In a a session this morning, we were talking about how people spend their time watching shows like Dancing with the Stars and I was saying how I have better things to do with my time. We then went onto what those things are and I stepped him through my blog, saying that I'd far rather spend an hour or two writing, than watching people who can't dance, try.
I showed him the post on my Splinterlands purchase from last night and the picture of the card caught his eye and he inquired about it. After explaining and showing what it cost, he just couldn't wrap his head around it, because of all the risk involved.
However, it is funny how we talk about investment risk concerning money, but don't actually acknowledge that we are surrounded by risk all of the time. Eating a bag of candy a day is only going to cost 2€ in money, but what does the risk profile look like from an investment perspective? Obesity, thinking and decision-making degradation, self-esteem and confidence issues? These might not all be incurred at the time of eating, but the potential for them is high. Smoking is the same, crossing the road, taking a shower, driving on the highway - everything comes with risk attached, including the way in which we spend out time.
While the risk of investment seems to hold people back from investing, the biggest risk to their money is probably not risking it. This might seem conflicting and counterintuitive to some, but most should know, idle money is, losing money. If it isn't generating beyond the inflation rate, the purchasing power is going down and thanks to the poor fiscal policies taken to deal with Corona, rapidly increasing inflation globally is going to erode much of the value that people feel they have gained, without "costing" a dollar.
A hundred dollars a year ago is still a hundred dollars today, but what that can buy is worth less than a hundred dollars. Even the current ATH value of Bitcoin is a lie of some sort, as for example, the US has an inflation rate of 6.2% over the last 12 months, which means a $69,000 Bitcoin, is like having 65,000 to spend a year ago. One Bitcoin is one Bitcoin, but what it can purchase is going to change also.
From a psychological perspective however, it is interesting to consider how people have such an adverse reaction to monetary risk exposure, yet have almost no reaction to debt exposure, without realizing that they are essentially the same thing, except what is bought for an investment and what is bought on a credit card, generally have a different financial lifecycle. I used the example of a TV last night, but a car is something that people often by on credit too.
People pay 40K for a car and 4% interest a year for 5 years, ending up paying around 50,000 for the car and by the time they "own it", the value is more around the 15K mark. That is a risky investment, yet people seem to be quite happy to make it, many times in their life. However, many of the same people say, "I don't have enough to invest with".
Even if they still bought a car on the same deal, they could get one for three quarters of the price and have 10K more to spend using the loan money, which is facing a 4% interest rate. That means that they would need to beat the interest and the inflation rate, which requires getting more than about 10% at the moment, but they would have a 10K "lump sum" to invest into something.
That is too risky!
Yes, it is risky, but maybe not as risky as first thought, because after 5 years, the 50K spent on a 30K car has a car that is worth 10K, which is only 5K less than the 40K car, but the 10K has had five years of investment potential. If on average that 10K is able to earn 15% per annum and is compounded across those five years, at the end it will have a value of 20K dollars. This means that while the 40K car lost 35K dollars, the 30K car lost 20K dollars and of course, inflation is applied to both.
However, if instead of 5 years, we kept the car for 10 years, the 40K car would be owned after 5 and at 10 be worth about 5K. The 30K car would be owned after 5 and be worth maybe 3K after 10 years. However, the 10K loan invested for an average 15% yearly gain compounded (yearly), would be worth 40K - *the purchase price of a new car, though with inflation, it would be the equivalent of the 30K car from ten years ago.
Well, perhaps I lied. The biggest risk with money isn't leaving it idle, it is spending it on consumables that diminish in value, yet don't necessarily bring much of a difference in experience to the table, for example, a 40K car instead of a 30K car.
I am not suggesting people take additional loans to invest with however, because most people buy the highs and as such, are likely to lose. However, if having access to very cheap loans in the lows, take a little "risk" is probably the least risky thing a person can do at that time. For example, I asked my wife if we could spend some of our renovation loan in March 2020 to buy two Bitcoins - she said no, because it was too risky. That would have been 7000 to purchase on a loan that has a very low interest rate capped for teen years and today, it would be worth 130,000 dollars. What the risk would have been, is that we lost it completely and would have had to wait a bit longer to collect the money form our salaries to do some part of the renovation. In hindsight, she realizes her error, but I had to have her approval for this kind of purchase - as far as our relationship is concerned.
Risk is interesting for me to think about in these terms, as what it is actually playing on are our various fears of loss, looking like fools and missing out on other opportunities. We have been conditioned to live in a society that sees taking a loan for a car is not a financial risk, but investing into something with potential generative value is. This conflict in concept seems to be more pronounced the lower we go on the economic spectrum of wealth, with the wealthy being far more risk-seeking than the poorer cousins.
