Surprises never cease: Some myths surrounding your money—Part I
One day, while at a local filling station, the pump attendant looked at me and drew closer to my car window. I rolled it down and told him how much petrol I needed. But instead of serving me, he drew closer and said to me: ‘I bet you enjoy reading personal finance books. I can sell you one’. He then went into the shop and brought with him a well wrapped book Killing Sacred Cows. He confessed having never read it himself. It just reminded me of one famous cliché that goes round; “if you wish to hide anything that would make an African prosper, then put it in a book.”
It goes without saying that I do enjoy reading personal finance books, particularly those that offer different advice and ideas than the rest, even if I don’t agree with what they have to say. Killing Sacred Cows by Garrett B. Gunderson falls into this category.
Killing Sacred Cows takes on some “myths” around our finances that the author argues is destroying our prosperity. As with all such books, it’s an entertaining read and it makes quite a few good points—and quite a few questionable ones. I wish to highlight a few myths what Gunderson points out.
Myth 1: The finite opportunities. Quite often, people convince themselves that the good things in life are scarce. There is only so much success and money and opportunities to go around, they argue, and they are jealous of the people that have the things they do not. In truth, there is a bounty of wealth and opportunities in the world, and someone else’s success almost never precludes your own. Instead of worrying and stressing about the great things others have, focus on improving yourself and claiming opportunities for you.
Myth 2: Financial security. Some people think financial security is all about a steady paycheck and a pension. But the world doesn’t work that way anymore. Instead, the true source of financial security is you: the unique skills you have, the experience you have, and the connections you have to others. If you can provide genuine value to others, you will always find work and business opportunities.
Myth 3: Money and power. Others think money is power. Money is not power. Money is just an expression of the value created by people for people. People who create more value tend to accumulate more money. You do not need to have money to make money – you just need to be able to produce value on your own with your skills, connections, experience, hard work, and creativity.
Myth 4: High risks ensure high returns. Some people think engaging in high risk projects will ensure them high gains. An economist is an ardent believer in this. The big problem that Gunderson points to (in so many words) is that people often confuse volatility and risk. Volatility means that over a certain period of time, an investment might go up and down rapidly. The stock market is volatile and you know it’s going to be. Risk centers around the yet-unknown outcome of a future event. A well-researched investment lowers the risk (because you increase your actual knowledge and reduce the unknowns about it) but doesn’t change the volatility (it will still be somewhat volatile, no matter how much you know). If you assume a lot of risk, it just means you are investing in something you know little about – and that’s more or less akin to gambling. So be someone who takes calculated risks and only consider high returns as a plus. Now I am talking like a proud economist. In Tumbuka they say, apawathunya fees yawapapiwakhemwanauyu (he is just showing off that his parents sent him to school).
Blessed weekend to you and yours, as you throw off some of these myths.
