Category: Philosophy

Blog posts that are about the thoughts underpinning financial decisions.

Donkey Kick or Money Can’t Heal Pain

Donkey Kick or Money Can’t Heal Pain

Donkey Kick

So have you been donkey kicked in the teeth by life yet?

If you have, you’ll know what I’m referring to. Donkey kicks to the teeth are experiences that are unexpected, highly painful and bewildering. They can also be gruesome, traumatic and life-changing in a brutal way. I could make a trite list here of all the things that could cause a donkey kick, but the truth is that it will be different for everyone. A personal experience that may be harrowing for one person may have a completely different effect on another.

If you haven’t received a donkey kick that’s left you spitting your teeth out yet, you will be. It happens to everyone, guaranteed.

Money Doesn’t Heal Pain

So what do donkey kicks have to do with a money blog? Simple! Most people think that having more money will eradicate life’s donkey kicks.

Like your ageing uncle in a wife beater who rocks up to your birthday celebrations with a can of horrid beer and a reek that you can smell three streets away, I’m here to spoil the party.

Money doesn’t heal the pain of donkey kicks. No matter how rich you are, some things will always smash you up. Period.

Think about it for a second. A billionaire’s child is diagnosed with a fatal illness, and they can use money to chase specialists, drugs, special treatments. But if the illness is terminal, the best money can do is buy palliative care. The child is still going to die.

What can Money Buy?

Money is good for some specific donkey kicks. Money can make life easier in a difficult time because it can alleviate stress that would otherwise be there if debt would exacerbate a problem, or gain you access to something you otherwise would not be able to afford. It can alleviate some of the worst effects of poverty. It’s always a good idea to have an emergency fund to cover your bills if you experience a life-changing event. You can use money to pay for medical care, funeral expenses, insurances, or counselling following a traumatic event or past.

But money does not and cannot heal pain. It cannot rewrite the past. It cannot ensure a successful future. It cannot keep you safe.

You and I are human. We feel pain. We cannot change that with banknotes. We cannot gain affection and love from watching numerical figures on a screen.

Living in an uncertain world, money can alleviate additional stress but cannot protect you from the worst of life.

Throwing gold at life’s donkey won’t prevent its back hoof from connecting with your jaw. If you understand this, you will have a far healthier relationship with your finances.

See Money as the Options Creator

See Money as the Options Creator

How do you see money?

When we think about money, and how we view it, many of us see money in one of three ways: too little, too much, and ‘I dunno, I don’t think about it much’. None of these categories is particularly helpful. In this article, I’ll call these categories ‘desperate’ ‘bored’ and ‘no idea’.

I’d like to propose a better way of thinking about money: as an option creator.

Let’s look at each of these categories in turn.

Desperate

You’re struggling to pay your bills, and you are up to your eyeballs in debt. You can barely concentrate any further than what is happening directly in front of you. The future is so terrifying, you don’t want to think that far ahead. It’s a deep, dark and dank down here. It’s not impossible to get out, but it can be very difficult. In desperate land, winning the lottery seems like the answer to all your problems, and you cannot imagine the wealthy being unhappy.

Bored

You have money. A lot of money. So much, in fact, that you may not be sure what to do with it all. You seek to continue to make more money, and work hard to achieve this goal, although if you stopped to think about it, you’re not really sure why. You fear losing the money you have gained. You’re living in a nice neighbourhood, and spend more money keeping to same standard of living as your neighbours, without recognising how much you have. In this phase, you may have lots of money, but you have grown used to it. It is unlikely to bring you any joy.

No idea

Money? What, you? You hardly ever think about it. I mean, you work a job, you live a nice lifestyle, you spend whatever you want. Cash, credit, what’s the difference? You’ve hardly ever looked at your bank balance. If anyone ever mentions money, you laugh it off. You take a ‘money comes in, money goes out’ approach. After all, life’s too short to worry about something as boring as finance, right? It’ll all work out fine.

All three of these modes are not that great a place to be. Being in desperate mode is an awfully stressful experience. Bored mode means you have too much and don’t know how to effectively use it. No idea mode is fine until life eventually kicks you in the teeth.