Some will put this down to having the security of enough wealth to spend, but that is only part of the reason I believe. A larger part is that a lot of people is because they do not understand how their minds play tricks on them in what is valuable or not and how they think that because they don't have a lot to go in with, they can't make significant gains. Yet, they still buy that car on finance.
Crypto is opening up the possibility for the least fit to invest into the traditional economy, to invest into the future economy using amounts that would seem insignificant anywhere else. Times are changing and those who start to understand their fears surrounding money, their mindset around risk and investment and can find ways to generate even small inflows of value to build their wealth, will find that in the not too distant future, they will be far better off for it.
But, this is opt-in and very few are willing to spend their time learning how they can participate more actively in the economy, while they sit down in front of the TV and watch stars do something they aren't very good at for entertainment.
The biggest risk to our wealth, is us.
Taraz
[ Gen1: Hive ]
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Well said. My dad always said, "It's not what you make, it's how much you save". My father always paid cash, he would bark about interest rates on loans. He built an incredible paving business worth millions but not without having to take on loans along the way. But he hated paying interest, so anytime he made money, he would pay those debts off as quickly as possible. As business grew, his investments were not in stocks, but in land. As the years went on, that land was developed by himself and his own crew, which were my uncle and my three brothers.
That property now has 9 shops on it, that not only cover taxes and expenses, but it's cash cow. Completely paid for with 9 rent checks coming in every month. It was his retirement fund. Gosh for a guy with just a high school education, he was amazing.
He also said, "in God we trust, others pay cash. I miss him.
This is a good thing - but also has to be expanded on since then. Back at that point, saving was an investment because of interest rates - now it s a cost, so the investment part has to be done actively.
Seems like your dad had a good head on his shoulders :)
I think perhaps being seen as wealthy is just as important to some people, as actually being wealthy. Makes sense. If their only rationale for becoming wealthy is to appear so, then just taking out the loan for the shiny car; is a reasonable short-cut.
Have you heard about "The Secret"?
It was popular a few years ago about visualizing the things you wanted in the future and lots of people would spend their time imagining themselves driving a fast car, living in a dream house etc. The problem is, the imagination is so powerful that once you imagine it well enough, your mind and body thinks it has already been achieved.
I feel a lot of our life is like that now. We sit down in front of a driving game or FPS and think we can race or go into battle. We watch a surf movie and feel like surfers, we read tweets and think we know about the world and we google answers an think we understand in practice.
There is no need to actually be something, just make it look like you are that thing, and the imagination will do the rest.
Exactly. We don't buy products for what they can do; we buy them for what they tell us about ourselves.
"I'm a guy who owns a Porsche".
If you can stay on top of that little voice telling you the bank still owns the Porsche, it's a valid substitute for actual wealth.
The secret downfall of "The Secret" -- EXACTLY!
People take risks if everyone else is doing the same - there is psychological safety in being part of the herd.
I bet if everyone was buying bitcoin but hardly anyone bought cars, people would fret and shy away from a $40,000 car as too risky.
This is why people buy the highs too. Also, why I think that in the future, there are going to be people clamoring for one full bitcoin - just like they want a Porsche now.
We are our own worst enemy when it comes to making money grow rather than spending, savings placed into crypto is as risky as saving placed into a bank, both may go up or go down. Personally - No Risk, No Reward - Money must work for you!"
Buying new compared to second hand vehicle, or possibly paying more for car paying back over time, no matter which you opt for, a car takes you from A to B, why throw money away, save and try pay in full, sounds crazy, one only realizes later how much one saves!
@tipu curate
I don't know how it is in your country, but it was calculated that it is profitable to keep your own car, if only you move more than 30,000 kilometers per month on it. If less, then taxes, fees and maintenance of this car eat up all the benefits. And this is about the new car. Used and even worse.
Otherwise I agree!
First car brand new lasted fifteen years inland. Where we live now at the coast, the rust eats them up, lifespan approximately ten years. Second hand still (no more than 3 years old) saves on some taxes imposed, always try pay vehicle off as quickly as possible, or pay cash.
Where we live new cars are over inflated in value, you could end up paying almost equivalent of a brick and motor home for fancy ride, so I err to caution in what is required. Long distances to travel, little to no public transport, we rely heavily on private vehicle.
so true @joanstewart we can make ourselves useful and also we can destroy ourselves
Children grow up well we grew up with a 'piggy bank', parents appear to fail taking that a step further, yes you can save, now what? Put it into somewhere to make more, or take it to the corner store for sweeties?
