

Whether they are making smart money decisions
How well they are spending
Whether they have money to passed on to future generations
Suspect about the motivations of the people providing the advice and consultations

Again, having a depth of knowledge, and a good environment of people who manages wealth well, would allow you to alleviate these concerns.

The problem for many is that they deemed they are uninterested in money, too troublesome to learn all these things. That’s fair.

And what you will get is that, if you are unwilling to partake in building a set of wealth competency, you cannot rid these anxiety because at the back of your mind, you do not trust your advisers, and you know, even after all these, you do not know enough.

Lastly, surround yourself in a good environment where everyone has a focus on improving their wealth position in a sound manner. This gives yourself an ideal place to find people in the same situation, and would have the same anxieties and how they live with these problems in the first place.

What’s it like Saving 50% of your Disposable Income? My 6 Reflective Thoughts

May 23, 2016 by Kyith 7 Comments

If you ask anyone about what advice their parents passed down to them when it comes to money, one of the most common advice is: Put away part of your money because you do not know what will happen in the future.

Saving money is nothing new.

No one will say they invented that. I certainly do not claim credit for that.

When I was growing up, mom and dad did not discuss much about money, but I observed what they do with it and the struggles every decision that they made involve money somehow. It drove home the idea that money is hard to come by and you need to take a great deal of care with it.

Since 18 years old, when I earned my first pay check, in the form of national service allowance, I have been putting away a portion of what I earned into savings or wealth building.

In my wealthy formula, I shared with you how I went about building my wealth, and what I have distilled up to this point that works for me, and I believe will work for many of you. Roughly how much I have built up is no secret, and avid followers will know where to find the figures. I do not talk about it openly because, it is not very important.

The more important things is whether I can help you get to where I am now.

Someone asked me recently how much do I put away monthly and my reply is that I am not sure. While I carry out zero-based budgeting regularly, I do not have this figure off my head.

My best guess is 50% of my disposable income. Disposable, which means my take home pay. To be fair it fluctuates, and I believe it was closer to 70% in the past when I started working to 40% currently.

To him, it is a sum that is unfathomable.

He is rather responsible and like most people, puts away 15% of his disposable income into savings. So he asks does he really need to put away so much and how does living with a 50% savings rate feels like.

The first question, I have written about quite extensively here on my site,but the second one, the feeling of actually doing it, that is something new to me.

So here is what I told him how it feels to put away so much.

1 You become frustrated by people not knowing the intention behind putting money away

A lot of people tried their hardest to understand based on what they know, and why normal people would want to put such a large sum of money away, but they often missed what I think.

When I was 24, I started aiming to build a portfolio of $135,000 by the age of 35 years old. Back then, I don’t even know such a thing called Wealth Machines. You have less blogs that explain what are roughly the right things to do with your disposable income.

I came out to work during the SARs period and the psychology is that you will never gonna get a pay increment in your life, and I pessimistically fixed putting away $500/mth into a Wealth Fund. I save much more than this $500. It is the way I compartmentalize how my wealth would grow, the other savings above this $500 is for rainy days or other purposes that I have not thought about.

Over time, people know you save, but they always think you are overdoing things, without understanding the true intentions.

The reality is that over time, there wasn’t any true intentions other than reaching financial security or independence.

The reality is that there isn’t so much things to buy and enjoy. You work, you are satisfied with how you mentality stimulating it is, you are ok with the people you work with and the people you meet. And you have this amount of enjoyment out of work.

What more do you need?

Excess money just funnels to emergency fund, which is why over time I was startled by how it has grown.

2 People look at you as if you do not have a life

There are some things that you can infer from most conversations, but they expect you not to put away so much because it is necessary to carry out some customary things that young, single male that have a working income should do.

They have your best interest and are afraid you missed out important life journeys and that you will regret them later in life.

What I felt they failed to grasp is that: If you didn’t even know you need to enjoy something, how can you regret missing out?

Sometimes because we lived a much hermit life and are less exposed to opportunities, you minimized yearnings as well.

You are going to get many of these over time, and you can explain to them your ideas (and hopefully you find more soul mates) but you can also choose to not do anything and let others imagine, gossip about it.

Sometimes they are right. You live a life that is less than deficient.

You got to be pragmatic in looking at your own situation, reflect and admit that there are some truth to that and perhaps you might want to do what they say.

3 You develop an awareness of cost and value of things versus your priorities

You save a lot because of a saving goal, but for myself, it is more of having a rather clear idea of what exactly I want.

If I had that, I choose what I want well. I discard things that are less of a priority in life, and try to find the best price for things that we value more.

If you develop an appreciation of your own priorities, you realize you might spend even less (when you pair this with less yearnings from #2) and put more money away.

4 You start seeing and exploring Possibilities and Models you can DO with your Wealth that didn’t occur previously

Unless you are the type who likes wealth building as an intellectually stimulating subject, putting 50% of your money away lets me explore some models that I failed to see.

When I put away 50% for 7 years, I started asking the question, so how much is enough? How would I know I reach my goal? What IS my goal?

It is where I understand the formula to financial security and financial independence, and further research tells me while these and retirement feels similar, these 2 are actually better than the idea of retirement.