So how should we see money?

Money as an option creator

In the modern world, money gives you options. I encourage you to see money as working for you, to enable you to create choices and options in your life. How does this work in practice? Let me explain.

At its most basic stage, money enables you to pay your bills and live. As you progress, beginning to save and invest, you can begin to gain some measure of safety: an emergency fund provides you with funds if you lose your job, for example. So these are your basic options: living and a little security. But money goes further than this.

If you pay even a minimal amount of attention to your finances (i.e., you’re don’t take a ‘no idea’ attitude),you can make small savings grow through the magic of compound interest. If you choose some good investments (see index funds), you can make your money grow over time, giving you options in the intermediate and long term future. This is the next level. Saving and investing means you are building options for your future self.

Let’s take it a step further. As you can continue to save, invest and make good choices, there’s a good chance that you will end up with enough money. What actually is ‘enough money’ is a personal choice, but I would argue it’s not being rich. It’s being able to make decisions that are not motivated purely by money. At this stage, you have enough funds that if you want to change jobs, start a business, or take a six month trip around the world, you can do it. If you want to start a charity and in other ways positively change the lives of others, you can do it.

Building options

This is the power of money. This is how I suggest you see it. Not as something you’re desperate for, not as something you have too much of and are bored by, and not as something that will look after itself. If you see money as an option builder, it will work for you, not control you.

You will also be able to see when you have enough, and you won’t seek money for its own sake. Most importantly, it can help you build a better life, your own life, led by your own options and choices. And ultimately, that’s what I think finance is all about.

How to cheat the capitalist system (legally) – Part 1 – Theory

How to cheat the capitalist system (legally) – Part 1 – Theory

Capitalism – a definition

Ah, capitalism. If you live in most countries, it’s almost something you take for granted. It’s everywhere.

First, a quick refresher. Capitalism is a political and economic system where goods and services are produced and provided by private actors for a profit. Private actors means companies and businesses, rather than by the government or the state. It’s how many modern societies run their trade and industry.

So what does that actually mean in practice? It means that corporations, businesses and companies are responsible for providing and running many of the goods and services we have. For profit. Almost every product you can think of, and almost every service that can be provided, is provided by companies. This includes your furniture, clothes and car, the house you live in, and the painter you hired to patch up that gnawed hole in the wall your pet puppy created when he was bored. It may include the food you buy at the supermarket, the train you catch to work, the smart phone, computer, hey maybe even pen and paper (if you’re old school) you do your work on.

Even organisations that are not run for profit depend on capitalism to function. For example, hospitals that provide life saving treatment source their pharmaceutical drugs and medical equipment from for-profit companies, while government-run schools obtain books, computers and desks from companies as well.

The lure of profit

The key ingredient for many companies, and the key idea underpinning capitalism itself, is profit. Have a think about this from a company or business perspective for a moment. Profit can be an effective positive motivator, or a negative one. Companies could choose to treat their employees and customers well, in order to continue growing their business, gain a good reputation, be part of the local community, and make a profit. Unfortunately, the opposite is also true. Some companies unnecessarily cut jobs, provide terrible customer service, do the bare minimum legally required for complaints and consumer and employees protections, gain a bad reputation, and still make a profit (as long as there is still a customer for the good or service they provide).

Now everyone’s view on this is different. To a die hard capitalist, capitalism is the solution to all world problems, and the catalyst for the increased standard of living experienced in many countries today. To a die hard Marxist, who wants to give power back to the people and property back to the public purse, capitalism is the ultimate evil.

I’m not getting into that debate. The point of this post is not to provide an opinion on either of these views at each end of the spectrum, but to note that capitalism, like all political and economic creatures, has both its good points and its bad. Most political systems are a little grey, rather than black and white. Capitalism is no exception.

Your advantage

As a person living in a capitalist society, we can all be on the receiving end of not-so-sweet parts of capitalism. Losing your job in a unnecessary restructure, or to cheaper labour offshore. Making a call to a customer ‘service’ centre that offers anything but. Finding a refund or exchange process so onerous you give up. Countless other everyday interactions with poor business practice that make you grumble and swear and mumble that you can’t do anything about it.