Many cases it is not being taught when young, no direction leaves one to stumble around finding out later, much is lost.
if you ask me it would be a good idea to invest in crypto cause as kids you cant save thousands of dollars but you can buy some cheap crypto and wait for the boom it might worth a lot when they grow up
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Watch for good projects, crypto is only as good as what it will offer people at the end of the day.
Blockchain technology will have many good uses spend time reading and familiarizing yourself about what each offers.
Keep an eye open for scams, they are rife!
I think a lot of people don't know how money can work for them, nor their own time. They know "Time is money" but don't add a practical action to move on it.
I know some wealthy people - the cost of their car is a tiny, tiny fraction of what they own and compared to their investments, almost nothing. However, I know lots of people who drive pretty expensive cars - I think if people are spending more than a year's income on a car, they have a problem.
Much more discipline is required to save and grow, than to spend enjoying frivolously, some buy expensive shoes, watches, cars and live in shacks!
Good rule of thumb is don't spend what you don't have, the only time you go into written contract agreements is on a home and possibly a car, everything else save and pay cash.
Money on loan is never cheap, count the cost!
Most people seem incapable of visualizing these costs anymore.
Most dive into debt with no eyes open,
FOMO must have what everyone else has,
or plain and simply living far beyond their reach.
Have yourself a great day and thanks for posing questions people should think about.
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Like Taraz said, everything is a risk. Actually even a purchase of a physical item carries risk, especially once its warranty is up.
Risk involved with all, you can drive a brand new car off the showroom floor, de-valuates by 5% in first few minutes, it's a "Monday" car and gives you endless problems. Yes warranty will cover repairs, it does not cover time without the car when in repairs, or get you from A to B. Same goes with most 'big tag' white goods today, electronics and almost anything you buy.
Definitely... And then some brands seem to fall apart once the warranty expires.
Warranty is a laugh a minute of late, planned demise more like it.
It's not so funny when it happens 😂
Normally happens in x3's almost planned ahead to catch you off guard....
Since I was young (now I'm 35) my father taught me that life is indeed all about risks. However, there are two kinds of 'risks'; 'Stupid Risks' and 'Calculated Risks'. What you are suggesting in your article is 'Calculated Risks' and I agree with you wholeheartedly that this is the risk that everybody should be aiming for.
When looking at (for example) casino companies, they take risks all the time. At any moment someone could hit the jackpot and suddenly devoid the company of millions. However, unlike their loyal gamblers/members, the casino takes calculated risks for it employs people to appeal to the addiction (gambling) prevalent in the majority of its members.
In essence and in comparison, the company took a big risk not by letting you play on their slot machines; but by divulging its practices to its employees (whereby if one speaks then the company can go bust via negative media exposure). However, the company knows that if they pay the employees well and share the wealth; the risks are minimized across the board.
To note, I am new here and in time I will be writing a few articles about some of the practices and methodologies employed by one of the biggest and largest casino companies in the UK right now. I feel I am the right person (8yrs experience) to do this because I conceptualized and brought into fruitition the majority of these methods until 3 years ago (I resigned to cleanse my soul). I'll take you through the discussions with stakeholders so you are aware of how vile and unethical you have to be to prosper in the casino industry. Additionally, since my resignation I studied politics whilst I took a small job (I needed a simpler life) and explored spirituality whereby I will be writing about those too.
Nice to meet the Hive.
Casinos are interesting, as their calculations are incredibly precise. In Australia (many years ago anyway - late 90s), slot machines had to pay out at least 25% of takings and they were audited. They were programmed to payout 25.1% - and people think they have a "system" to win.
Sounds interesting. Depending on how you present it - there is the LEO Finance interface: https://leofinance.io/ that might be suitable. Maybe STEMgeeks might be okay also: https://stemgeeks.net/
Welcome :)
I'm glad that we no longer really spend that much time watching the old tube. Thinking back on it, I feel all of the time wasted but can't dwell on that. Spend time to remove that stuff! Interacting on Hive, Splinterlands, Hive-Engine and others is far more valuable short and long-term than watching whatever shit is on television.
Granted I do enjoy watching something here and there if I'm not feeling well but that's far less common. Most things I opt to watch nowadays are survival shows, outdoors shows and stuff like that. I can learn a little bit while doing something else. Though the past 4 weeks I've spent more time on the homeschooling front with our son and I've been enjoying that far more!
I know the feeling of not buying Bitcoin when it was an opportune time. I had the money to buy a couple Bitcoin back when it was 3k each in our recent memory. Would have been a great thing to do but hindsight is always 20/20. I've been making up for lost time and investing what I can trying to get to that magical number bias of 1 whole bitcoin.