I am also assured that when you placed your goals clearly in front of you, sometimes it is not about chasing the greatest return by pushing your money hard but to recognize that your goal might be smaller than what traditionally is (read the wealthy formula article).

I also understand the importance of recognizing what are your survival expenses and rich living expenses in the grand scheme of things.

Understanding these possibilities and how probable they are gives you excitement, contentment and calmness knowing things are within reach.

5 You really enjoy the luxurious stuff

When you save more, and honestly spend more time doing real work, you have less time for entertainment.

And when you have them, your satisfaction of these activities tend to be much higher.

It follows the theory that if you do fun things on such a frequent basis, they lose their uniqueness and joy factor after a while.

6. You have something that keeps you going

With the smartphone, I see many peers playing games where they level up their characters, chasing experience points to level up.

People like this kind of things, chasing milestones.

I just wonder why they do not gamify their life and do some goals like building a wealth machine.

When the money starts accumulating and you start realizing models and possibilities that defines your wealth goals better, such as a realistic $500,000 wealth machine in 10 years, you have something other than work that keeps you purposeful in life.

This is why there is no constant need to find ‘entertainment’ and lamenting ‘life is boring’

Conclusion

At the end of the day, things are really less bombastic as most think. I live a normal life. Some things you do, I did a much scale down version. That hasn’t bring down my satisfaction level.

I attribute the most important thing to understanding the concept of your priorities and how much is enough.

Overtime, it really becomes less of putting away 50% but more of, in daily life, I only need less than 50%.

In other words, its the spending equation then the saving one.

The savers would think this is a normal routine, but if you are a spender, can you imagine putting away that much and still be quite satisfied with your zest in life? For the savers who also have a high savings rate, do you have any realization that you encounter, only when you embark midway into this journey?

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Put in the Upfront Hard Effort in your Wealth Building or Career to reap a Easier Future

April 10, 2016 by Kyith Leave a Comment

Behind every successful business man, career man or investor they always talk about the challenges in the early days.

Some of them lament about the tough life that they have to suffer.

When I was a junior staff at work, you end up doing all sorts of tasks, some you understand some you do not. Usually the thought going through your head is: “Why do I, a degree holder, needs to do things like this?” Whatever things your seniors do not want to do, its up to you to do them.

Looking back, you realize that all these difficult things becomes easier over time as you became familiar with them, develop better ways of doing things.

Even after you take on a different scope of responsibility and these tasks are not carried out by you, you somehow have a vague and good idea how to do them, because you have an unconscious competence.

Whether I am in the army or at work or investing, I am in awe of the accomplishments of my seniors. For them, things are usually tougher because the tough things have not been smoothed out.

In army, there was less regulatory measures to guard against tougher trainee punishments and that the tasks are less about technology more about physical and mental prowess.

At work, the systems and software are not abstracted to such a high level and they have to do all the low level work.

In investing, they didn’t have the internet. They have to really find mentors, and honestly only those lucky ones manage to find them. They didn’t have portals that aggregate financial data, don’t have blogs that provide some of the simple fundamentally sound wealth building principals, or to interact with like minded peers.

I always thought that these tough environment set them up to make their understanding of things, their reactions to better work or investing decisions.

The Willingness to Put in Effort Upfront

In this fast pace age, we were pampered by what the millennials developed that give us what we want, at the comfort of our smartphones. Software as a service provided services that make our lives much better then without these services.

What happens is that, we expected things to be effortless.

This is so when we come out to work from university or polytechnic, progression at work and also how we make money.

I believe we will get there when it comes to investing.

I do envision a future where smart ETFs based on some fundamentally sound allocation that shifts between cash, bonds and equities ensuring that your money is low volatile, rather passive and reasonable costs.

Till that day happen, investing in various wealth machines require knowledge, wisdom, execution, reflecting on what works and what doesn’t work and then doing more.

I haven’t been doing much prospecting lately, and I can feel I am getting rusty at it.

However, if I encounter a potential business to look into, I know what to watch out for because I have put in the initial upfront effort.

Just like the above graph, your initial effort would be higher to comprehend and kick start, then when the knowledge and execution becomes unconscious competence, things become smoother, you can evaluate what used to be challenging for you in a much faster manner.

This is how we have the time to look at things from multi facets. We did the initial hard work and now the recurring effort we can make use of our unconscious competence and slowly learn new conscious incompetent stuff.

In all things you learn you realize there are usually: Upfront Effort + Recurring Effort.

Usually, different things have varying degree of these 2 kinds of effort.

In some of the wealth machines shown in this table, some of them requires high competence or relatively low competence. Before you get to the recurring maintenance stage, you need to put in the high effort, unless you are dealing with fixed deposits

In creating a cash flowing business

When I listened or speak to people that have build an online businesses, who is able to earn cash flows monthly with relatively less upkeep, the idea is still the same.

Not many see the effort that they have to endure, carrying out a 9 to 5 job then going home and doing a second job from 6 to 8.

Even if you have a good mentor, or go on a course that ironed out your mistakes, you also need to put in the time to comprehend and execute. With the competition nowadays, it is difficult to stand out. Even with good guidance, you still need hard work.

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