But I’m here to tell you that you can.

How?

Look, I’m pragmatic about this stuff. There are good bits and bad bits about capitalism. But living in this type of society, you can turn the odds to your advantage in three main ways:
1. Become a shareholder
2. Be the controller, not the customer
3. Maximise your value as an employee, or create your own business.

We’ll cover each of these in more detail – but you’ll have to wait until Part 2.

Maintaining Motivation

Maintaining Motivation

It’s tough to maintain motivation to achieve your goals, financial or otherwise. Sometimes, you start out all excited, but for some reason, you can’t keep it up, and you drop off, often kicking yourself. Dropping out is a self-discipline issue, but this article isn’t about that type of dropping out. Sometimes dropping out means the goal is right. However, the action you take to get there might not work for you, and you need to find the action that does. Let me illustrate with an example.

Running

A couple of years ago, I decided to get fit. I wanted to get to that easy level of fitness, where any adventurous activity that I decided to do would come to me with relative ease.

Being the nerd I am, I looked up some of the most effective ways of getting fit quickly. Not too many Google searches later, I decided to pick up running. Calculated on a distance basis, running a certain distance, compared to walking or jogging the same distance, could burn many more calories and build up your fitness faster. I even found a great program that could take me from 0 to 10 km in five weeks.

So I had my plan, I had my goal, and I even had a roadmap to get there. I was ready to go.

There was just one problem.

I hate running. The feel of my feet smacking on the pavement. I hate the feeling of being out of breath all the time, the rhythm, and feeling my body chugging up and down. But most of all, I just find it dead boring.

A new plan

I thought there was something wrong with me, so I started looking for motivation to run. I read all sorts of helpful materials. Some articles suggested I plug-in music and I blast away the pavement with my awesome tunes. Some articles suggested that when I first started running, I might find it really difficult, but after I spent some time doing it every day, it would become a habit, I would get into the “flow” and start to love running. So with renewed enthusiasm, I bought myself some expensive earphones, pre-programmed some amazing songs in my phone, and set up a consistent pace to develop some flow.

But it didn’t work.

I still found running boring. I knew it worked for some people, I even had some colleagues who ran marathons for fun. Yet I couldn’t escape the fact that it just felt like enhanced walking to me. I didn’t feel like I moved fast enough for it to be fun. As it continued to feel more and more like work, it didn’t take long for me to give up. I ended up feeling pretty guilty about it.

Motivation

A couple of months later, I remembered how much I loved bike riding as a kid. The feeling of wind through my hair, great views, and the feeling of moving quickly, controlling my speed, and covering kilometres and kilometres. I brushed the dust off my old bike, oiled and tuned it up, and went for my first ride in a while.

It wasn’t the greatest day for it. It was fairly cloudy, and there was a biting strong wind (if you’ve ever been into cycling, you will know that like being in a kayak, wind is your ultimate enemy). For the first few minutes until I warmed up I wished I’d brought my jacket out into the cold. And yet, within a little while, I warmed up. I started to love the rhythm, the views, and the feeling of freedom being on a bike had always brought me.

I’ve been riding ever since.

Sure, there are some days that I find it a bit tougher to get on a bike than others. It still sits in the garage more days in winter than summer. And yet, on my bike, I get that feeling of ‘flow’ that other people talked about with running.

Whether you’re struggling for motivation with your fitness or your finances (unless you’re in deep debt, or are struggling with self-discipline), you need to find a strategy that works for you. How do you know when you’ve found it? Well, chances are that if it always feels like a chore, it’s probably not the right thing for you.

You need to find that solution that feels good for you on most days, and even on the tough days is still worth doing.

A Conversation that Helped Me Think Differently About Money

A Conversation that Helped Me Think Differently About Money

Like a lot of other people, I grew up poor. My family ran a business that made no money. Heavily indebted, the business barely made enough profit to put stock back on the shelves. Our lives were funded by whatever extra cash could be scraped together, as the business did not pay a living salary.