I'm tentatively going to onboard a friend of mine tomorrow, he's intrigued but hasn't had time to dedicate to this place. I'm hoping to transition him from watching lots of sports all the time to shooting the shit on here and still talking about sports, plus earning some crypto while he's at it!
I do too, though it is mostly with my wife. I'd prefer it if she sat writing herself instead and we could talk over creating content, rather than just consume content. And it isn't that it is all bad, but the passive watching of nonsense just gets on my nerves.
I want to be inspired to act, not encouraged to not.
Yeah, the buy/ hold issues... I sold 30 Ethereum for a 300% profit. I sold them for 80 dollars. :D Bought Steem.
With your friend, don't focus on the money too heavily, but it is a bonus :)
Yeah I've told him that the people here are what I stayed for. The money is cool but the people and the opportunity to learn about all kinds of stuff is way better. He's also looking for a risk/benefit ratio and not having to spend 100$ to get started here for him to figure out of he likes it or not is a good thing.
Not taking risk is the greatest risk
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!BEER
I think part of the world we have created is, sitting around waiting, just in case something goes wrong by getting up and moving.
View or trade
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BEER.It's more difficult proving where the capital came from to purchase large items than it is to finance the same item.
That can be an issue in some cases, but I think for the most part, no one will have that money anyway, since they keep purchasing on finance :)
When we got the car we have right now the salesman and the manager tried hard to convince us to finance. One of their pitches was how it'll be done in less than an hour. Strange.
All the billboards and ads in the states hardly list actual value anymore, everything from phones to home loans offers such and such down with X monthly installments. Big bright flashing lights on the side of roadways. "Only $129/month!"
They even lease phones here... alright I'm far enough off subject now.
Only XXX a month! and suddently, it is 1500 dollars going out on products and services that will never be owned, but will become habits.
No, I didn't think about you off chain, don't be ridiculous. No, I didn't take a picture either.
How much is it?
Lol :D
On a side note. Me have a no junk mail sticker... Works wonders for the wallet.
Relentless dude. I get about four credit card offers per week, every.single.week and they're always the same four; Capital One, Discover, Citibank, bla, whoever else, every day.
That is part of the reason I have never purchased a brand new car. I prefer to get a slightly used one because the value is so much better versus the depreciation. You make some really good points here. I think we all would benefit to be a little more risky.
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I wonder if our risk aversion in regards to money is innate, or it has been acquired through conditioning.
You know the saying "fortune favors the brave/bold". That implies to me that not being brave/bold is likely the norm. That still doesn't really answer if it is innate or conditioned though...
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People are weird about risk. A non-financial example in my own life is a certain family member of mine, who worries a lot about all the mountain climbing I do. I try and tell this person that climbing is actually one of the least risky things I do, because I'm experienced and in control. It's scenarios where I lack complete control that are truly risky, such as driving on the highway (other drivers could err and cause an accident) or getting stopped by law enforcement (police brutality is an epidemic in America). And as far as financial risk goes, I've told quite a few people about investment opportunities in crypto with insane APYs and it's like I'm talking to a mannequin in a store. I guess they prefer traditional banks with 0.5% APYs and draconian limits on what you're allowed to do with your own money.
There is a long history of condoning it, so I suspect it isn't going to change soon unfortunately.
I know that look!
Few years ago it was not that easy to beat the inflation for regular Joe. Now with defi and crypto you can take a small chunk of your savings, put it in something and get inflation cover in relatively small amount of time with relatively small risk. Fantastic!
Regarding cars: as my friend told me, he would never buy a new car as it is to fragile thing to own. He knows very well because his wife has this habit of hitting other cars with their car😉
So now he drives Fiat and surprisingly he loves it 😎
Yeah it is great. Plus, it is possible to go a little higher "risk" with a smaller percentage and cover all of the inflation on other investments too.
A decently safe and reliable car with some comfort is all I really need. I have never seen the value in having a car to show off with.
I've bought my car 8 years ago, it was a used one - 5 years old back then.
during that 8 years it lost about 2500£ in value, £26 per month
That is not too bad!
sorry for posting twice but I had this thought:
I dont understand why people are buying bitcoin right now. I actually never understood it, maybe I am dumb.
Do you think BTC will be 120k next December? It would give you 100% APR. I am not saying it won't because I just cannot predict where will it go. It may as well retract to 30k or less.
But I believe you can get similar APRs somewhere else without taking that much risk.
I am talking small investing, not hundreds of thousands.