I point out this fact for no other reason than to demonstrate that poverty colours your life. I’m no longer poor, but I still carry the fear of debt. As a child and particularly as a teenager, I was keen to fit in, stop the bullying, and just look like everyone else-that is, middle-class. As I grew up, and even into adulthood, I wondered about the inner workings of what appeared to me to be the “rich”. How they thought, who they were, how they thought of us poorer people. I resented them.

Recently, a friend and I got talking about how we grew up. She’d had the opposite experience from me – her father worked his way up from a poor background to run two successful businesses. They were very well off. They lived in a lovely house, had people to help them with their house-work, and flew first class. She was one of those “rich” people.

I found our conversation fascinating. Not because of the immense differences we’d experienced growing up, but because of the similarities.

At school, I’d been bullied and lost friends because I was poorer than most of the other children in my class. At school, she’d been bullied and lost friends, who assumed she was a rich snob. As I got older and a little bit wiser, I scoured thrift shops for discarded clothing better than mine, desperate to fit in during casual clothes days at school. My friend described an uplifting experience where she had used the last little bit of money in her wallet to buy food from a street-food seller that she shared with a friend. I developed an elegant style to blend in. She developed a casual style to fit in. Growing up we both had parents in constant screaming matches, arguing over money.

Moving into adulthood, I developed a strong dislike of debt, and fought hard for financial security and financial independence. Moving into adulthood, my friend developed a dislike for looking financially  different from others, and fought hard to be seen as a creative person in her own right, irrespective of her financial background.  We both felt very uncomfortable talking about our financial pasts with others and restricted it to close friends, respectively because we did not want to seem poor or rich.  We were both happiest when hard work and wise decisions led our financial backgrounds to play no part in others’ opinions of us, and we were valued and judged by our own individual contributions.

The similarity of our experiences shocked me.

I wasn’t so naive as to think that money would solve all problems, but I didn’t think that having money would create some similar reactions to lacking it.

What is the role of money in life? The answer is complicated and personal and a bit too long for this post. But certainly at all levels, while money helps you in life, it doesn’t necessarily make for a happier one.

Warning! A Rant About Ill Informed Comments

Warning! A Rant About Ill Informed Comments

Rants from reading

I was reading comments on a financial post today that made my blood boil. I know, I know, I shouldn’t read them. There’s a lyric I love from the song Swear Jar by hip hop artist Illy: ‘You know the reason Mama said don’t read no comment sections’. It’s a great point. (If you have no idea what I’m talking about here, pull up a random video on YouTube and read the comments section. No seriously, do it! I’ll wait).

Anyway, the posted question asked was something like ‘What tips do you have to pay down your mortgage faster?’ (Note that for the purposes of this post, we’re not considering mortgages, or if you should or shouldn’t buy a home, this is a rant about destructive and unhelpful comments).

It was answered with the usual barrage of inane, unoriginal tips like: don’t buy take away, pack your lunch, go camping if you need a holiday, etc. The comments then quickly devolved to preaching and lectures on the need for self-discipline, hard work and sacrifice. Then this beauty turned up: ‘When I bought my home, we slept on the mattress on the floor for six months before we could afford a bed frame’. The rest of the comments made further enlightening posts with the words ‘in my day’, and a generational whinge about young people.

Why this makes me mad

Wow this makes me angry. Did this person seriously sleep on a mattress on the floor until they could afford a bed frame just so they could buy a house?

First, I call bull dust. This person lives in a developed country. They were clearly not poor: they bought a house. A house is expensive. Poor people may be homeless, or they may be barely able to afford their rent. They are not mortgagees (unless they fell on hard times after their purchase, but that’s not the case here). Second, that’s irresponsible. Buying a bed frame is a necessity. You need to sleep on a bed.

Buying a house is a luxury, a privilege. If you buy a house and sparsely furnish it because of low cash flow, that’s reasonable. You should have a bed though before you buy a house. And if you have nothing left to your name after you purchase a property, you’re completely cleaned out and can’t afford a bed frame, you clearly haven’t planned this properly. It means you don’t have the money to cover yourself if even the slightest thing goes wrong.

Obviously these comments is meant to engender either pity for this commenter’s bed-less state, or admiration for their hard work and sacrifice. I feel neither. If they really did buy a house before they bought a bed frame, they’re a victim of their own stupidity.

The reality

Here’s a real comment on the nature of self discipline and hard work. We all know someone that needs a good kick up the pants. The whiny kid who just graduated from university and wants the job it took you 20 years to build, or the 50 year old unemployed drop kick who lives with their parents and is waiting for them to die so they inherit their house. However, it’s just as likely that our university graduate is enthusiastic about working and saving for their future, and our 50 year old is an early retiree living it up in the Bahamas.

Self discipline is a skill. Hard work is an ethic. Sacrifice is sometimes required, sometimes not, depending on your circumstances, your reaction to your circumstances, and the choices you make. Some people never develop these traits. Some do. Age has very little to do with it. The decisions you make has lots to do with it.

Think for yourself!

Are you a Consumer, Dreamer, Destroyer or Creator?

Are you a Consumer, Dreamer, Destroyer or Creator?

Let’s take a short quiz.

What’s your most valuable asset?

A. Cash

B. Stocks

C. Property

What was your answer? If you answered A, B, or C you’re wrong. It’s actually a trick question. Alright, alright, I know that was a bit cruel.

The answer is time.

This is the point where if your mind is anything like mine, your eyes glaze over, you lean back in your chair, and you cross your arms and read this post with a new sense of skepticism. But just bear with me, I promise this philosophical post will have some practical application.

How do you spend your time?

If you’re like a lot of people, you never really seem to have enough of it. We’re all busy. Much of the day is taken up with working, studying, looking after family and friends, firefighting work and emotional issues, catching up with news and knowledge, being bombarded with emails and social media feeds, advising, loving, helping, arguing, falling asleep only to wake up and do it all again.

Let me ask a more difficult question. How much of your time is spent doing things you like? Probably not all of it, after all there’s always work to do. But do you spend at least some of your time creating and living the life you want?

For the sake of simplicity, I’m going to briefly introduce four generalised ways we spend our time: as consumers, dreamers, destroyers and creators. Obviously, reality is more nuanced than this. This serves as an illustration, or a thought experiment.

Consumers

As consumers, we consume time (well, duh). What I mean by that is that we spend time doing what is expected by other people than ourselves: by society, our parents, friends, even random strangers. Some of these expectations are necessary, like working to pay our bills. Other expectations are not necessary, like the expectations others have for what we should do at particular stages in our lives (e.g. partner up, have children, buy a property, retire). In consumer mode, life is busy, a series of never-ending tasks that need to be completed. We don’t ask ‘what if?’, we focus on ‘what is’ and what needs to be done.

Dreamers

As dreamers, we have grand ambitions. We dream of idealised worlds, the beautiful family, the perfect career, the vast exploration of possibilities, ideas and places unknown. Weaving wonderful tales – yet only tales they remain. We dream of what could be, but we don’t take the steps to create it. Sometimes as dreamers we are happy just dreaming: reality is too brutal and might turn our dreams into nightmares. So we don’t bother to try.

Destroyers

As destroyers, we spend time damaging other people’s creations. Bitter about life and the cards we’ve been dealt, we find fault or question the dreams and activities of others. As destroyers, we see the world in a dark, angry red lens. We often miss recognising the impact of our choices and reactions on our life outcomes, even when circumstances were in our control. We destroy in many ways – from trolling and bullying to sowing grains of doubt about what can be achieved.

Creators

As creators, we spend at least some time creating meaning in and improving our lives. We are dreamers with action plans. Consumers with meaningful tasks to complete. We ask ‘what if?’ and then try to find the answer. Dreaming of ideal worlds and states of being, we then take actionable steps to achieve our dreams. We try, succeed and fail. We try again. Plans change, evolve and are recreated. We may get questioned and bullied by bitter destroyers. It affects us, but we continue on. Maybe we only achieve part of what we thought possible, or we might go beyond what we dreamed. We find power in our choices, tasks and activities. We create meaning.

So I ask again: how do you spend your time?

Think for yourself!