Ummm... this is not financial advice :D
I can't predict the markets, but a lot of people are going on the stock to flow model as well as whatever some YouTube personality might have said. The large investors don't really need it to go too high to make gains, they just need it to go up enough. I do think that we will see 100K this year or close to - but the question is, as someone already in crypto, is that the only token worth buying today?
I actually hate it - it has no use. you cannot cheaply transfer it, you cannot transfer it quickly. you cannot do contracts on it, it takes awfully lot of energy to operate.
I think most of these things is being addressed right now with the latest update but still... not great coin
A hundred dollars a year ago is still a hundred dollars today, but what that can buy is worth less than a hundred dollars
You have rub salt in the wound. My natinoal currency have lost in value about %30 since the beginning of the year. Besides, the inflatiojn rate is %20.
Here, you have to take risk to protect the value of your money even if you don't want. So what people have done is that they bought dollar, gold, car, house; I think few went for crypto. I also think that many people have got into debt in this period.
That is crazy. 100 dollars buys about 50 dollars worth under those numbers...
I think places like that are well positioned to have the necessity to get into crypto, whilst the richer and more stable will put it off, as they think "things aren't that bad".
People get stuck in a rut. They get used to staring at the TV for some hours which could be used productively, then they say they don't have time to learn something new. Break the cycle, and everything changes.
I know many who are in that rut, perhaps everyone when it comes to something.
We are creatures of habit... But we can choose which habits are good for us.
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I kept my car for 20 years. Had get another used car just last month. The only reason I had to buy a different car was due to rust eating away at the rails of my car. Lucky for me I was able to pay cash so no car payments. I didn't get much back on my car, that is life when you hang on to a car as long as I did.
I have had several cars over the last 35 years, the longest I kept one was my last, which was about 11 years. They do a yearly inspection here for cars older than 3 and mine wasn't going to pass and the fix was going to be 40% of the cost of the car, but would likely lead to more issues.
This is enlightening and an eye-opener for me even though I got lost in the part about the worth of a car 5 years ago/10 years later and all vis-a-vis the investment risk. Not so good with math but I get it. I think the reluctance to take risks has to do with our perception of investments generally. This quote stood out for me —
I couldn't agree more. 🙂
It might not have been the best way to express the numbers, but if you read slow, you can probably sketch it out. It is worth building mental representations of concepts, as they can be used as basic rules to follow.
I agree I think i also waste a lot of my time every day so I need to change my habit of watching YT videos
At least, make what you watch worth it, by having it be stuff that is actionable and motivating enough to act upon.
agree I wast my time watching agt on yt
We cannot possibly avoid risk, only choose which risks are worth taking. And we cannot even avoid making the choice. As Rush sang "If you choose not to decide, you still have made a choice." !BBH
For sure. A "non-choice" is a decision just the same. People think it absolves them, but I believe not choosing is an incrimination :)
Yes, like those who sit on the fence. Either get in the pasture or out of the pasture. Sitting on the fence is a choice to do nothing--to be irrelevant. Dietrich Bonhoeffer said that "not to speak, is to speak; not to act, is to act." Although he was speaking morally, the same is true for business.
I think the rule of thumb is don't put all your eggs in one basket
This is a sound investment, divide the capital among more than one project and act wisely.
It depends on what you are investing into. For example, an entrepreneur generally has to put all of their investment capital into getting their business up and running. This is why, investing into what you believe in is sound advice :)
To be successful in achieving goals requires risk
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In the example that you give, all economists agree that a car is a liability, first that it does not generate profits and for a long time it consumes money in addition to the devaluation in its price, investing in cryptocurrencies is risky but it can be very beneficial and end up buying not a car maybe two or three with the money from the earnings, success ...
I totally agree with you. Because people can't predict the risks and what damage or good and how much it'll do they stay on the secured-path, where they feel comfortable and have it under control
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Time indeeded is a very important resource and should not be traded lightly!
Regarding loans, having money that is not yours is a big risk.
More than the price of interest the timing of return and amount of loan to return are important imho.
The biggest risk to our wealth, is us.This statement really caught me!!
From my own view, I believe there virtually risk in every decision we make in this world, none is guaranteed. No wonder some people say that life is full of risk but then, I believe in investment rather than getting liabilities. I believe in taking that risk and face the outcome, even though I lost plenty dollars in the past due to some past wrong investment, I will keep pushing forward without attaching any form of fears rather being positive for a better result.
@tarazkp , thanks a bunch for sharing.
that bitcoin hesitance makes it sound like there is some unaccounted for risk is in your relationship